Wednesday, January 25, 2023

How To Settle Credit Card Debt In Collections

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Option : Try A Debt Management Program Instead

Is it Better to Settle a Collection Account or Pay it in Full? Credit Card Insider

Depending on your amount of debt, a debt management program may be a better choice for your financial situation. Debt management programs help you make a budget and pay off your debt in full. This differs from a settlement, which means you are paying less than you owe. With debt management, you repay the balance you owe in full, but reduce or eliminate interest charges. Since you repay the principal in full, you can avoid the credit damage caused by settlement.

Can I Settle A Debt After A Lawsuit Has Been Filed

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In a Nutshell

It can feel overwhelming to be served with a lawsuit, especially if youâre being sued for unpaid debts. A lot of people face debt problems at some point in their lives. If youâre facing debt-related challenges, youâre not alone and you do have options. Even if youâve been sued because of an unpaid debt, you can still potentially resolve the matter, as you can manage this debt in a variety of ways.

Hearing the words âyouâve been servedâ is a dreaded thing. It can feel overwhelming to be served with a lawsuit, especially if youâre being sued for unpaid debts. A lot of people face debt problems at some point in their lives. If youâre facing debt-related challenges, youâre not alone and you do have options. Even if youâve been sued because of an unpaid debt, you can still potentially resolve the matter, as you can manage this debt in a variety of ways.

How Debt Settlement Works

Debt settlement companies may also be known as debt relief or debt adjusting companies. The companies generally offer to contact your creditors on your behalf, so they can negotiate a better payment plan or settle or reduce your debt. They typically charge a fee, often a percentage of the amount youd save on the settled debt.

Learn more about different types of debt relief and how they work.

The company may try to negotiate with your creditor for a lump-sum payment thats less than the amount that you owe. While theyre negotiating, they may require you to make regular deposits into an account thats under your control but is administered by an independent third-party. You use this account to save money toward that lump payment.

While they negotiate, the debt settlement company may also advise you to stop paying your creditors until a debt settlement agreement is reached.

Once the debt settlement company and your creditors reach an agreement at a minimum, changing the terms of at least one of your debts you must agree to the agreement and make at least one payment to the creditor or debt collector for the settled amount. And then the debt settlement company can begin charging you fees for its services.

Keep in mind that there is no guarantee the company will be able to reach a debt settlement agreement for all of your debts.

How to ask for help when youre struggling financially.

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Consider Filing For Bankruptcy Instead

If you have a lot of unsecured debt that you could get discharged , bankruptcy might be a better choice. While your will take a major hit, it’s probably already significantly damaged by your missed debt payments. The most common types of bankruptcy cases that individuals file are Chapter 7 and Chapter 13. A Chapter 7 bankruptcy case allows you to eliminate many types of debt. A Chapter 13 bankruptcy case allows you to restructure your debts through a supervised repayment plan.

With a Chapter 7 bankruptcy case, you might be able to eliminate most of your unsecured debt, including medical bills and credit cards. You may also surrender real estate or vehicles that you’ve financed if you don’t want to keep those debts. With a Chapter 13 bankruptcy case, you repay a portion of your unsecured debts through the court-supervised repayment plan. Depending on your circumstances, you might be able to pay for your vehicle at a reduced rate, and also save your home fromforeclosureand vehicle fromrepossession.

As soon as you file for bankruptcy, an automatic stay goes into place. The stay prohibits most creditors and collectors from continuing collection activity against you. The automatic stay has the power to stop harassing phone calls, lawsuits, garnishments, repossessions, and foreclosures.

How Else Can You Get Help Settling Your Debt

Debt Negotiation Services

If youre not confident in your ability to handle the process and negotiate the debt settlement successfully on your own, you can hire an outside firm to do it for you. In general, it is best to utilize a debt settlement service with extensive experience in negotiations.

Check Out Our Top Picks:Best Debt Settlement Companies of 2021

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How To Avoid Being Sued By A Creditor

Your risk of being sued by a creditor increases after the six-month mark of nonpayment. Thats when many creditors charge off an account, meaning, they write off a debt as uncollectible and report it as a charge-off to the credit bureaus. However, youll still be expected to pay it. The six-month mark is often also the point when your creditor might typically hand your debt off to a third-party collection agency or sell it to a debt buyer.

To avoid a lawsuit, try to settle your debts before a charge-off occurs. Call the creditor or the debt collector and see if you can negotiate a settlement. If you have more than one debt, try to target one or two accounts to settle first, prioritizing those that are most likely to sue you.

How To Settle Credit Card Debt

When it comes to how to settle credit card debt, your two main options are to hire a debt settlement company to negotiate a reduced lump sum payment on your behalf, or negotiate directly with your credit card company.

If youre in debt, theres a chance you want to get out of it as soon as possible. Thats because it can be hard to pay off your debts if you take a long time. Also, taking more time to pay off your debt will mean paying more because the debt will build up in interest.

Too many Americans struggle with credit card debt. The average American makes $61,937 a year, but they have to pay an average of $3,100 in credit card payments each year.

This means that most Americans are spending most of what they earn paying debts. If youre struggling to pay off your credit card, read on. This post will help you find ways how to settle your credit card debt with ease.

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How Does Credit Card Debt Settlement Affect Your Credit Score

If you work with a debt settlement company, the company might advise you to stop making payments on your debt during the negotiation process. This may cause your debt to fall into delinquency, which your creditors will then report to the credit bureaus. Delinquencies stay on your credit report for seven years, meaning you could feel negative impacts even after you settle the debt.

Debt settlement may also affect your credit score if it affects your credit utilization. If you stop making payments on your debt, your balance may climb due to additional charges and late fees. Using too much of your available credit and not paying off debt will cause your score to drop while youre in the process of settling that debt.

Consider Asking For Pay For Delete

How To Settle Credit Card Debt With Wells Fargo

As part of your debt settlement negotiation, you may be able to get the creditor or debt collector to agree to report your account as paid in full or have them request to have it deleted from your report. You can suggest this in exchange for paying some of your debt or upping the amount youre offering to pay. This is not all that likely to work with credit card banks and other lenders, but can be effective with medical and utility collections, and is also now part of the credit reporting policies at three of the largest debt buyers in the nation: Midland Credit Management , Portfolio Recovery Associates and Cavalry Portfolio. You can learn more about each of these companies pay for delete policies here.

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Avoid Debt Collection Scams

It makes sense. When youre in debt, anything that looks like a solution to getting out of debt sounds good. But unless your plan includes getting all the facts in order about your debt and obliterating the debt, youre headed for trouble.

You may be in debt, but youre not desperate. Sleazy debt collectors are a dime a dozen and so are their ugly counterparts: credit report clean up companies and companies that promise to settle your debts for you. Dont ever pay someone to provide these services. Theyre scams designed to squeeze even more money out of hurting people.

If you want to know the best next step for your situation, book a free call with a Financial Coach and get advice we stand behind.

About the author

Ramsey Solutions

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners.

What To Do When A Debt Collector Calls

Make sure to ask for and write down the following information:

  • the name of the person calling
  • the company the debt collector works for
  • the name of the company the debt collector is collecting money for
  • the debt collectors telephone number

Ask for details on the debt, such as:

  • the amount you owe
  • who you owe it to
  • when you started owing it

Tell the debt collector that you’ll call back as soon as you verify the information. Look at your bills and bank statements to help you confirm if the debt is yours and the amount you owe is correct.

You can ask the collection agency to contact you only in writing. Ask your legal advisor to send a written request to your creditor by registered mail, including an address and phone number at which you may be contacted.

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Understand How Much You Owe

The first step is to assess your credit card debt. If you have multiple credit cards, go through your statements and make an itemized list of how much you owe on each card and the respective interest rate.

Also jot down the customer service phone numbers. Now youll have all this information stored in one place once youre ready to call your credit card companies.

Know How Your Payment Will Affect You

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Be aware of what your offer means for you. Your payment will be reported to the credit bureaus if the debt is still within the credit reporting time limit, which is seven years for most debts. Paying in full typically looks better than settling your debt, but a payment looks better than non-payment.

Any payment on the debt will restart the statute of limitations on the debt giving the debt collector more time to sue you. It’s important that you make an agreement what will satisfy the debt and eliminate the risk of being sued in the future.

Settling your debt may have tax implications. If more than $600 of your debt is canceled, the collector has to report the canceled amount to the IRS. You’ll be sent a 1099-C Form to include the canceled debt as income on your next tax return.

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What Is Pay For Delete

Pay for delete refers to the process of getting a debt collector to remove collection account removed from your credit report. Its a point you can use during a debt settlement negotiation, as you settle a debt for less than you owe. You agree to pay a certain amount of money in your settlement. In exchange, the collector agrees to remove the collection account from your credit report. In some cases, a collector may require a debt to be paid in full to agree to remove the account.

Why Should You Avoid Having Your Debt Go To Collections

Its better to deal directly with the original creditor than to have your debt sold to a debt collection agency. Collection agencies are often more aggressive in their collection attempts and may take extreme measures.

The original creditor is the first source of the money loaned. However, if they cant get you, as the debtor, to pay your debt, they often turn the effort over to a debt collection agency.

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How To Pay Off Collections

10 Minute Read | September 24, 2021

Dodging debt collectors can feel like youre on a high-speed chase, bobbing and weaving through traffic with the bad guy hot on your tail. Debt collectors are ruthless and relentless. Theyll stop at nothing to get you to pay up.

But what if all the phone calls, voicemails and letters stopped? What if you didnt have to hide inside your own life any longer? Understanding how to pay off collections takes a little research, but its worth every bit of effort. So lets get right to it.

Can Paying Off Collections Raise Your Credit Score

How to Settle Credit Card Debt with Discover

Paying off debt collections will not remove it from your credit report or raise your credit score. You see, the paid collection item will remain a fixture on your report for seven years from the original delinquency date, which is the date when you missed your first payment. However, as time passes, this settlement will carry less weight and impact on your credit score.

Typically, debt settlement companies advise their clients to avoid making regular payments and make a lump sum payment instead. That is terrible advice that should not be followed as it can further reduce your credit score. It is ideal to avoid opening up multiple delinquent accounts and focus on paying all your bills and payments on time.

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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.

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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Settle Your Credit Card Debt Through Turbodebt

With the help of TurboDebt, you can regain control of your money and strive toward a debt-free life by learning about the available credit card debt relief options. Their debt settlement team has years of experience and for credit card debt settlement and financial recovery. You may even be debt-free in as little as 24 to 48 months with their help on how to settle credit card debt. Feel free to contact one of their representatives right now for a free debt relief consultation.

A Debt Consolidation Loan

Example Letters for Debt Settlement, Validation &  Credit

Debt consolidation is a great way to get out of debt, but its not always the right choice. Many people dont realize that there are two ways to approach debt consolidation one you do yourself, and another requires a counselor or financial coach. The first option is always risky and, you could end up in more debt than before.

On the other hand, Debt counselors can help you understand your finances better and make informed decisions about consolidating your debts. They also offer personal finance education, which helps clients avoid future problems with money management. So if your goal is getting out of debt for good, consider using a credit counseling service instead!

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