Negotiate Credit Cards Before Charge Off
You know that the first and often best opportunity to negotiate and settle for the lowest payoff will be with your bank, and prior to your account charging off. The better you understand why you should target as much of your debt negotiations with your original lenders, the more strategic, committed, and proactive you can be in raising the money you will need. You will want to understand how and why to prioritize some of your accounts over others for earlier negotiation. You should also know that it is okay when some of your debts progress into later stages of collection. Some of your debt may in fact be best negotiated and settled in 2nd or 3rd stage collections.
Do not hesitate to get help and feedback when prioritizing the debts you will negotiate first, second, third etc. You can do that by participating in the comment sections below, or on any of the pages you visit on this site.
You should know that it is best to be prepared to pay your settlements from a separate bank account that you set up specifically for this purpose. Having your set aside account set up in advance is just good planning.
Debt Relief Options For Insolvency
Depending on your circumstances and the types of debts you have, you may need legal help to resolve your debt problems. Two options are available to all Canadians, a Consumer Proposal and Bankruptcy.
Consumer Proposal
Once it is agreed to, a consumer proposal is a legal agreement between you and your creditors to settle your debts. The process in Canada is governed by the Bankruptcy & Insolvency Act and allows you to repay a portion of your unsecured debts over a period of no more than 5 years.
A lot of debt relief companies and agencies have heavily advertised and over promoted the benefits of consumer proposals vs bankruptcy; you can learn more about the differences between the two here.
Bankruptcy
Bankruptcy is a legal process that someone can enter into when they are not able to pay their debts, and they do not have any assets they can sell to pay their creditors. Someone in this position is said to be insolvent. The legal process for bankruptcy in Canada is governed by the Bankruptcy & Insolvency Act.
Declaring Bankruptcy or filing a Consumer Proposal does not always provide debt relief from all of your debts. Before you choose an extreme solution to deal with your debts, make sure that you have considered all of your options. Even if you think that you are completely insolvent, you should look at alternatives to bankruptcy first to make sure that you have considered all of your options. A certified credit counsellor can help you do this.
How To Negotiate Credit Card Debt In Seven Steps
Negotiating credit card debt can be an extensive process. It can go a lot smoother if you prepare ahead of time. Start with the following steps:
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How To Negotiate: Credit Card Debt Settlement Yourself
So youre wondering how to negotiate credit card debt yourself? Debt settlement should be your last resort, whether you plan to negotiate credit card debt on your own or use a service. If youre to the point where you just need to settle a few small debts on your own, the following guide will show you exactly how to do so. But the truth is, if you have high debt , programs are available to help you pay off your debt for the least possible amount so that you dont have to deal with the stress.
Before you decide to settle credit card debt on your own, speak to a debt counselor about debt validation. The consultation is free, allowing you to compare your options before diving in with the sharks! And trust us, debt collectors are just that, sharks! Validation can be a much cheaper method of dealing with high credit card balances. Debt Validation is rated #1 by TrustedCompanyReviews.com. Not only is validation cheaper, but additionally, you could end up getting the debt removed from your credit report entirely. Call 376-9846 for a free consultation now! Our counselors are all IAPDA trained, and weve been assisting consumers with debt relief programs since 2004.; You must have over $7,500 in total unsecured debt to qualify for a program.
Before resorting to settling debt, consider debt validation. Heres why:
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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You May Not Need To Use A Debt Settlement Company After All
If you find yourself crippled by , 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.
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 you’re considering settling your credit card debt, you’ve 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 . ;
Why would a credit card company let you off the hook for less than what you owe? It simply comes down to whether they want some of their money back versus none of it. Credit card debt is unsecured debt, meaning it’s not tied to an asset like a house or a car. So if a person’s financial situation gets so dire that they file for;bankruptcy, it’s possible a credit card company won’t see any of the debt repaid.
Some people work with debt settlement companies to help them negotiate a settlement with credit card companies, but it’s also something you can do on your own. Debt settlement is not without its risks, however. Your credit could take a further hit and it could take years for it to recover, but it’s a definite option for debt relief. Here’s what you need to know:
Don’t Give Them Access To Your Bank Account
If you negotiate a plan for paying off the debt, whether it’s a lump sum or a payment plan, NEVER give them access to your bank account! ;This is a recipe for disaster!
Some collection companies will monitor that account and make a huge withdrawal at the worst possible time. ;Some will accidentally take out more than you agreed to.
Getting that straightened out and getting your money back will be an exercise in futility. ;Avoid giving them access at all costs!
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Who You Call To Settle Your Credit Card Debt
With your list of credit cards prioritized, and your timing set, making your calls to negotiate will start like prior calls I have suggested. Different creditors have different departments that handle delinquent accounts. In the first month or three of missing a payment, your calls may be handled by the banks customer service department. After 90 days of non-payment, calls are often routed to, or made by, a department that handles bank recovery.
Your banks recovery team will be who you are able to settle with. The number you call when you are ready to negotiate the settlement could be:
- one you received in a collection notice from your bank recently.
- the number on the back of your card .
- dependent on the creditor your account may be out with a collector even before the account charges off, in which case you may be calling a collector, are get routed to one when you call in.
If You Cant Pay Your Cards Stop Trying
In a lot of cases, credit card companies wont even consider negotiating if you cant provide evidence of financial hardship.;
Trust me, theyre more than happy to continue to accept your minimum payment for the next 20 years. Youll end up paying a mountain of interest, and you may even rack up more debt if you continue to use your account.;
As a result, it may be necessary to stop making payments on your credit cards if you can no longer afford to do so. Creditors start reporting late payments when youve been late for 30 days or more, so doing this will negatively impact your credit score. But if this process can give you a second chance to get your finances in order, it may be worth it.;
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Reasons To Choose Diy Debt Settlement
Using a debt settlement company can be less work than negotiating on your own, but it has some significant downsides. Firstly, debt settlement companies dont help you out of the goodness of their hearts. Theyre for-profit companies working for a fee.
According to Forbes, most debt settlement companies charge 15% to 25% for their services. It can be a percentage of either the total amount you owe or the settlement amount. Thus, if you settle $10,000 in debt for $5,000, you could owe another $750 to $2,500 in fees.
DIY debt settlement can also be faster. Debt settlement companies often require you to stop making payments on your debt and instead set money aside in a special account for at least 36 months . They dont begin negotiating with your creditors until theres enough in the account to cover your lump-sum payment and their fee.
This plan is both slow and risky. According to the Federal Trade Commission , many people cant keep up the payments for the full three years. They drop out of the program without getting their debts settled.
Even if you manage to make all the payments, theres no guarantee the company can settle all your debt. And in the meantime, those three years without any payments damages you financially. Your will fall, and your debts may continue to accumulate late fees and penalties, leaving you still more to pay off.
How To Negotiate With Debt Collectors
In some cases, a creditor may have turned your debt over to a debt collector. Debt collectors make money by collecting past-due debts that originated with a creditor, such as a credit card company.
When dealing with debt collectors, be patient. It may take several attempts to get the type of settlement youre comfortable with. Resist pressure to agree to a settlement thats not in your best interest. Also, ask about whether the debt collector is willing to settle the debt through a payment plan rather than all at once, with one lump-sum payment.
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The Basics Of Debt Settlement
Debt settlement involves negotiating with creditors to significantly reduce the amount of money you owe. Unlike the less dramatic forms of achieving debt relief, like debt consolidation or a debt management plan, with debt settlement, you repay only a portion of the principal you owe.
Lets say, for instance, that youre overdue on $5,000 you owe to one credit card issuer and $5,000 you owe to another credit card issuer. In order to get at least some of their money, the card issuers then decide to accept a lump-sum payment representing 50% of what you owe. So, instead of possibly not getting a penny from you, each creditor receives a lump-sum payment of $2,500.
How To Negotiate Your Own Debt Settlement
The following is presented for informational purposes only and is not intended as credit repair or legal advice.
If you feel like youre drowning in debt, the idea of settling for less money than you owe can be appealing. You could hire a debt settlement company that will work on your behalf to negotiate settlements with your creditors. However, you may need to save up enough money to pay the creditor and the settlement companys fee before you can settle your accounts.
As a result, working with a debt settlement company could prolong the process and cost you more money overall.
A do-it-yourself approach may be just as effective, save you money, and let you settle your debts sooner.
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Be Prepared For Creditors Calling About Your Delinquent Debt
During this process, expect a lot of phone calls from the creditors even bordering on creditor harassment. While you want to do this on your own, it is a lot of work with a lot of problems. Working with a settlement law firm can help you and make sure that the collection agency is following the Fair Debt Collection Practices Act, which lays out when the credit card company can contact you, what they can and cannot say to you and other illicit debt collection practices. Make yourself familiar with these and the complaint process in case a creditor does not follow these rules so you know how to protect yourself from creditor and creditor harassment.
What The Research Says
A number of financial and credit experts believe that paying off the smallest debt first is the best way for consumers to pay down their credit card debt. Heres a look at some research that backs up this theory.
- A Boston School of Business study finds that the repayment strategy you choose can have an influence on how much money you apply toward debt elimination. Consumers in the study who paid off their accounts one by one paid down their debt 15% faster than those who made their debt payments in equal amounts. Conclusion: Small wins can keep you motivated.
- Experian provides an example of how the debt snowball method can save you money on interest. In the scenario, a consumer who has nearly $19,000 in debt could use the debt snowball approach to pay $4,300 less in interest, even without making extra payments above the total amount due when he or she created the original debt payoff list. The secret is applying the extra money you free up when you pay off your first debt toward the next highest balance .
- myFICOpoints out that the debt snowball method might also help you lower the rates on your individual credit card accounts faster than the debt avalanche. Why is this point meaningful? Anytime you lower the balance-to-limit ratio on a credit card , theres a chance your credit score might improve. And a higher credit score may save you money in ways that arent always immediately apparent.
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How Resolve Can Help
If youre dealing with debt and not sure what to do, were here to help. Become a Resolve member and well contact your creditors to get you the best offers for your financial situation. Our debt experts will answer your questions and guide you along the way. And our platform offers powerful budgeting tools, credit score insights and more. Join today.
Try To Settle Before Your Account Goes To Collections
If you’re having trouble paying down your debt, it’s best to be proactive. ;You’ll likely have more success with debt negotiation if you try to settle your debt before it goes to collections.
However, there is no way to know how a credit card company will react once you make the call. ;Some will be willing to work with you, and some will not make any effort at all.
You should be careful about how much you tell them when negotiating your debt. ;If you lost your job or have had a family emergency, they may be more willing to work with you for a while. ;But if you tell them you just can’t afford to pay because you have too much debt, they may be less likely to help out.
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