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How To Negotiate Credit Card Debt Settlement Yourself

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Determine If Negotiation Is Right For You

How to negotiate credit card debt settlement yourself : Frugal living to be debt free

You cant make the determination about whats right for you until youve calculated how much you owe and how much time you realistically would need to pay off your debts without going through debt settlement.

Total it up. Get a calendar out. Dont ballpark it. Be honest in your assessment.

If the period required is unrealistic or virtually impossible given other financial obligations, negotiating with creditors might be the best choice.

You shouldnt expect to get debt relief overnight, but creditors and collection agencies might be more willing to negotiate with you than you think if you are months behind in payments.

Why? In many cases, they are incentivized to reach a settlement out of concern they might end up getting nothing, and having to write off the entire debt.

Dealing directly with creditors would save you the expense of paying a for-profit debt settlement company to negotiate on your behalf. Even the reputable debt settlement companies can overpromise on the terms and the timetable for debt relief. The DIY savings could be significant, as some debt settlement companies charge 20%-25% of the enrolled debt.

What Is A Bankruptcy

Bankruptcy is the last resort but not the end of the world. In some cases, can be the best option to eliminate debt and allow you to start over with a clean slate. A Bankruptcy can only be administered by a Licensed Insolvency Trustee like Bromwich+Smith, once signed, it affords you legal protection from your creditors which means peace of mind for you. A first time Bankruptcy is usually discharged in 9 months and affects your credit as an R9. Something to consider in this option is you will likely have to sell your assets .

Licenced Insolvency Trustees, Bromwich+Smith have debt relief specialists available to offer debt advice and debt restructuring entirely from the comfort of your own home. Now offering video appointments with clients, Bromwich+Smiths Debt Relief Specialists are available for initial free, no obligation, confidential consultation by phone at 1-855-884-9243 or request a call back at contact us page.

Taz Rajan Community Engagement Partner at Bromwich+SmithTaz has been in the finance industry for nearly 2 decades and has always been passionate about education and empowerment. Having declared bankruptcy herself, she intimately understands the shame, stigma surrounding matters of debt as well as the joy and relief that comes from restructuring. Taz actively works to normalize the conversation of debt through blogs, media interviews, webinars, lunch & learns and through building relationship.

Know Who Holds The Debt

First, make sure you know who youre talking to. There are a few different types of companies that you may be talking to for a settlement:

  • The original creditor i.e. the credit card company that you have the account through
  • An in-house collections department, who may be trying to collect on a debt thats past-due but not charged off yet
  • A third-party debt collector thats attempting to collect on a charged off debt on behalf of the original creditor
  • A debt buyer, who purchased a portfolio of bad debts from the credit card company for a small percentage of each amount owed.

Adebt buyeris much more likely to settle for a lower amount. They paid pennies on the dollar to purchase your debt from the credit card company. If they purchased your debt for 5% of what y6 Steps for Negotiating Debt On Your Ownou owed, then even a 10% settlement offer might be enough to get an agreement. Theyd still make a 5% profit.

Original creditors are much less likely to settle and usually require higher amounts to get an agreement. Also, if the original creditor has not sold the debt, even a third-party collector cant agree to a settlement without the creditors signoff.

So, if you negotiate with ABC collection company, they must get the agreement from Capital One or Wells Fargo or you may still face issues. You could settle with the collection agency, but the original creditor will continue to come after you for the remaining balance.

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Diy Debt Settlement Vs Debt Settlement Companies

Time and cost are the main distinctions between debt settlement through a company and doing it yourself.

You may be able to get faster results with DIY debt settlement. While completing a plan through a company can take two and a half years or more, you may be able to settle your debts on your own within six months of going delinquent, according to debt settlement coach Michael Bovee.

With a debt settlement company, youll likely pay a fee of 20% to 25% of the enrolled debt once you agree to a negotiated settlement and make at least one payment to the creditor from an account set up for this purpose, according to the Center for Responsible Lending.

In addition, youll likely have to pay setup and monthly fees associated with the payment account. If you pay $9 a month to manage the account plus a setup fee of $9, you could pay upward of $330 over 36 months on top of the fee taken for each settled debt.

Debt settlement companies also can have inconsistent success rates. The Consumer Financial Protection Bureau has logged more than 330 complaints against debt settlement companies since 2014. Among the most common issues were fraud and excessive fees. In 2013, the CFPB took legal action against one company, American Debt Settlement Solutions, saying it failed to settle any debt for 89% of its clients. The Florida-based company agreed to effectively shut down its operations, according to a court order.

> > How to pay off your debt:A three-step strategy

Review A Written Settlement Agreement

How To Negotiate Credit Card Debt Settlement Yourself ...

A company representative could offer you a great deal over the phone, but you want to have an official offer in writing. The proposal should have your name, the creditor or debt collectors name, and the account number. It should also have the terms of the settlement, such as the amount being paid, whether its paid in a lump sum or over time, and the payment due dates.

Make sure the letter clearly states that your payment will satisfy your obligation. It may say the account will be settled, paid in full, accepted as settlement in full, or something similar. Keep a copy of the letter, and any payment confirmations, in case a collection company contacts you about the debt again in the future.

In some cases, you may need to set up a payment agreement with your original creditor before it sends you the settlement letter. Try to work out an arrangement to schedule your payment in the future, giving the company several business days to get the letter to you in the meantime. You could then cancel the payment if you dont receive a letter.

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Budgeting And Cutting Back Are Two Great Options To Help You Save Up Money For A Debt Settlement But Depending On How Much You Owe They May Not Be Enough

There are ways to legally settle credit card debt that involve everything from manageable payment plans to interest forgiveness to flat out not paying all or part of what you owe based on specific legal statutes. This is very important as a paid collection is as negative to your credit rating as an unpaid collection. all your negotiation efforts and hard cold cash will do nothing to rebuild your credit report if you neglect to negotiate your credit rating in the process. Ask your creditor for a settlement letter that outlines your agreement.

Debt Hardship Letter Template

Your Name


RE: Settling a . Creditor Name and Account Number

Dear ,

My name is . I am currently going through challenging times health-wise and financially, which Im about to explain.

EXPLAIN YOUR HARDSHIP: I was diagnosed with Lime Disease on . I incurred $15,000 in medical debt, and my insurance covered only half. Included with this letter are medical receipts. I stayed at the on , and this hospital visit cost and insurance covered only . This situation has caused me to fall deeper into debt, making it impossible to continue paying on anything besides my mortgage/rent, groceries, etc.

I have not been to work in 15 days, and my income has gone from down to .

I have been on a payment plan with your firm, paying since . Unfortunately, due to this unexpected circumstance in my life, its now impossible to continue paying this amount.

This letter includes a settlement offer that I am willing to pay today to resolve this debt in one lump sum payment. The funds that I am eager to offer you today were borrowed from friends and family members who have all contributed all they are willing to provide to help me address my debt.

Ive also attached my income to illustrate that its gone down from to . I hope you are willing to work with me to resolve this debt so that I am not forced to file for bankruptcy. I even plan on giving you guys an excellent review online if you can help me out today.

Be sure to get in touch with me as soon as possible to begin the process.

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Payment Plans And Partial Payments

There are a few different methods of lowering your debt that may be acceptable to a collector:

  • Partial repayment. When dealing with a collection agency, start your negotiations low. Start by offering cents on every dollar you owe, say around 20 to 25 cents, then 50 cents on every dollar, then 75. The debt collector may still demand to collect the full amount that you owe, but in some cases they may also be willing to take a slightly lower amount that you propose.
  • A payment plan. Spend some time laying out your monthly budget. How much money do you think you’ll be able to put toward a recurring debt payment? If you had difficulty making the payments under the terms of the original creditor, you may be able to negotiate a lower monthly amount with the collector.

The Cons Of Debt Settlement

How To Negotiate Credit Card Debt

There are also some potential drawbacks to debt settlement that you should be aware of:

Debt settlement fees: Most debt settlement companies will charge you a percentage of the debt they settle for you. These fees can range from 15% to 25% and are typically paid out of the money you save by settling your debts.

Your creditor may not agree to settle: While some creditors are open to negotiating a settlement, others may refuse. Creditors are not mandated to agree to settle your debt. If they disagree, youll still be responsible for repaying the total amount of your debt.

You could end up paying more: It can take several months or even years to save up enough money to settle your debt, and during that time, interest and late fees will continue to accrue, making the total amount you owe even higher. And if youre unable to make the monthly payments required to save up for a settlement, you may default on your debt.

You could end up in default: If you stop making payments on your debt to save up for a settlement, you will technically be in default. This can lead to wage garnishment, legal action, and damage to your credit score.

You may have to pay taxes on the forgiven debt: Depending on the circumstances, the IRS could classify the forgiven debt as income, which means you would be responsible for paying taxes on it.

It can negatively impact your credit score: Any debt settlement, whether through a debt settlement company or DIY, will negatively impact your credit score.

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Sign The Formal Document

Once that agreement is reached, the terms of the settlement are laid out in writing and both parties sign the formal debt settlement agreement.

Take the time to read through the fine print and ensure that all the details are accurate. Once you sign, you cant go back.

Remember, dont pay anything until both parties sign this official document and you have a signed copy for your records.

Orderly Payment Of Debt Program

Consolidated Payment at 5% Interest

If youre a resident of Alberta or Nova Scotia, you may qualify to enter into a consolidation order known as an Orderly Payment of Debt program . Other provinces used to offer this program, but have stopped offering them because non-profits have been doing such a good job at helping consumers through their credit counselling and debt management programs.

Through an OPD program, you pay back the full amount that you owe on your unsecured debts typically over a period of 3 years. The interest rate is set at 5% and you are able to keep your assets. Your creditors must agree to your OPD program and the courts must approve it.

To find out if OPD is a good solution for you, contact the agency that administers your provinces OPD program.

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Offer A Lump Sum Settlement

If you have access to a good amount of cash, or can put it together fairly quickly, you can try to negotiate a settlement with the credit card company in three payments or less . Sometimes your credit card issuer will reduce your debt to the principal you owe. For example, lets say you have a credit limit of $9,000, but with interest, fees and penalties, your current balance is $12,000. You may be able to negotiate so that you pay just three installments of $3,000. The other $3,000 you owe will be forgiven.

Is Debt Settlement Worth It

How to Negotiate Credit Card Debt Settlement Yourself

For some people, debt settlement can be a good option. If you can negotiate a settlement thats lower than what you owe, it can help you save money and get out of debt faster.

Specifically, debt settlement may be a good option if:

  • Youre struggling to make your minimum monthly payments
  • Your debts are significantly past due
  • Youre unable to find a solution with your creditors
  • You cant afford to make the full monthly payment on your debts

On the other hand, there are some drawbacks to debt settlement that you should be aware of.

For one, it will negatively impact your credit score. Additionally, you may have to pay taxes on the forgiven debt, and you could end up owing more money if your creditors dont agree to the settlement terms.

Before you decide to pursue debt settlement, you must understand all potential risks and rewards. Work with a qualified financial professional to explore your options and make the best decision for your unique situation.

However, if you finally decide to go for it, keep these few things in mind.

Review your finances. Youll need to clearly understand your current financial situation before deciding if debt settlement is right for you. This includes knowing how much debt you have, the kind of debt, and your current income and expenses.

You can get a good idea of your current financial situation by reviewing your credit report and creating a budget.

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Why Do Creditors Accept Settlement Offers

With a secured loan, like a mortgage or auto loan, the lender may have a right to claim the collateral and wont be as willing to settle. But theres no collateral with unsecured loans, , personal loans, and medical bills. Creditors can either send your accounts to collections, sue you for nonpayment, or sell the debt to a third-party debt buyer or collector.

Sending an account to collections isnt free, as the company will have to pay operational costs for in-house collections or a fee to third-party collectors. Hiring attorneys to sue you for unpaid debts costs money as well. Even if the creditor can sell the right to collect the debt, it often wont recover the full amount you owe.

According to a Federal Trade Commission report on the debt buying industry from 2013, debt buyers paid an average of 4.0 cents per dollar of uncollected debt. The figure may include debts that have been sold and resold multiple times, which can lower their value. Still, as a borrower, you may see why you have some negotiating power.

If you offer your original creditor more than it could potentially make from a debt buyer, it may accept your offer even if its for less than the full amount owed. Similarly, if you offer a debt collector more than it paid for your debt, it may be making money even if you dont repay the debt in full.

How To Negotiate Credit Card Debt Settlement By Yourself

  • Kate Rockwood

If you find yourself crippled by credit card debt, having racked up charges that will be hard to pay off, you might be able to settle your accounts with your lenders for less than what you owe. And you might not need a debt settlement company to do it. Heres how to negotiate credit card debt by yourself.

Settling debt means coming to an agreement with your creditors to pay back part of what you owe while being forgiven for the rest. If youre considering settling your credit card debt, youve probably already missed some payments, perhaps even several months worth. You may have already been referred to a collection agency. All of this puts a big dent in your credit score.

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Negotiating Car Motorcycle Boat And Other Secured Loans

It’s easier to negotiate these types of secured loans if the loan originated from a small local bank. If you’re having trouble making your car loan or lease payments, you might be able to negotiate with the lender or leasing company to get lower payments, get an extension of time to make the delinquent payments, cancel your car lease, or work something else out.

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