Credit settlement, also know as debt settlement, is a way to deal with debt without filing bankruptcy. Although there are numerous debt settlement companies available, people can often get results that are as good or better than those achieved by the professionals by handling debt settlement themselves. Since states have different rules and regulations, consult with local authorities before starting with credit settlement.
Verify the Debt
Make sure the debt is valid before you begin credit settlement negotiations. The website Bargaineering recommends sending creditors a debt validation letter requesting the name of the creditor or collection agency, the account number of the debt, the account holder's name, and proper documentation of the account including applications, agreements, contracts and billing statements. Determine if the debt is still within the statute of limitations (SOL). The SOL is the amount of time a creditor has to collect on a debt and varies by state and type of debt. Debts that are out of SOL cannot legally be collected and you should not waste money on a credit settlement in these cases.
Keep Good Records
Whenever you have contact with a debt collector or creditor, keep notes of the date and time of the contact. Make copies of letters, email and paperwork and put them in a safe place. Keep the originals on hand while you are working with each creditor. For phone calls, write down the name and position of everyone you speak with and get all offers or agreements in writing before sending any money. Use certified mail for payments and correspondence and request a signed return receipt to verify the date things are received. Avoid using credit cards and checks--even cashier's checks--as they can be traced and money can be taken out of your account even after your settlement. The website Debt Steps recommends opting for money orders and keeping the receipts.
Make Low Offers
Start with a low offer and work your way up. Try to negotiate the lowest payment possible and only agree to pay what you can realistically afford. If you tell the creditor that what you are offering is all that you can afford, the creditor may be more willing to allow a smaller payment. You may have to talk to several people and write numerous letters before you can negotiate the lowest payment.
Know the Law
The Fair Debt Collection Practices Act includes requirements and restrictions which, if violated, can carry fines up to $1,000, as of 2010. According to the FDCPA, creditors are not allowed to call before 8 a.m. or after 9 p.m. They are also restricted from harassing you, threatening you, or making false claims to you or talking about your debt to others. Also, during the validation process, creditors are legally obligated to stop all collection activity. If the creditor uses these or any other banned practices outlined in the FDCPA while you are in credit settlement, report the violations to the Federal Trade Commission.
Negotiate How the Debt Will Report
Once you have agreed to a settlement amount, try to get the creditor to report the debt as "paid" or "paid as agreed" instead of "settled" or "paid settlement." A "paid as agreed" notation indicates no delinquency on the account while the "paid settlement" reads as a delinquency that was later cleared up. This request is most often considered for large settlements but each company has its own reporting rules. If you are successful, you might want to try to negotiate the removal of late notations from your credit report as well.
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