How to Call a Bank & Ask Them to Accept a Credit Card Debt Forgiveness

A settlement is when you and the bank mutually agree to let you pay less than the outstanding balance. Many banks are accepting settlements on credit cards because of the state of the economy. They reason that it is better to get something than nothing. If you want a settlement you must meet certain requirements. Your account needs to be at least 90 days past due. When you settle a debt your credit can be damaged. If you need to call a bank to ask for a settlement there is a way to go about it.

Instructions

1. Call the bank using the toll free number on the back of your credit card or your monthly statement. Ask for the collection department. The representative will transfer you to the collection department. If you are asking for a settlement you are probably experiencing financial difficulty. Explain your situation to the bank and inform them you would like to settle your debt. The representative will review your account.

2. Determine the amount you would like to settle for. According to MSN Money Central, banks and credit card companies usually accept settlements in the range of 20 to 75 percent of your outstanding balance. The amount that you can settle for will depend on the financial institution. Start as low as 25 percent of your balance. If you have a credit card balance of $2,500 you would have to pay $625, if they accept your settlement offer.

3. Make a counter offer. If the bank accepts your offer you are in good shape. However they may make a counter offer which is a higher percentage. Negotiate until you reach a mutually agreed upon settlement. Depending on the situation you may have some leverage because banks don't want to force you into bankruptcy by refusing your offer.

4. Gather the funds needed to settle. When you reach a settlement amount you will need the entire amount of money in a lump sum, in some cases. Some banks do offer settlements, depending on the amount, which are broken up into three large payments. A possibility also exists for you to make monthly payments on a settled debt. No matter how you settle the arrangements should be comfortable for you.

5. Get payment information. Find out from the bank where the money should be sent. Usually a payment address is on your monthly statement but it's always good to confirm the information. It's a good idea to get written confirmation of the settlement offer before you send money. This is your proof that you have a settlement arrangement with the bank. If there is a dispute later on you can provide your written proof to defuse any disputes or disagreements that may occur.

Tips & Warnings

• when debt is forgiven you may have to report it as taxable income if it is $600 or greater. If you owe $3,500 and you settle for $2,000 you may have to report $1,500 as taxable income. The bank or lender could send you a 1099-C form, which is a debt cancellation form. Contact your tax person if you receive this form. They will be able to let you know if you meet certain exclusions and exceptions to this rule.

• Debt settlements can remain on your credit file for seven years and hinder your ability to receive credit in the future.

References

• MSN Money Central: Debt settlement: A costly escape; SmartMoney