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Credit card debt settlement is a process wherein you shrink your debts through negotiation with your creditors. It can help you pay almost half of what you owe on your credit cards through a process known as credit card debt negotiation.

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OVLG Credit card debt settlement process

Credit card debt settlement process

OVLG can bring you debt relief in just six small steps. Our attorneys are available in 48 states, 24/7, to give you expert credit card debt settlement advice. All you need to do is allow us to help you navigate the credit card settlement process and trust us.

How OVLG eliminates credit card debt

When is it good to settle credit card debt?

There are many reasons to take this approach to eliminating your credit card debt.

  • There are many reasons to take this approach to eliminating your credit card debt.
  • When creditors are threatening to sue you.
  • When you can’t make minimum payments.
  • When you’re getting too many collection calls.
  • When you have to borrow money just to pay back creditors.
  • When you want to save money.

How to settle credit card debt with a collection agency and your creditors

  • 1. Calculate how much you owe: Go through your credit reports and make a list of how much you owe on each credit card. If you have any doubt, call customer care and verify the amount you owe.
  • 2. Calculate how much you can save: Use the monthly savings calculator above and figure out how much you can potentially save under two different circumstances:
    1. When you settle credit cards yourself
    2. When you settle with credit card settlement companies
    If you're happy with the amount you can save, then contact OVLG for no-obligation, free counseling. But before you make the call, calculate how much you can actually afford to pay to your creditors.
  • 3. Check the statute of limitations (SOL) on credit card debt in your state: Look at this before you even think about how to settle with credit card companies. This is extremely important. If the SOL has not expired, then take steps to settle your credit card debt as soon as possible. If it has, you can avoid paying off your accounts.
  • 4. Verify or validate your debt: Contact your creditor and verify the debt if you have any doubt about the outstanding balance. If your accounts are in collections, then ask the collections agency to validate them in writing. By doing these two simple things, you can avoid overpaying, or even being scammed.
  • 5. Contact a settlement company: Once you have verified and validated your debt, contact a reputable debt settlement company to initiate the process of negotiating a settlement. Explain your condition and requirements to the company so that they can act accordingly.

    The settlement company will negotiate with your creditors for a lower payoff amount, on the basis that you are experiencing financial hardship. They will continue the negotiation process until your creditors agree to reduce the outstanding balance and waive late fees.
  • 6. Make your agreed upon payments: Once you enter into a settlement agreement with your creditors, pay it! Your settlement company will send you the final agreement and its terms. Read it carefully and pay the negotiated amount by the deadline.
Tip: Make sure your creditors don't report your account as ‘paid as settled’ on your credit report. Rather, ask them to update it to ‘paid in full’. By changing one simple word, you’ll save your credit score a lot of pain.

What to look for in credit card settlement companies

  • 1. An affordable fee structure:Obviously, how much they charge you is an important factor. If the fee stricture is high, you will save less. The best credit card debt settlement companies won’t have upfront fees, hidden fees, or fee structures that are excessively high.
  • 2. Accreditation: Accredited companies have passed through a certification and training process. They learn negotiation techniques and how to communicate with creditors through their certification program. Needless to say, these companies have an edge over those without that kind of experience and training.
  • 3. Good reviews: Generally, clients give good reviews when they are satisfied with the performance of the settlement company. Check their online reviews to know what existing clients are saying about the companies you’re considering - before you hire them.
  • 4. Privacy policy: You'll share confidential information with the settlement company. What will you do if the company shares your financial information with others? Check the privacy policy of any company you’re planning to work with. You need to be as certain as possible that they won’t share your data - and that they’ve taken reasonable precautions against data breaches.

Why you must choose OVLG

  • 1 It offers the best credit card debt settlement program available online.
  • 2 It helps you save money on late fees and penalties.
  • 3 It follows all the credit card debt settlement laws.
  • 4 It gives you a 100% no-result-refund policy.
  • 5 It gives you sample debt settlement letters for free.
  • 6 It gives you expert credit card debt settlement advice.
  • 7 It has 84% client satisfaction rate, with 400+ live reviews on their settlement services.
  • 8 It’s a law firm registered with the State Bar of California.
Sun Feb, 2019 Review: SM2 saved $1758.16
Client satisfaction level:
Read case study »
Sun Feb, 2019 Review: SM2 saved $1758.16
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* Client names have been changed to protect privacy

Credit card debt settlement pros and cons

Pros: What you gain
  • Peace of mind.
  • Significant cash savings.
  • Fewer collection calls.
  • A much lower risk of getting sued.
Cons: What you lose
  • Your credit score will drop by a few points before it improves again..
  • You’ll have to pay a tax when you save more than $600 on your debt.

The credit card debt relief act 2010

The Federal Trade Commission (FTC) passed this credit card debt release measure that places increased scrutiny on debt settlement companies, to protect consumers from unscrupulous players.

Here’s what that means to you:

  • 1 Debt negotiators must tell you how much to save before initiating the credit card settlement process. In other words, you must have the money you will need to settle.
  • 2 They must clearly explain the terms and conditions of the credit card debt settlement program you are considering.
  • 3 They need to give an idea of how long it will take to get results.
  • 4 If debt negotiators ask you to stop making payments on your debt, they need to explain the consequences of doing so.
  • 5 They can't ask you to pay an upfront fee for their services.
  • 6 They can only charge a part of the full fee for every account they settle.
  • 7 Your funds will be set aside in a trust account, of which you will be the sole owner. You will be entitled to all the interest earned in that account as well.
  • 8 The FDIC insured bank that offers the trust account must not be affiliated with the debt relief company. In other words, they cannot self-deal with your money.

Myths and facts of credit card settlements

Ready to settle your credit card debt? Wait a minute first, and check out these myths and truths to make a well-informed decision.

Myths
  • Credit card debt settlement companies are scams.
  • You can get out of your credit card debt today!
  • You need to pay a fee in advance. A big one!
  • It is the only way to get out of debt.
  • You can settle secured debts for less than you owe
  • You can't settle credit card debt online.
Truths
  • No. They’re expert advisors that help you settle credit card debt fast.
  • No, you can’t. Only a miracle could do that. Debt settlement takes time.
  • You won’t have to pay an advance fee at all. It’s illegal for credit card settlement companies to charge an up front fee.
  • No, there are several options. Some of them may be right for you.
  • No. You can’t settle secured debts for less than you owe, although there are other approaches to handling secured debts.
  • You can! OVLG can help you do it.

The four secrets of settling credit card debt for less

Secret 1

Settle before your accounts go to collections

The first black spot on your credit report is when you default on your credit card. The second is when your debt goes to collections. When that happens, expect to see your score plummet between 45 and 65 points.

Secret 2

Develop a strong negotiation strategy

Get your facts together - your income and expenses. Then, create a convincing story to present to your creditors. You need to persuade them that you really can’t pay the full amount - not by any means. Remember, creditors already know you pretty well, so don't lie. It won’t work, and it will hurt your chances of getting the outcome you want. Now, if you want to skip out on this headache entirely, call OVLG. We'll take care of everything.

Secret 3

Be patient and wait for the right time

Creditors may not accept your initial offer. In fact, they probably won’t. That doesn't mean there’s no hope - that the decision is final. With persistence, you may persuade them to accept a modified version of your offer. So, be patient and let us negotiate on your behalf. And don't be ashamed! It's not a crime to settle credit card debt. If it was, there’d be a lot more people in jail.

Secret 4

Get it in writing

No matter how you settle your credit card debt, never pay a penny without a written agreement. Ever. It can only hurt you. When you work with OVLG, you will always get a written settlement agreement, conveniently online. You can check the clauses before paying a penny. Just like your creditors would..

How credit card settlements affect your credit score

Does settling a debt hurt your credit? Well, it can. When you settle a credit card, your FICO score will go down. But the magnitude of the effect, and how quickly you recover from it, depends on a number of different factors.

Here are a few of them:

  • 1 How your creditor updates your account status.
  • 2 What your FICO score is currently.
  • 3 The size of the debt you settled.
  • 4 The condition of your settled debts.
  • 5 The difference between what you paid and what you originally owed.

Of course, the obvious question is “why does your FICO score go down after you settle a debt? Shouldn’t it go up?”

That’s a good question.

Any account status other than 'Paid in full' can hurt your FICO score. That’s because you’re not paying the full amount. FICO rewards borrowers who pay the full balance on time, every time, as agreed. When you opt for a lump sum credit card debt settlement, you're not paying the full amount. That means you're modifying the original agreement and paying only a portion of the outstanding balance; it’s also late. As a result, your FICO score is penalized.

Should you still choose this debt relief option?

Yes. It's better to pay something to creditors than to ignore your credit card bills completely. Honestly speaking, you're more likely to consider this debt relief option when you have a high outstanding balance, high credit utilization ratio, and late payments. When you’re in that boat, your credit score has already started to sink. A lump sum credit card debt settlement won't make much difference. If anything, it will put you in a position to stop drowning so you can get your score afloat again.

Surprising credit card settlement facts

  • 1 If you don’t pay the negotiated amount of the credit card settlement agreement, it becomes null and void. That means your creditor can start coming after you again, so be sure to honor your agreement.
  • 2 You need to get your credit report updated to "paid as agreed" or "paid as settled" after making your agreed on lump-sum payment.
  • 3 If you can convince your creditor to update your credit report to “paid in full,” that would be best for your credit score.
  • 4 Credit card debt settlement programs are not part of any government programs like the Home Affordable Modification Program (HAMP) in the mortgage industry.
  • 5 The IRS will ask you to pay tax on savings over $600 obtained through credit card debt settlement plans.
  • 6 Depending upon the skill of debt negotiators and the mood of your creditors, you can save as much as 60% through a lump sum credit card settlement.

Three steps you can take to settle credit card debt online

1 Save

Save money until your creditors are ready to agree to settle your credit card debt.

2 Negotiate

Negotiate with your creditors, either on your own or through OVLG.

3 Pay

Make the lump sum payment you agreed to during negotiation

Make the lump sum payment you agreed to during negotiation

Credit card settlement is not as easy as you think. There is a lot to it. Here are a few mistakes you should always try to avoid.

  1. Being too quick to send a cease and desist letter:

    Being too quick to send a cease and desist letter.

    If you think that you will be able to end debt collection calls by sending a cease and desist letter, then you are absolutely right. The Fair Debt Collection Practices Act lays out rules concerning just that, and it says collection agencies can’t call you after receiving a cease and desist letter.

    That doesn’t mean they don’t have other debt collection tools in their box, however.

    Some debt collection agencies are quick to file a lawsuit against you when they get your cease and desist letter, just as a matter of policy. So think about that: you may end the calls, but you’re likely to get sued for the debt you owe. Is that what you want? Probably it isn’t. So unless you’re ready for a lawsuit, avoid sending a cease and desist letter without consulting an attorney.

    Moreover, if your goal is to settle credit card bills, then why would you send a cease and desist letter to begin with? Why would you stop communicating with collection agencies? They’re annoying, yes. But without lines of communication you’re not going to get anywhere, except the court.

  2. Threatening to file bankruptcy:

    The problem with threatening creditors with bankruptcy is that they won’t believe you. They deal with debtors threatening bankruptcy every day, and very few people actually do it. So they’ll be much more likely to call your bluff than cave to your demands.

    But what if you’re not bluffing? Maybe you actually intend to file for bankruptcy protection. Well, that’s not as easy a task as you might think. Congress had made it harder and harder to file consumer bankruptcy, notably in the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005. There are strict eligibility criteria that you need to meet, and you need to owe enough to even qualify.

    Your creditors most likely know those rules better than you do, so it’s best to leave talk of bankruptcy for after you’ve talked to the professionals.

  3. Adopting an extremist attitude:

    Adopting an all or nothing attitude is frequently a mistake in life. It’s very much a mistake when you’re trying to settle your bills. Creditors are different. Some are cooperative and some are not. Some may agree to reduce your outstanding balance by half, while others will agree only to a quarter. If you don’t take the 25% settlement offer because another creditor offered you 50%, you’re probably making a mistake. You can’t expect to get the same deal on every account.

What if you can't settle your credit card debt?

You’re not slaves to your creditors, and they’re not slaves to you. Everyone has some freedom of choice in these kinds of relationships, just like any other. They may choose not to settle. What then?

Well, now you have to look at the alternatives:

Credit card debt consolidation: an approach where you set up an alternative payment plan.
Credit card debt management: an approach where creditors agree to slash interest rates.

Credit card settlement - safety kit

These are the tools you will need to successfully settle your credit card debt:

  • Credit card settlement letter: This is a template you will use to begin the negotiation process with your creditors. You can get one from reputable debt settlement companies like OVLG.
  • Credit card settlement agreement: This is the blank contract that you will eventually fill in and offer to the credit card company. Alternatively, they may fill out one of their own and send it to you. Either way, you need to make sure that you have a signed copy in hand at the end of the process.
  • Credit card debt collection laws: Credit card debt collection laws can vary from state to state, so it’s important to understand the laws of your state. There are also federal laws to consider. Why do you need to have a basic familiarity with these laws? To protect yourself from negligent or malicious acts from careless or unscrupulous creditors. You wouldn’t be the first person to be taken advantage of, so protect yourself. Know the law, or find a partner who does.

Why you should use attorneys for credit card settlement

  • 1 They will help you to complete the credit card settlement process successfully.
  • 2 Attorneys learn the fine art of persuasion, which makes them excellent at jobs like persuading creditors to lower your outstanding balance.
  • 3 Experienced credit card settlement attorneys understand creditors, and know how much to offer them.
  • 4 They can give you expert legal guidance and help you avoid lawsuits.
  • 5 They know the debt collection laws and credit card debt laws of your state, and can teach you about these laws as well.
  • 6 Credit card debt settlement attorneys know the statute of limitation period in your state. That can be a crucial factor in deciding whether or not it makes sense to settle your debt.
  • 7 They have an up-to-date view on the state of the credit card industry, including overall lump sum settlement percentages and recently passed laws. That puts them in a position to deal with creditors accordingly.

Best way to settle credit card debt - Compare and choose

Online credit card debt settlement Non-profit credit card debt settlement Credit card debt settlement attorneys
You will have to pay a settlement fee You will have to pay a nominal fee. You will have to pay an hourly fee.
You won’t get legal advice or help. You won't get legal advice or help. You will get legal advice and help.
You'll get credit card debt settlement services online. You can get advice for settling credit card debt both online and offline. You can get credit card debt settlement advice both online and offline.

FAQ

Q: What is credit card debt settlement?

Ans: It is a debt relief method that helps to lower the total outstanding balance on your credit cards through a tough negotiation process. It involves making an offer to the credit card company to reduce the amount you owe in exchange for a lump sum payment. If the credit card company accepts the proposal, then you must pay the agreed amount in one lump sum.

Q: Should I pay immediately after receiving a credit card settlement offer?

Ans: No. There are a few things you need to look at before accepting a credit card settlement offer, like these:

  1. How much do you have to pay to settle the credit card?
  2. How much have you saved for settling credit card debt?
  3. Is the debt valid? (hint: that’s not always as obvious as it looks)
  4. Is the settlement offer authentic?
  5. What is the statute of limitations for credit card debt collection in your state, and has it been exceeded?

You should consult an attorney before accepting the offer. They can tell you if the settlement offer is legally binding. If the offer is not good, then an attorney can negotiate with the company and help you get a better deal.

Q: What happens when you settle a debt?

Ans:When you settle a debt, your financial situation improves drastically.

  • You will pay less than you owe, and your penalties will be waived.
  • Multiple debts will disappear after making only one big payment.
  • Your credit report will indicate that your debt has been paid as settled, paid as agreed, or, if you’ve negotiated very well, paid in full.

Q: Can you settle credit card debt if you are current?

Ans: Credit card companies differ on this, but usually credit card companies won’t agree to reduce your payoff amount unless you’re lagging behind on your payments, or you’re in demonstrable financial hardship.

That’s because when you settle credit card bills with a lump sum payment, their profits take a hit. When you’re current on your payments, they don’t incur that loss. Unless you can persuade them otherwise, creditors will assume that you can afford to pay the entire amount. Hence, they are more likely to reject your credit card debt settlement plan.

Q: How much can you settle credit card debt for?

Ans: This depends on your priorities. If you don’t want to hurt your FICO score, and you can afford it, pay the debt in full. But if your score is already tarnished and it’s more important to save money, then you may want to go for a settlement on your credit card. The decision is yours. Even when you opt for credit card debt reduction, you can take steps to improve your FICO score over time.

Q: How can you negotiate credit card debt when a lawsuit has been filed?

Ans: This depends on your priorities. If you don’t want to hurt your FICO score, and you can afford it, pay the debt in full. But if your score is already tarnished and it’s more important to save money, then you may want to go for a settlement on your credit card. The decision is yours. Even when you opt for credit card debt reduction, you can take steps to improve your FICO score over time.

Q: Should you pay your debt in full or settle?

Ans: Settling your credit card debt is possible when a lawsuit has been filed against you. In this scenario, an attorney can help you to settle your accounts out of court. They will know how to negotiate with credit card companies to reduce the amount you owe and to stop legal proceedings.

An experienced attorney will know how to answer a summons within a set time limit. They can make a quick analysis of your financial situation, make a practical settlement offer to the credit card company, and also help you to defend the lawsuit.

Q: Do you have to pay a lump sum amount to settle?

Ans: Creditors prefer a lump sum. They are less likely to agree to a settlement plan which is spread over time.

Q: Is a verbal agreement enough?

Ans: Absolutely not. Credit card companies are not always trustworthy. Make sure that you get everything in writing. Communication with the company should ideally be made by registered mail. If possible, try to record the phone calls. Keep a record whenever it is possible to keep one.

Q: How long does it take to settle credit card debt?

Ans:If you are planning to settle your credit card debt, take the time you need to save the money for a lump sum payment, but know that the longer you take the more interest will accrue. Be confident, negotiate well, but know that time is working against you.

Video transcript on: How Can You Settle Credit Card Debt?

Hi,

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Last Updated on: Wed, 14 Apr 2021