Navigating Debt Negotiation:
Thomas K. McKnight, Your Bankruptcy Service Lawyer in Irvine, CA
The Basics of Debt Negotiation
Debt settlement represents an accord reached between a lender and a borrower, wherein a substantial lump-sum payment is made toward an existing debt balance, leading to the exoneration of the remaining debt. For instance, imagine an individual grappling 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 one-time payment, the credit card provider agrees to pardon or erase the remaining $5,000 debt.
But why would a credit card issuer voluntarily agree to relinquish a significant portion of the outstanding balance? Typically, this occurs when the lender faces financial constraints or harbors concerns about the borrower's ultimate inability to repay the full balance. In both scenarios, the credit card issuer endeavors to safeguard its financial interests—an essential aspect to consider as you embark on negotiations.
It's worth noting that credit cards constitute unsecured loans, meaning there is no collateral that your credit card company—or a debt collector—can seize to settle an unpaid debt.
While the idea of negotiating with a credit card company to settle a debt may sound too good to be true, it is indeed a viable option. Notably, lenders do not actively promote debt settlement, and though precise success rate statistics are scarce, the Federal Trade Commission (FTC) estimates that roughly half of debt settlement cases reach a resolution. Consequently, if you find yourself significantly behind on payments and teetering on the brink of bankruptcy, your lender might be willing to accept what it can recover, granting you a final opportunity to regain your financial footing.
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, in the "debt settlements department." Clearly articulate the urgency of your financial predicament. Emphasize your diligence in accumulating a modest sum and your intention to settle one of your accounts before allocating these funds elsewhere. Mentioning your pursuit of debt settlements across multiple accounts often encourages the receipt of competitive offers.
Present a specific dollar amount, approximately 30% of your outstanding account balance, as your proposed settlement amount. The lender may respond with a counteroffer suggesting a higher percentage or dollar figure. If the counteroffer surpasses 50%, it may be prudent to explore negotiations with a different creditor or allocate the funds toward addressing future monthly expenses.
Finally, upon reaching a debt settlement agreement with your lender, insist on obtaining a written confirmation. It's not uncommon for a credit card provider to verbally endorse a debt settlement only to subsequently transfer the remaining balance to a collections agency. Ensure that the written agreement explicitly specifies the agreed-upon amount required to absolve your entire balance, relieving you from any further payment obligations.
For comprehensive insights into Chapter 7 and Chapter 13 bankruptcy or guidance on initiating your bankruptcy proceedings in Irvine, 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.
