Debt settlement is popular with some people drowning in debt that hope to avoid bankruptcy. Settling with your bank for less than the full amount owed on your unsecured loan or credit card will stop the collection calls and end the possibility of being sued on that particular account. The savings can be significant, with banks commonly settling for about the half the balance and sometimes for as little as 20 percent, according to The New York Times.
Review your credit card or loan statement to determine if your account is four months behind. According to the site Bank Rate, most debt settlement activity takes place when accounts are at least four months delinquent, but not more than six. After six months the banks generally close accounts and sell them to collection agencies.
Call the bank's customer service department using the number on the back of your card or on your billing statement. Tell the representative that you wish to speak to someone about your past-due account and that you are seeking a settlement. You will be transferred to the collections department, which will consider your request. Before you begin, ask the collections agent for her name and bank mailing address for possible follow-up in writing. Offer to settle the account for a certain amount, such as 20 percent of the balance. That starts the negotiation and the bank will likely counter with a much higher offer -- up to 90 percent of the balance. Keep negotiating until you reach a deal that you believe is fair, or politely end the conversation and go on to the next step.
Write a letter. Use the name and address you acquired in step 2. In your letter, emphasize that you remain interested in a settlement offer that is fair for you and the bank. Then make a new offer better than your most recent offer but less than the bank was offering. Wait for a response. Continue the negotiation by mail or telephone with the same bank representative until you have a deal.