DEBT SETTLEMENT WITH CREDIT CARD?
I am over my head in credit card debt and would like to know if I can settle it for lesser amounts than my balances. What are the steps that I need to take in attempt to achieve this? How will my actions will effect my credit score? Thank you
They only settle if you are either drastically past due or have completely defaulted on the card. They won’t settle on a current card. You may be able to settle in the 25% – 50% range if your cards are already defaulted. If you settle, get all terms in writing. They will probably want a large lump sum rather than small payments over several years. Any settlement will be a negative on your credit report.
Stay away from any “debt consolidation” company that promises to cut your debt and payments in half through debt settlement….This is a risky tactic of deliberately ceasing all payments to creditors and forcing your accounts into default to attempt settlements. You pay a monthly fee to a debt consolidator….this entire fee goes towards building a settlement account and to the consolidator’s fees to “settle” your accounts in the future. Your credit card companies will deliberately not be paid so that all the accounts will default/charge-off so that they can attempt settlements at around 50%. If you are current on your accounts, this process will ruin your credit rating for sure. Debt settlement is like a roll off the dice with your finances…You can never predict how your creditors will respond to the deliberate defaulting of your accounts…they might settle at 50%…or they might serve you a summons, take you to court…and if they win, you could be looking at wage garnishment.
Many people who sign up with “debt consolidation” firms incorrectly assume that they have the power to force your creditors to accept settlements…they don’t. Your creditors have the right to refuse settlements and take you to court.
Your credit score will be badly affected if you are late on your payments because youre over your head. You should call your creditors and negotiate with them first and tell them you have to or you cant pay. They will usually try to offer you some other terms. If you offer you can pay them some kind of cash balance now, like 50% of the balance, then they would be more willing to take that rather than wait many years to get all of the money. Visit here for more information about making your way out of debt: http://reducingcreditcarddebt.net
Debt Management.
The first thing to do is stop using your credit cards. Use cash for all your purchases. Do a lot of research. Avoid those “Debt Settlement” companies that promise to get you debt free (read the ezinearticle in source). Also, I personally would avoid any service that does not own its domain name. For example: anything that ends in ifastnet.com, tripod.com, tripod.lycos.com.
Go to the National Foundation for Credit Counseling here: http://www.nfcc.org/
They can help you find a qualified debt management counselor (not a rip off site) that will help you decide if bankruptcy is right for you. The debt management counselor can also set up a 5-year program to get out of debt, if you qualify.
Avoid the Debt Management scams that will want you to default on your credit cards. CCCS is a nation wide network of councilors who can give you advice on how to get out of debt. Be careful here though, they will want you to cut up all your cards and pay all your debt in 5 years (this is by law – they have no choice if you go into a Debt Management with them); but they are reputable.
I have personally talked to a CCCS councilor – and although I have chosen my own path, much of the information that they gave me (for free) has been useful in my charting a path to a debt-free future.
I was in the same situation as you. I spent countless hours researching my options. In the end, I settled my credit card debt on my own for thousands less than the balances owed. However, this also ruined my credit score for the near future, but I knew this would happen and I had to do something. Bankruptcy might also be an alternative for you. I have posted my experiences and information on this site, you will find answers to a lot of your questions there. Good luck whatever you decide.
http://www.pay-off-debt-advice.com