The Basics of Debt Negotiation
Debt settlement is an agreement between a lender and a borrower for a large, single payment toward an existing balance in return for the forgiveness of the remaining debt. Somebody who owes $10,000 on a single credit card, for instance, may approach the credit card company and offer to pay $5,000. In return for this one-time payment, the credit card company agrees to forgive or erase the remaining $5,000 still owed.
Why would a credit card provider voluntarily choose to give up a significant amount of the balance it is owed? It is usually because the lender is either strapped for cash or is fearful of your ultimate failure to pay off the entire balance. In both circumstances, the credit card company is trying to protect its financial bottom line-- a key fact to keep in mind as you begin negotiating.
Credit cards are unsecured loans, which means that there is no collateral your credit card company-- or a debt collector-- can take to pay off an unpaid balance.
While negotiating with a credit card provider to settle a balance may sound too good to be true, it's not. Not surprisingly, lenders don't like to advertise settlement, and although there are no independent statistics regarding success rates, the Federal Trade Commission (FTC) estimates that around fifty percent of debt settlement cases make it to completion. Still, if you're significantly behind on your payments and spiraling toward bankruptcy, your lender might be willing to take what it can get, giving you one last chance to get back on your feet.
The Negotiating Process
Begin by calling the main phone number for your credit card's customer service department and asking to talk to someone, preferably a manager, in the "debt settlements department." Explain how dire your situation is. Highlight the fact that you have scraped a small amount of money together and are wanting to settle one of your accounts before the money gets spent somewhere else. By stating the fact that you have multiple accounts on which you're pursuing debt settlements, you're more likely to receive a competitive offer.
Offer a specific dollar amount that is approximately 30% of your outstanding account balance. The lender will most likely counter with a higher percentage or dollar amount. If anything above 50% is proposed, think about attempting to settle with a different creditor or just put the money in savings to help pay future monthly expenses.
Last but not least, when you have finalized your debt settlement with your lender, be sure to get the agreement in writing. It's not uncommon for a credit card provider to verbally accept a debt settlement just to turn over the remaining balance to a collections agency. Make sure the written agreement spells out the amount you need to pay in order to have your total balance excused from additional payment.
For More Information About Debt Negotiation in Fountain Valley, California, Contact Thomas K. McKnight LLP At (800) 466-7507 or Visit Our Website at TKMLLP.Com for a Free Consultation!
