The Right to Settle Credit Card Debt

Most credit cards are unsecured forms of loans.

Consumers sometimes look to settling their credit card debts as a possible way to help them out of debt difficulties. Your ability to settle your credit card debt comes from you and your credit card company's willingness to negotiate and enter into an agreement. You can always try to renegotiate the terms of your credit agreement with your creditors, though there is no guarantee it will work.

Card Agreements

When you signed up for your credit card, you and the card company entered into a contractual relationship. The company offered you certain terms, such as specific interest rates, and you agreed to accept the credit card on condition that both of you would comply with the terms. This offer and acceptance transaction occurs in all contracts. As a party to a contract, you have the right to try to renegotiate the terms at any time.

Settlement Terms

Just as you negotiated the terms of the credit card agreement, you can also negotiate the terms of the settlement. Typically, credit card settlements allow the debtor to pay off a smaller portion of the outstanding debt in exchange for the creditor forgiving the remainder. However, there are other options. You can, for example, negotiate a period of forbearance in which the credit card company allows you to not make payments or not charge you interest for a specified period of time. You can also negotiate new interest terms, such as a lower interest rate.

Settlement Companies

Debt settlement companies often claim that they can lower your credit card debt by negotiating with your creditors for you. While this is true, they have no more power or right to do this than you do. A debt settlement company merely acts as your representative and tries to convince your credit card company to accept the settlement offer. Like your negotiations, the settlement company's ability to settle debt rests solely on the willingness of both parties to come to an agreement.

Other Options

While you have the right to try to settle your credit card debts, there are other options available to you if you're having difficulty paying your bills. At the most extreme end, you can file for bankruptcy. Before considering this option, debtors are often better served by talking to a government-recognized credit counseling service. These services can help you analyze your finances and even negotiate a settlement on your behalf. You can contact the Department of Justice at www.justice.gov for a current list of approved credit counselors.

References

• Federal Trade Commission: Settling Your Credit Card Debts
• U.S. Depertment of Justice Trustee Program: List of Credit Counseling Agencies Approved Pursuant to 11 U.S.C. § 111