Can I Settle My Credit Card Debt With a Creditor?

In times of economic hardship, people sometimes turn to methods of getting out of debt that they would not normally even consider. For most people, the thought of bankruptcy is an unacceptable or only a last resort. Some people turn to debt settlement as one means of tackling some of their current debt, especially unsecured debts like those accrued through the use of credit cards.

Legal Considerations

It is possible to settle your debt with your credit card companies, but you should take into account the various legal considerations in doing so. It is possible for a creditor to win a judgment against you, making it possible to have your wages garnished. However, there are considerable legal expenses involved in this process and many credit card companies are simply not willing to incur the additional expense needed to take you to court. Chances are that your debt will be sent to a collection agency. The fact that a credit card company sends your debt to the collection agency indicates some willingness to settle. Collection agencies typically purchase a debt at pennies on the dollar and try to collect whatever money they can on that debt, even if that means settling the account for less than the original amount.

Debt Settlement Companies

One way that people settle their debts with the credit card company is by hiring a debt settlement company or attorney to do it for them. The way that this usually works is that the client pays the settlement company or attorney a set fee plus the percentage of the amount of money that they save you on your debts. How they go about collecting these fees may vary. Some may require that you pay up front or retain your first several months worth of payments that would have gone to the credit card company had you been paying on the debt. Because you are paying someone else to settle for you, you may not actually save as much money in the long run using this method, but it does take some of the hassle and angst out of the process.

The Process

Whether you do it yourself or retain the services of someone else to settle the debt for you, the process of settling a debt is basically the same. The first step is to stop paying on the debt. Any payments made during the settlement period will start the process over and eliminate any negotiating leverage you may have had. The credit card company will usually try to collect the debt on its own first before sending your debt to collections. After several months have passed and you have been harassed by more than one collection agency, you will likely have better leverage to negotiate a settlement. You will need to contact the original lender to settle the debt.

Considerations

Settling a credit card debt is not easy. It requires patience and a willingness to ignore collectors' phone calls. Having caller I.D. and some kind of call screening service can make your life simpler as you move through the collection and settlement process. Putting money aside as you move closer to negotiating with the credit card company will also be helpful. When you finally reach an agreement on an amount, the creditor will send you a settlement statement in the mail. There is usually a conditional period of time for the settlement, so you should ensure that you actually have the proper funds available when you finally settle on an amount.