How to Negotiate Personal Credit Card Debt

There are numerous television commercials touting debt settlement companies. You also might have run across one of their ads in the newspaper or on the Internet. The truth is, you can negotiate your own credit card debt without the aid of a for-profit company. It does require time and patience, but with an organized plan, it can be done.

Instructions

1

Explain your situation. Write a letter to your creditor informing it why you are having trouble paying your bill. Debt collectors are more likely to work with you if you honestly lay out your problem. If you've recently suffered an illness, job loss, or gone through divorce, tell the creditor in the letter. Creditors receive thousands of hardship letters a year, so make your request stand out by eloquently presenting your case and sending copies of any supporting evidence. Tell the creditor that it is your wish to honor your obligations but that your current situation makes it impossible to do so. Send the letter certified mail with return receipt requested so that you have proof that your creditor received it. Keep a copy of everything you send for your personal records.

2

Ask for a deferment or reduction in interest rate. If you can manage lower monthly payments, request an interest rate reduction. If you simply cannot make the payments but expect the situation to improve in the near future, ask the creditor to defer your monthly payments for a few months, giving you time to get back on your feet. Contact your creditor by phone after you have sent a letter. The personal touch gives the creditor a voice and a story to attach to an account number. Request that your creditor send you a written copy of your new agreement. Although your creditor may be recording the call, you have no way to verify anything you are promised by phone.

3

Request a settlement plan. If you've reviewed your budget and realize that no matter how you rearrange things, you're not going to be able to make payments to this creditor, ask it to agree to settle the account by accepting less than you owe. Clearly tell the creditor your only other alternative is to file for bankruptcy. Creditors would rather receive something from you than nothing from the bankruptcy court. You can make this proposal by phone or in your initial letter, but you should obtain the creditor's written version of the agreement before sending any money.

4

Tell the representative you would like to have everything in writing so that there are no misunderstandings. Wait to receive a letter in writing from your creditor stating it will accept the terms of your negotiations. If you're settling the account, make sure the letter states that the amount you're paying will settle the account in full. Request that the creditor report the matter to the credit bureaus as "paid in full" rather than "settled." The creditor often refuses to do this, but it is worth the effort of asking.

5

Prepare for a hit on your credit report. While you're negotiating with creditors, develop a plan that will allow you to live on cash. Debt settlement, in particular, can damage your credit report for years, making it more challenging to secure a loan. By living on cash you give yourself time to find ways to rebuild your credit.