Negotiating debt: Know your credit card settlement laws
Credit card debt can be overwhelming—especially if funds are tight. Often, the first option people think of is to settle debt through debt settlement services or debt relief providers. However, we suggest consulting a professional, like an attorney, who knows the ins and outs of credit card settlement laws.
A professional debt attorney can be an ally who protects you through the process of settling debts with creditors. Compared to debt settlement services and non-profit credit counseling programs, lawyers are legal experts who are familiar with common unfair practices and can advocate for your rights and protections as a consumer.
That said, you can try to negotiate with credit card companies on your own. While we don’t recommend this route for everyone, here are the steps:
1. Understand what debt settlement is
Debt settlement is the process of negotiating your consumer debt down to less than you owe. You can attempt to settle personal credit card debt, student loan debt, auto loans, and personal loans. Debt settlement is different from credit repair, but successfully eliminating debt from your credit report may result in a favorable impact to your credit score after some time. Learn more about how debt settlement impacts your credit.
2. Stop using the credit card you are trying to settle
This is an important first step that’s pretty painful for a lot of consumers to accept. You must stop charging items on your credit card, and certainly do not take a cash advance or balance transfer. Make sure you stop using all of your credit cards from the bank/creditor you are trying to settle with. For example, if you have two American Express cards and one you want to settle and the other you are currently using, it is unlikely that the creditors will negotiate with you. Also, do not open any new cards, especially from the same creditors you are trying to negotiate with.
2. If you can’t pay your credit cards then stop
It is sometimes necessary to stop making payments on your credit card accounts because credit card companies will generally not resolve the balances if you do not show a hardship for being in debt. Trust me, they will be happy to continue accepting your minimum payment for the next 20 years since it includes a lot of interest and there is always a chance that you will continue to use your credit cards and rack up more debt.
3. Be patient
It will likely take some time before creditors will be willing to settle your unsecured debt. This can be as short as 90 days from the date of your last credit card payment, to maybe even several years for the creditors to start to negotiate a settlement or resolution of your credit card debt with you.
4. Be prepared for creditors calling about your delinquent debt
During this process, expect a lot of phone calls from creditors—even bordering on creditor harassment. While you want to do this on your own, it is a lot of work with a lot of problems. Working with a settlement law firm can help you and make sure that the collection agency is following the Fair Debt Collection Practices Act, which lays out when the credit card company can contact you, what they can and cannot say to you and other illicit debt collection practices. Make yourself familiar with these and the complaint process in case a creditor does not follow these rules so you know how to protect yourself from creditor and creditor harassment.
5. Negotiate with the credit card company
Firmly negotiate the terms with your credit card company. This may take a few attempts to get them to settle for less than the full balance if at all. Some creditors won’t work with you directly and will not give you the best debt settlement deals. Keep in mind that you want to keep track of who you spoke to and when, keep a notebook by the phone when talking to them so you can make notes of the conversations with your creditors. Know that many creditors will take a better deal if you agree to the settlement in lump sum, meaning you make one payment to the creditor but again a very experienced debt settlement firm can get interest free settlement terms making the resolution of your debts simply and easy for you. If you have a hardship, such as a loss of job or medical issue, make sure to explain that to the creditor to let them know you have a good reason for not being able to pay back the debt.
6. Get everything in writing
Whatever debt settlement or debt reduction agreement you agree on, make sure you get it in writing along with a schedule of payments. Ask them for a settlement letter mailed and emailed to you with the terms of the settlement. This will include your name, the account number, the current balance, and settled amount, the payment terms (due dates and amounts) as well as who to make the payments to.
7. Don’t miss debt settlement payments
Make all the settlement payments on time and as agreed. Many settlements will void if you miss or are late with just one payment. Make sure you make all the payments on time so that you can get rid of your debt fast!
The team at Tayne Law Group, P.C. is here for you. We tailor our solutions to your specific situation and can help you navigate the credit card settlement process. Call us for a free consultation at 866-890-7337 or fill out our short contact form and we’ll get in touch!