Debt Settlement Simplified: Thomas K. McKnight, Your Debt Negotiation Attorney in Tustin, California
Understanding Debt Settlement
Debt settlement represents a mutually agreed-upon arrangement between a lender and a borrower, involving a substantial one-time payment towards an existing debt balance, in return for the absolution of the remaining debt. For instance, envision an individual burdened with a $10,000 debt on a single credit card. In this scenario, the individual can engage with the credit card provider and propose a payment of $5,000. In exchange for this singular payment, the credit card provider consents to pardon or erase the remaining $5,000 debt.
But what prompts a credit card issuer to willingly relinquish a substantial portion of the outstanding balance? Typically, this occurs when the lender faces financial constraints or harbors concerns about the borrower's ability to repay the entire balance. In either circumstance, the credit card provider's objective is to safeguard its financial interests—an essential consideration as you initiate negotiations.
Credit cards constitute unsecured loans, implying that there is no collateral that your credit card provider—or a debt collector—can seize to recoup an unpaid debt.
While the notion of negotiating with a credit card company to settle a debt may seem too good to be true, it is a legitimate avenue. It's important to note that lenders do not actively promote debt settlement, and while precise success rate statistics are elusive, the Federal Trade Commission (FTC) estimates that approximately fifty percent of debt settlement cases reach a resolution. Consequently, if you find yourself significantly delinquent on payments and inching closer to bankruptcy, your lender may be open to accepting a negotiated settlement, offering you a final opportunity to regain financial stability.
Navigating the Negotiation Process
Initiate the negotiation process by dialing the primary contact number for your credit card's customer service department. Request to converse with a representative, ideally a manager, from the "debt settlements department." Articulate the urgency of your financial predicament, emphasizing your efforts to pool together funds for settling one of your accounts before allocating these funds elsewhere. Mentioning your pursuit of debt settlements across multiple accounts often encourages more competitive offers.
Present a specific dollar amount, typically around 30% of your outstanding account balance, as your settlement proposal. The lender may respond with a counteroffer suggesting a higher percentage or dollar figure. If the counteroffer exceeds 50%, it may be prudent to explore negotiations with a different creditor or allocate the funds to address future monthly expenses.
Lastly, upon finalizing your debt settlement with the lender, insist on obtaining a written agreement. It is not uncommon for a credit card provider to verbally agree to a settlement only to transfer the remaining balance to a collections agency. Ensure that the written agreement explicitly outlines the agreed-upon amount required to absolve your entire balance, relieving you from further payment obligations.
For comprehensive insights into Chapter 7 and Chapter 13 bankruptcy or guidance on commencing your bankruptcy proceedings in Tustin, CA, reach out to Thomas K McKnight LLP at (800) 466-7507 or visit our website at TKMLLP.Com. We offer a free consultation to empower you on your path to financial stability.
