Credit card settlement: How to settle and get out of credit card debt
It is a type of debt settlement where credit card issuers allow you to get rid of credit card debts without paying off the total outstanding amount. Credit card settlement companies negotiate with your credit card issuers to settle your credit card balance for a lower payoff depending on your financial situation.
Table of Contents
- Credit card settlement: How to settle and get out of credit card debt
- How does our credit card settlement process work?
- How can I help you get out of credit card debt through debt settlement?
- What other services does my team offer except for debt settlement services?
- What is credit card settlement?
- Should I pay immediately after receiving a credit card settlement offer from credit card companies?
- How to get credit card debt settlement with a collection agency and your creditors
- What does the Credit Card Debt Relief Act of 2010 imply for you?
- How does credit card settlement affect your credit score?
- What mistakes to avoid while settling credit card debt?
- How can I settle my debt without having to pay taxes?
- What if you cant settle your credit card debt?
- What should you look for in credit debt settlement companies?
- How to choose the best credit card settlement company?
- Should you hire attorneys for credit card settlement?
- Non-profit organizations vs. attorneys - Which one should you choose?
- Can you settle credit card debt if you are current?
- How much can you settle credit card debt for?
- How can an attorney help you negotiate credit card debt when a lawsuit has been filed?
How does our credit card settlement process work?
Once you contact us:
- My assistant will take down the details of all your credit card debts. He will explain the debt settlement process to you.
- Once you join the program and share relevant financial information, such as taxable income, credit utilization ratio, credit history, and outstanding debts, I will review your file.
- I will help you choose the best solution for your outstanding debt.
- I will contact your credit card company and inform them that they cannot harass you anymore.
- Once credit card issuers know I am representing you, most credit card companies will negotiate debt and settle your credit cards at favorable terms.
- I will help you work with my assistant to make payments to the credit card company.
- You will get out of credit card debts in three to four months through the debt settlement.
How can I help you get out of credit card debt through debt settlement?
I have helped people like you:
- Pay less than what you owe and save money
- Eliminate hefty fees such as late charges
- Replace multiple outstanding credit card bills with a single payment
What other services does my team offer except for debt settlement services?
- Credit card consolidation
- Payday loan consolidation
- Payday loan settlement
- Relief from collection abuse
What is credit card settlement?
Credit card settlement is a debt settlement method to reduce consumer credit that lowers your credit card balance through a tough negotiation process. Here, you offer the credit card company a lump sum payment, rather than monthly payments like debt management, for a reduction in the amount you owe. If the credit card company accepts the proposal, you must pay the agreed amount in one lump sum.Back To Index
Should I pay immediately after receiving a credit card settlement offer from credit card companies?
It depends on the answers to these questions:
- How much do you have to pay to settle the debt?
- How much have you saved for settling credit card debt?
- Is the debt valid? (hint: that's not always as obvious as it looks)
- Is the debt settlement offer authentic?
- What is the statute of limitations in your state, and has it been exceeded?
How to get credit card debt settlement with a collection agency and your creditors
Calculate how much you owe: Go through your credit report and make a list of how much you owe on each credit card. Review your credit report properly and look for errors if you have any doubts. You may also call customer care and verify the amount.
Check the statute of limitations (SOL): Look at this before settling with a credit card. This is extremely important. If the SOL has not expired, then take steps to settle your credit card debts as soon as possible. If it has, you can avoid paying off your account.
Verify or validate your debt: Contact your credit card company and verify the debt if you have any doubts about the outstanding balance. If your account is in collections, ask the collection agency or debt collectors to validate it in writing. By doing these two simple things.
Contact debt settlement companies: Once you have verified and validated your debt, hire a debt settlement company to initiate negotiating a settlement. Explain your conditions and requirements to the debt settlement professionals so that they can act on your behalf.
The debt settlement company will negotiate with your creditors for a lower payoff because you are experiencing financial hardship. They will continue the negotiation process until your creditors agree to reduce the outstanding balance and waive late fees.
The debt settlement agency will try to stop your annoying multiple monthly payments through a large settlement payment. After enrolling in debt settlement programs, you'll have zero missing payments, zero late payments, more funds in a savings account, and peace of mind.
Make your agreed-upon payments: Once you enter a debt settlement agreement with your creditors, pay it! Your debt settlement company will send you the final settlement agreement and its terms. Please read it carefully and pay the negotiated settlement amount by the deadline.
Tip: Make sure your creditors don't report your account as 'paid as settled' on your credit report. It will hurt your credit score badly. Instead, ask them to update the credit report to 'paid in full.' Changing one simple word will save your credit score a lot of pain.Back To Index
What does the Credit Card Debt Relief Act of 2010 imply for you?
The Federal Trade Commission (FTC) passed this law to scrutinize debt settlement companies and protect consumers from unscrupulous players.
Here's what that means to you:
- 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.
- They must clearly explain the terms and conditions of the credit card debt settlement program you are considering.
- They need to indicate how long it will take to get results.
- If debt negotiators ask you to stop making payments on your debt, they need to explain the effects on your credit report and the consequences.
- They can't ask you to pay an upfront fee for giving debt settlement advice.
- They can only charge a part of the total fee for every account they settle.
- They will set aside your funds in a trust account, of which you will be the sole owner. You will also be entitled to all the interest earned in that account.
- 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.
How does credit card settlement affect your credit score?
Does settling a debt hurt your credit score? Well, it can. When settling a credit card, your FICO credit score will decrease. But the magnitude of the credit score damage and how quickly you recover from it depend on many factors, such as
- How your creditor updates your settled account status.
- What your FICO score is currently.
- The size of the debt you settled.
- The condition of your settled debts.
If going through a debt settlement program reduces your credit score, you may take different positive measures to improve it.Back To Index
What mistakes to avoid while settling credit card debt?
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.
Being too quick to send a cease and desist letter:
If you think you can end debt collection calls by sending a cease and desist letter, you are right. The Fair Debt Collection Practices Act says collection agencies can't call you after receiving a cease and desist letter. However, that doesn't mean they don't have other debt collection tools in their box.
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 you must know that you may end the calls, but you're likely to get sued for the debt you owe.
Threatening to file bankruptcy:
The problem with threatening creditors with bankruptcy is that they won't believe you. They deal with debtors threatening bankruptcy daily, and very few people 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 intend to file for bankruptcy protection.
Well, that's not as easy a task as you might think. Congress had made it harder to file consumer bankruptcy, notably in the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005.
You need to meet strict eligibility criteria, and you need to owe enough even to qualify. The credit card company most likely knows those rules better than you do, so it's best to leave talk of bankruptcy after you've talked to the professionals.
Step into debt settlement scams
Like any debt relief options, such as a debt management program or a debt consolidation service, people may also face debt settlement scams. Fake credit card debt settlement companies may charge upfront or high success fees on a settled account, no matter how much your credit scores are getting hit.
Using the credit cards again during the settlement process
Stay within your available credit limit, and do not use the credit card accounts that are going for settlements. Avoid applying for new credit during the settlement process. Credit card settlement and new credit applications can lower your credit scores immediately. After settlement, you may apply for a new credit line and build credit.Back To Index
How can I settle my debt without having to pay taxes?
You won't be required to pay taxes on a debt settlement savings of less than $600. Ask a creditor to forgive $599 in debt if your savings are close to $600 and you're negotiating with them. Then, the largest amount will be canceled for you without resulting in a tax bill.Back To Index
What if you can't settle your credit card debt?
Your creditors are not your masters, and you are not their masters. Everyone has freedom of choice in these kinds of relationships, just like in any other. They may deny debt settlement offers. What then?
Well, now you have to look at the alternatives to debt settlements:
- Debt consolidation: An approach where you set up an alternative payment plan through minimum monthly payment or lower interest rate. Creditors usually report to the major credit bureaus that the credit card debt is paid back in full balance. This information will be added to the credit reports.
- Debt management program: Debt management is one of the best approaches where the nonprofit credit counseling agency helps you to lower interest rates through their professional credit counselors. Through a debt management plan, a nonprofit credit counseling organization will appoint an expert credit counselor.
They will help you evaluate your finances, identify debt relief programs through credit counseling services, and set up a payment plan with the creditors. Credit counseling won't harm your credit history or credit scores. However, if your credit counselor enrolls you in a debt management program or DMP, your credit standing might be affected in several ways. The credit counseling service will likely come with a monthly fee.
- Chapter 13 Bankruptcy: Declaring bankruptcy might be an approach where the court helps you pay back creditors within five years. A Chapter 13 bankruptcy will stay on the credit report for up to seven years after filing.
- Chapter 7 Bankruptcy: Declare Chapter 7 bankruptcy can be an approach where the court helps you make credit card payments within 3-4 months.
What should you look for in credit debt settlement companies?
An affordable fee structure: Obviously, how much they charge you is important. If the fee stricture is high, you will save less. The best credit card settlement companies won't have upfront fees, hidden fees, or excessively high fee structures.
Accreditation: Accredited companies have passed through a certification and training process. They've learned negotiation techniques and how to communicate with creditors through their certification program. These companies have the edge over those without experience and training.
Good reviews: Generally, clients give positive reviews when they are satisfied with the performance of the debt settlement company. Check their online reviews to know what existing clients say about the companies you're considering before hiring them.
How to choose the best credit card settlement company?
If you believe that debt settlement is the finest or most practical action provided by credit card settlement companies, you might need to follow the advice given below:
- Check with the Better Business Bureau to find out whether there are any complaints.
- Avoid any debt settlement agency that asks for upfront minimum payments.
- Avoid any debt settlement service provider who promises that your credit card debt will be paid off, late fees will be revoked, and your credit scores will remain intact.
- Make sure fees are calculated as a percentage of debt settled rather than a percentage of the total debt amount.
- Avoid businesses that offer zero fees on a settled account.
No matter what option you choose, as per famous personal finance experts, credit card settlement will surely harm your overall financial status. If you don't want to work with debt settlement firms, you might want to hire a lawyer or do it yourself.
An attorney may bill by the hour, by a flat rate per creditor, or by a percentage of the debt or the amount of the settled account.
It usually doesn't hurt to contact creditors once you're far behind.
A few credit card agencies have programs for people in debt that could help. A bank might also provide a credit line, such as a personal loan with a low interest rate. These funds can help people to settle credit card bills quickly.
Consider gathering a good amount of money as cash to make a solid offer for a lump sum settlement to the creditor. (Creditors might be more inclined to accept an offer and sign the settlement agreements that give them money immediately.) Be mindful that some creditors might have a policy against debt settlement.Back To Index
Should you hire attorneys for credit card settlement?
- Attorneys learn the fine art of negotiation, which makes them excellent at jobs like persuading creditors to lower their outstanding balance.
- Experienced debt settlement attorneys understand creditors and know how much to offer them.
- They can give you expert legal guidance and help you avoid lawsuits.
- They know your state's debt collection and debt laws and can teach you about them as well.
- Credit card settlement attorneys know the statute of the limitation period in your state. That can be a crucial factor in deciding whether it makes sense to settle your debt.
- They have an up-to-date view of the state of the credit card industry, including overall lump sum debt settlement percentages and recently passed laws. That puts them in a position to deal with creditors accordingly.
Non-profit organizations vs. attorneys - Which one should you choose?
|Non-profit credit card settlement||Credit card settlement attorneys|
|You must pay a nominal fee.||You will have to pay a settlement fee.|
|You won't get legal advice or help.||You will get legal advice and help.|
|You can get advice for settling credit card bills both online and offline.||You can get credit card settlement advice both online and offline.|
Which one should you choose? It depends on your situation. But an attorney can advise you and help you deal with lawsuits. So, if you want to avoid legal hassles, then the best way to settle debts on credit cards is to hire an attorney.Back To Index
Can you settle credit card debt if you are current?
Credit card companies differ on this, but usually, credit card providers won't agree to reduce your payoff amount unless you're lagging behind on your unsecured debt payments or you're in financial hardship. That's because their profits take a hit when you settle credit card bills with a big payment. They don't incur that loss when you're currently on your credit card payments. Unless you persuade them otherwise, creditors will assume you can afford to pay the entire amount. So, they are more likely to reject your debt settlement plan.Back To Index
How much can you settle credit card debt for?
This depends on the expertise of the debt settlement agency. If they can negotiate well with the credit card company, you can expect to reduce your outstanding balance by around 50% or more. But do not forget you might have to bear tax consequences on your forgiven debt. The amount you save through debt settlement it's usually considered taxable income. So you have to pay taxes and deposit money to the IRS.Back To Index
How can an attorney help you negotiate credit card debt when a lawsuit has been filed?
Settling your credit card bill is possible when a lawsuit has been filed against you. When this happens, an attorney can help you settle your accounts out of court. They know how to negotiate with credit card companies to reduce your monthly payment and the full balance you owe and to stop legal proceedings. An experienced attorney will know how to answer a summons within a set time limit. They can quickly analyze your financial situation, stop penalty fees, make a reasonable debt settlement offer rather than paying the full balance to the credit card company, and help you defend the lawsuit.Back To Index
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