How to Settle Credit Card Debt
Settling a credit card debt means getting a creditor or collection agency to accept less than full payment on the debt. For instance, if you owe $1,000, you might convince the creditor to accept $500 as payment in full. It takes time, patience, nerves of steel and a thick skin to settle a credit card debt, but it can save you thousands of dollars you can't afford.
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Instructions
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Settle Credit Card Debt
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Stop making your credit card payments. Companies have no reason to settle with someone who continues to make timely payments. Most credit card companies only settle when they believe that if they don't make some kind of deal, they won't see a penny of the money they're owed.
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Ignore threats. At some point, your account will be turned over to a collection agency that may call threatening to sue you, garnish your wages and take your house or car. Take heart in the fact that most agencies won't go to the effort and expense of actually filing a lawsuit.
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3
Make an offer. Many debts are settled for as little as 7 cents on the dollar. Therefore, your opening offer should be no more than 25 percent of the debt. Do not make an offer you can't afford.
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Expect that your first offer will be refused.
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Use the threat of bankruptcy to keep the company talking. Remind its representatives that if you declare bankruptcy, the company may get nothing. Continue to negotiate until you reach a mutually acceptable settlement.
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Take your time. There is no reason to rush into a bankruptcy. Every day you wait, your debt gets older and harder to collect, and your creditors are more likely to cut their losses.
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Get all deals in writing. Before you send in your payment, make sure that the person who negotiated the settlement with you has the authority to do so. Be certain that the payment you are sending will settle your credit card debt.
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Tips & Warnings
Some credit counseling agencies and attorneys will help with debt settlement if you don't feel up to handling the task on your own.
A credit card settlement will show up as a negative on your credit report, so don't go this route unless you are truly out of money and options.
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Comments
View all 14 Comments-
rickwhoo
Aug 12, 2010
I just settled my credit card dept for less than 10% over the phone. I told them to send me documentation with the settlement offer. What should I look for in this document to make sure it will be settled? -
johndglas
Nov 21, 2009
Me and my girlfriend have a sears card. We've been using it for about a year and half and went crazy a few times(stupid stupid stupid move) and ended maxing it out. Credit limit was a 1000, I know we bought a few expensive things. Well the thing is we don't have trouble paying it off, its just we've noticed that when we make our payments, it doesn't really look like its doing anything to the total to be paid. Now we recently had our hours at work dumbed down and we ended up missing the last two payments(family emergency and other reasons). We wouldn't normally miss our payments, well now we owe a late fee of 130 or so. Is their anyway we can just make a few largeish payments and get rid of the card?
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how2helpyrslf
Oct 28, 2009
Also, It is actually better to settle with the original creditor. Never let it go a CA, they will demand the full balance while the original will actually take 20% of the balance. Yes, they will report to the irs but there is a form to help you called Form 982. Try not to stress! It's your business and no one elses!
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how2helpyrslf
Oct 28, 2009
A warning on step #2! Never ignore threats! Take them very seriously and personally. Depending on the amount of the collection, say $5000 or more, CA will most likley sue you. Debt collectors are professional cheats and liars. They think you are too stupid to know your rights under the FDCPA. So know those rights!
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pinkypwr
Oct 02, 2009
I recently settled a debt w/ a credit card company. On the terms of the agreement, the payment would be used to settle the account. That is also the statement that was written on the settlement letter after payment was received. Is this statement "the above funds will serve as settlement for this account". Is this suffice or the same as "settlement in full"?
