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. Someone that owes $10,000 on a single credit card, for instance, might approach the credit card provider and offer to pay $5,000. In return for this one-time payment, the credit card provider agrees to forgive or eliminate the remaining $5,000 still owed.
Why would a credit card issuer willingly choose to give up a significant amount of the balance it is owed? It is typically because the lender is either strapped for cash or is fearful of your eventual failure to pay off the whole balance. In both situations, the credit card company is attempting to protect its financial bottom line-- a key point to remember as you start negotiating.
Credit cards are unsecured loans, which means that there is no collateral your credit card company-- or a debt collector-- can take to repay an unpaid balance.
While negotiating with a credit card provider to settle a balance might sound too good to be true, it's not. Not surprisingly, lenders do not like to advertise settlement, and although there are no independent statistics about success rates, the Federal Trade Commission (FTC) estimates that around fifty percent of debt settlement cases make it to completion. Still, if you're seriously behind on your payments and spiraling towards bankruptcy, your lender might be willing to take what it can get, offering you one last chance to get back on your feet.
The Negotiating Process
Start by calling the primary phone number for your credit card's customer support department and asking to speak with somebody, preferably a supervisor, in the "debt settlements department." Explain how dire your situation is. Highlight the fact that you've gathered a little bit of cash together and are wishing 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 get a competitive offer.
Offer a specific dollar amount that is about 30% of your outstanding account balance. The lender will probably 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 bills.
Last but not least, as soon as you've finalized your debt settlement with your lender, be sure to get the agreement in writing. It's not unheard of for a credit card provider to verbally accept a debt settlement only to hand over the remaining balance to a collections agency. Ensure the written agreement clarifies the amount you need to pay in order to have your entire balance excused from further payment.
For More Information About Debt Negotiation in Newport Beach, California, Contact Thomas K. McKnight LLP At (800) 466 - 7507 or Visit Our Website at TKMLLP.Com for a Free Consultation!
