Friday, March 17, 2023

How Can I Settle Credit Card Debt

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Debt Collection Cease And Desist Letter

This letter template should be sent to tell a collector that you no longer wish to be contacted. If the debt is past the statute of limitations for collection in your state, this should stop any further hassle for that debt. If the debt has not passed its statute of limitations, then the collectors only recourse would be to sue you in civil court.

Pros Of Credit Card Debt Settlement

Debt settlement has the following benefits:

  • You’re paying less overall on your debt in a much shorter amount of time. Paying the debt off immediately means paying no more interest, and settling means you’re paying even less than you currently owe.
  • Debt settlement is less harmful to your credit than bankruptcy if your isn’t already poor.

Example. Ted owes $10,000 on his credit card. He’s six months behind on his payments. Ted’s six-month delinquency has hurt his credit however, bankruptcy would cause his score further damage. If he only makes the minimum payment, with interest, it will take him ten years to pay off the debt, and he’ll end up paying $18,000 total over that ten years. If he successfully settles the debt, he will be rid of the debt immediately and pay less than $10,000.

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What You Can Expect To Happen To Your Credit

A very important part of negotiating your credit card debt is understanding what to expect along the way so there are no surprises. Know that your credit score will likely be hurt during the process as you work on lowering your debt.

Your credit will continue to be impacted by late fees piling up and balances continuing to rise as you negotiate, but once your debt is paid off entirely your score can be on the rebound.

The timing of the whole process will depend on each client’s case. Some cases may require a few phone calls, while other cases benefit from one or more in-person meetings that last an hour or more. “The total debt settlement process takes anywhere from one to five years depending on creditors, budget and complexity on average,” Tayne says. “But that doesn’t mean it can’t be done sooner.”

Tayne notes that although you might see a dip in your credit score, most of her clients report their scores going up before the negotiating process is done. And at the end of it all, your accounts will be up-to-date and your will be much lower than before because you settled your balance and got rid of your debt. Both of these are factors that help boost your credit score.

How Does Settling Credit Card Debt Affect Credit Score

How can I pay off my holiday credit card debt?

Settling your credit card debt typically means that you negotiate an agreement to repay a portion of your balance, because you are facing hardships that prevent you from repaying the debt in full or if you cannot pay your outstanding balance for other specific reasons. While this can help you better control your finances by reducing the debt you owe, an official debt settlement may affect your .

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Nole Saves Big With Debt Settlement Negotiators

Nole also owed just over $30,000$30,093 to be exact. But unlike Mary, Nole wasnt worried about protecting his credit score. it was already bad because he was behind on most of his credit card bills. Nole just wanted to get out of debt as quickly as possible for the least amount of money possible.

So, Nole worked with a professional debt settlement team. They negotiated with his creditors on his behalf and heres what happened:

  • Nole paid just 55% of what he owed on each debt, on average
  • He got out of debt for $18,548 total
  • Whats more, he got out of debt in just 23 months, so he was debt-free in less than two years

Keep in mind that Nole did suffer some credit damage as a result of settling his debt. Each debt settled will be noted on Noles credit report for seven years from the date the account first became delinquent. But since Nole had missed payments and delinquencies already, this was something he was willing to deal with.

Work With Your Creditors

Reach out to your creditors to explain your situation. A credit card issuer may be willing to negotiate payment terms or offer a hardship program, especially if youre a longtime customer with a good track record of payments.

If your issuer offers a hardship program, it may provide relief when circumstances beyond your control like unemployment or illness impact your ability to manage payments. Whether you negotiate with your issuer or accept the terms of a hardship program, either option could lead to more affordable interest rates or waived fees, depending on the issuer.

These small changes might be just enough to help you get a handle on your debt, and the worst that can happen is they say no.

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Use Caution When Shopping For Debt Relief Services

Avoid any debt relief organization whether its credit counseling, debt settlement, or any other service that:

  • charges any fees before it settles your debts or enters you into a DMP plan
  • pressures you to make “voluntary contributions,” which is really another name for fees
  • touts a “new government program” to bail out personal credit card debt
  • guarantees it can make your unsecured debt go away
  • tells you to stop communicating with your creditors, but doesnt explain the serious consequences
  • tells you it can stop all debt collection calls and lawsuits
  • guarantees that your unsecured debts can be paid off for pennies on the dollar
  • wont send you free information about the services it provides without requiring you to provide personal financial information, like your credit card account numbers, and balances
  • tries to enroll you in a debt relief program without reviewing your financial situation with you
  • offers to enroll you in a DMP without teaching you budgeting and money management skills
  • demands that you make payments into a DMP before your creditors have accepted you into the program

Verify The Debt First

Is It Worth Trying to Settle Credit Card Debt?

If you get contacted about a debt, always ask the person on the other end of the phone to verify the debt. They should be able to provide:

  • The full name of the person on the account .
  • The name of the original creditor, if its a collection account.
  • A summary of the full amount you owe.

If they cannot provide this information, or the information they provide does not match your records, dispute the debt. Ask for the agencys name, the name of the representative that youre speaking with, and a contact call-back number. Then ask that they send you a written notice about the debt immediately.

Once you receive this notice, you have 30 days to dispute the debt in writing. You should send the letter to the collection agency by certified mail return, receipt requested. This will ensure you know exactly when they received your dispute letter.

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How To Settle Credit Card Debt Before Going To Court

  • Jennifer Thomas

The best defense against being sued for credit card debt is, of course, to pay your debts before that happens. That doesnt necessarily mean paying them in full or right away. But even if youve already received notice of a lawsuit, its not too late to settle your credit card debt before you end up going to court.

If you think theres a chance you could be sued or youve already received notice of a lawsuit, you should contact your creditor or debt collector. Lawsuits are time-consuming and expensive, so the creditor or the debt collector may be willing to negotiate a settlement with you instead.

Myth No : I Have To Pay Someone To Help Me Settle My Credit Card Debt

The truth: I proved that myth is not true, says Kenny Golde, author of The Do-It-Yourself Bailout.

Golde is a filmmaker whose partner became ill and died while they were making a movie. By the time the film was completed and it became apparent the film wasnt selling in a timely manner, Golde was $250,000 in debt. He consulted with a bankruptcy attorney, who told him about debt settlement.

Golde had heard a lot of debt settlement companies are scams. He figured no one would work as hard on his behalf as he could. Besides, he says, Here was a challenge, and I wanted to move forward and meet that challenge.

Golde successfully negotiated his debts and saved nearly $150,000.

On the other hand, having an experienced negotiator on your side can help.

You call and try to negotiate a balance, and its like, Get in line. A card companys attitude may be, Yeah, you and everybody else, says Ken Clark, author of The Complete Idiots Guide to Getting Out of Debt.

Based on experience negotiating with creditors, debt settlement companies know what percentage of debt owed each creditor is likely to agree to, Gordon says. The pros also have more leverage with creditors due to their volume of business.

Its kind of like, you can change your own oil in your car, but that doesnt mean youre going to do it the right way, Gordon says.

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Understanding Your Debt Payoff Options

While it’s best to pay off debt that’s in collections rather than settling it, both options are far more beneficial than ignoring the debt completely. You should give yourself credit for reaching the point at which you’re ready to face your debt and get rid of it. While it may take time and effort, the promise of being debt-free is a meaningful, and realistic, goal to pursue.

Take These Steps To Prepare For Credit Card Debt Negotiation

How Can I Pay Off the Credit Card Debt I Racked Up Over ...
  • If you have at least some income trickling in, review your budget to see how much you can reasonably afford to pay.
  • Cut expenses back to bare bones. Think of this as a guerilla budgeting period, where you only pay for bills and absolute necessities.
  • Also, write down what steps youre taking to restore your income if it was cut during the pandemic.
  • Are you working side gigs until you find full employment?
  • How many jobs are you applying to per week?
  • When do you believe you can reasonably expect to resume full-time work?
  • Finally, note how rollbacks in federal relief this summer have impacted your situation:
  • Do you live in a state where your unemployment benefits have been cut?
  • Are you renting and now facing eviction since the moratorium expired on July 31?
  • Did you apply for emergency rental assistance and get denied or is it not offered where you live?
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    Can I Negotiate A Debt Settlement By Myself

    Have you ever wanted to negotiate a debt settlement to save thousands of dollars? With the average consumer debt in Canada reaching over $71,000 in Q1 2019, Canadians are seeking to reduce their debt loads. In addition to traditional debt relief options such as and debt consolidation, many Canadians are also considering debt settlement.

    Depending on your financial status, debt settlement may be a viable solution. You can achieve debt settlement either by contacting a third-party credit counselling agency or on your own.

    This article discusses:

    • Settling debt on your own
    • The process to do so
    • Pros and cons of going with a company

    Does Citibank Offer Debt Settlement

    Citibank is one of the biggest banks in America. In fact, they are the 4th largest retail bank in the United States. Some people think Citibank is notorious for being a difficult bank to deal with when it comes to debt settlement but according to its customers, Citibank does agree or offer credit card debt settlements.

    For example, one previous customer in a myFICO discussion thread shared that Citibank offered him a 40% debt settlement, which means he will only pay 40% of his total debt for it to be erased. Another Reddit user said that he was offered an $800 settlement to erase his $3,000 debt. This means he only had to pay around 27% of his debt. These customer stories show that it is possible to get offered a debt settlement from Citibank.

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    Debt Settlement Has Risks

    Although a debt settlement company may be able to settle one or more of your debts, consider the risks associated with these programs before you sign up:

    1. These programs often require that you deposit money in a special savings account for 36 months or more before all your debts will be settled. Many people have trouble making these payments long enough to get all of their debts settled. They drop out the programs as a result. Before you sign up for a debt settlement program, review your budget carefully to make sure you are financially capable of setting aside the required monthly amounts for the full length of the program.

    2. Your creditors have no obligation to agree to negotiate a settlement of the amount you owe. So there is a chance that your debt settlement company will not be able to settle some of your debts even if you set aside the monthly amounts the program requires. Debt settlement companies also often try to negotiate smaller debts first, leaving interest and fees on large debts to grow.

    Avoid Talking To Debt Collectors On The Phone

    How To Settle Credit Card Debt Yourself

    Only talk to a debt collector on the phone if youre confident in your abilities to stay calm. Debt collectors are known for being harsh and evoking strong emotional responses. However, if you want to give it a try and talk to someone on the phone, just remember that you can hang up at any time.

    When you talk to someone, get their full name and any other identifying information. Then, take comprehensive notes so that you have records of everything that was said or agreed on. You can then send a copy of your notes to the debt collector via mail.

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    Determine Your Best Option

    There are a few different paths you can take to negotiate your credit card debt. No matter which method you choose, make sure to evaluate your own budget first. What kind of payment plan could you afford? Could you manage to pay off the full amount in a lump sum payment? If you choose monthly payments, how much could you reasonably fit into your budget?

    Does Negotiating Credit Card Debt Affect Your Credit

    Negotiating credit card debt can hurt your credit, which is why it’s best to consider other options first.

    If you’ve missed any payments, your credit score will already have taken a hit. And credit card companies often won’t negotiate credit card debt until you’ve been late on paying your bill.

    Here are the ways negotiating credit card debt can affect your credit, depending on the type of agreement you reach with your card issuer:

    • When you settle a debt, creditors generally report the debt as settled, rather than paid in full. This will be a negative mark on your credit report because it shows you didn’t fully repay money you borrowed.
    • If the card issuer cancels your credit card, it will reduce the available credit you have, which can increase your . It can also reduce your average credit account age. Both those factors can impact your credit score.

    The good news is that after you negotiate your credit card debt and fulfill your end of the agreement, you won’t have additional late payments or high balances recorded on your credit report. With no new negative information being posted, you can start to rebuild your credit.

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    Debt Settlement Negotiations: A Do

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    With do-it-yourself debt settlement, you negotiate directly with your creditors in an effort to settle your debt for less than you originally owed.

    The strategy works best for debts that are already delinquent. Creditors, seeing missed payments stacking up, may be open to a settlement because partial payment is better than no payment at all.

    Debt settlement is an option if your payments are at least 90 days late, but its more feasible when you’re five or more months behind. But because you must continue to miss payments while negotiating, damage to your credit stacks up, and there is no guarantee that youll end up with a deal.

    There are better ways to handle your debt than DIY debt settlement. If you decide to proceed, handling debt settlement negotiations yourself may be a better option than using a debt settlement company, which can be expensive and ineffective.

    Heres how DIY debt settlement compares to using a debt settlement company, and how to negotiate with a creditor on your own.

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