Credit Card Debt Settlement: Your choices

January 1st, 2012 | Posted in Credit Card Debt

Credit card debt relief is an option that you may have if you have long outstanding charge card debts where you aren’t making the monthly obligations.

What Is Discounted Debt consolidation?

Sometimes, if a company observes you have not paid anything for a while plus they think it isn’t likely that they’ll obtain the full quantity of the debt plus interest from you, they will sent a discounted debt consolidation offer.

They’ll write with an offer where one can pay perhaps 50% from the debt and they’ll write off the remainder. Usually they will want all of this in a single payment but if it is a large amount they may accept it in two or three instalments.

Often the letter will come from the debt collection agency. This can mean that the original lender has signed the debt to the collectors or it may simply imply that the company is employed by a portion of what you can recover.

Why Do They provide Debt Settlement?

The finance companies offer this when they can observe that you’re having a lot trouble paying, they may need to take you to court to get the whole amount and maybe they wouldn’t even get it since you might file for bankruptcy.

So they have a choice between incurring the cost of court proceedings and maybe still getting nothing from you, or offering you this deal in which you pay 50%. They figure they’ll be best accepting half of what you owe, than trying to get the entire amount with the courts.

What Should You Do?

Whether you should accept the offer depends upon many factors.

First, you should know that accepting this can affect your credit rating inside a negative way, because you won’t have repaid all of your debt. If you’re able to pay the full amount then its better for the personal credit record should you choose so. However, you probably will not have gotten to the point of receiving a settlement offer should you could pay entirely already. Accepting the settlement offers are usually much better than having court actions against you.

Second, you will need to consider the best way to make the payment that they want. Will it mean that other debts will go unpaid for a few months? What will be the consequences of that? Would you need to miss rent payments and maybe lose your house? Think carefully about the best way to raise the money.

Third, even though you choose to accept it, it might be worth trying to barter a lower settlement. This means giving them a call and saying that you can’t pay what they have asked for however but you could pay 30%. This is often worth trying since it can save you some money without extra penalties.

When you call, get the exact person’s name that you speak to. If they accept your offer, ask them to put it in writing and wait for a letter to come before you decide to pay. Then write instructions to send with your check proclaiming that this is the full and final settlement of the debt.

Remember that should you decide to not accept the sale, then after a while they might go ahead and take matter to court. A court may judge that you need to spend the money for whole amount plus the costs, so you might have much more to pay.

If you decide to accept, always read the terms and conditions on any offer. You need to be sure this really is full settlement and they’ll write off any additional debt, so that they have no right to return to you later on demanding more.

When everything is complete, check out what has been posted to your personal credit record. If there is any mistake you need to ask for it to be corrected immediately and you’ll need to send copies. Keep all of the paperwork when you accept any credit card debt relief.

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