Buried in debt? You and a huge chunk of the American population are in the same situation. While it can be a scary, frustrating and stressful moment, there is a way out of your debt.
Debt settlement refers to getting into a new agreement with your creditor or the collection agency that involves lowering your total outstanding debt. The deal will be to pay for a percentage of your original balance and have the rest forgiven. This is done through negotiations and a thick skin attempt to prove that you are unable to meet your current payment terms.
There are two ways for you to settle your credit card debts: one is through a professional debt relief service and the other is by your own aggressive means. If you are the courageous and adventurous type, it may delight you to know that there are people who have succeeded in settling their debts on their own.
Here are the steps that you need to take in order to accomplish this.
1. Cease paying your creditors. If you continue with your payments, that will mean you are still able to pay for your current monthly minimum. You will not be successful in negotiating for a lower outstanding balance. Most of the credit card companies will only settle with consumers with real financial crisis. The objective mindset is this: if they do not agree to your proposed terms, they may not receive a single penny from you.
2. Save for your settlement fund. Though you have stopped paying your debts, do not splurge it on something else. Save the money in a separate account and build it up as you wait for the creditors and collection agencies to start calling you.
3. Entertain the calls but ignore the threats. If it has been 3 months since your last payment, you can expect that you have been considered a delinquent payer and your credit account has been turned over to a collections agency. They will begin to call you and things usually turn ugly. Just ignore the threats to sue you in court. Believe it or not, they are just as hesitant to go through the tedious effort and expensive costs to file a lawsuit against you.
4. Make an offer. If you let the calls run for a month or so, you should have at least 4 months worth of payment savings. Start offering for a debt settlement. Indicate that you are unable to reach the usual terms and the chances of your complete payment is very slim. Offer to pay for only 25% of the original balance – or whatever amount you are able to pay for. Ideally, the first offer should be no more than this percentage so you have room to negotiate. Be prepared with your financial documents to prove a decreased income. Usually, the first offer is rejected but keep on trying as you continue building your settlement fund.
5. Mention bankruptcy. To keep the collectors interested, hint for the possibility of bankruptcy if they will not accept your offer. The chances of the collectors getting anything at all will be more unlikely if you file for bankruptcy.
6. Keep the negotiations going until both of you can reach an agreeable settlement.
When you are negotiating with the collectors, it is best to take your time. As it takes longer to collect from you, the more desperate they will become. This will make them more amenable to accept your settlement offer.
Make sure you put everything down in writing. After every phone call, send them a letter with the details of what you have discussed and agreed on. If they agree to settle with you, have that put down in writing with both of your signatures to prove that after the settlement, your credit card debt is completely paid for. Double check that the person you have reached an agreement with is authorized to make the decision on your settlement.
There is no doubt that you can settle your debts on your own but you have to know that hiring a professional debt relief service is your safe net. The professionals definitely know what they are doing. The legitimate debt relief companies will charge no upfront fees but they will take a percentage from the savings that you will get from a successful debt settlement agreement.