The Basics of Debt Negotiation
Debt settlement is an agreement between a lender and a borrower for a large, one-time 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 example, may approach the credit card company and offer to pay $5,000. In return for this single payment, the credit card provider agrees to forgive or erase the remaining $5,000 still owed.
Why would a credit card company voluntarily choose to give up a sizable part of the balance it is owed? It is usually because the lender is either strapped for cash or is afraid of your ultimate inability to pay off the entire balance. In both circumstances, the credit card company is trying 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 provider-- or a debt collector-- can take to pay off an unpaid balance.
While negotiating with a credit card company to settle a balance might seem too good to be true, it's not. Not surprisingly, lenders don't like to promote settlement, and although there are no independent statistics regarding success rates, the Federal Trade Commission (FTC) estimates that approximately 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 may agree to take what it can get, providing you one last chance to get back on your feet.
The Negotiating Process
Start by calling the main phone number for your credit card's customer support department and asking to speak with someone, ideally a supervisor, in the "debt settlements department." Explain how critical your situation is. Highlight the fact that you've gathered a small amount of cash together and are wishing to settle one of your accounts before the money gets used up somewhere else. By mentioning the fact that you have multiple accounts on which you're seeking debt settlements, you're more likely to get 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 recommended, consider attempting to settle with a different creditor or just put the money in savings to help pay future monthly bills.
Last but not least, when you've finalized your debt settlement with your lender, be sure to get the agreement in writing. It's not unusual for a credit card company to verbally accept a debt settlement only to hand over the remaining balance to a collections agency. Be sure the written agreement clarifies the amount you need to pay in order to have your entire balance excused from additional payment.
For More Information About Debt Negotiation in Orange, California, Contact Thomas K. McKnight LLP At (800) 466 - 7507 or Visit Our Website at TKMLLP.Com for a Free Consultation!