How to Reduce Unsecured Debt

You can't write off unsecured debt in the same way that a bank can write off a bad account as a business loss. But you can get rid of unsecured debt through a process called debt settlement. Debt settlement allows you to pay off debts for a fraction of the full balance, with savings up to 80 percent, according to The New York Times.

Instructions

1

Gather your credit card statements. Identify the accounts that are four or five months behind. At six months, card companies typically will close your account and sell it to a debt-collection company. Before that, the companies may be willing to settle for less than the full balance.

2

Contact the card companies holding your delinquent accounts. Ask for a settlement offer by writing or calling. Telephone conversations make for faster negotiations, but writing creates a paper trail.

3

Tell the credit card company that you can no longer afford to pay the full balance on your account and that you would rather settle than have the account sent to a debt-collection agency. Offer to settle for 20 percent of the balance. That's an 80 percent savings for you, and the card company may respond with a counteroffer more favorable to the card company. For example, the card company may initially offer only a 10 percent savings. Continue negotiating with the card company until you have a deal. Although it is possible to receive a settlement representing an 80 percent savings, you're more likely to receive a settlement for around half the balance.

4

Get the agreement in writing and keep it for your files.