Credit Card Debt Settlement

When I first heard about credit card debt settlement, I was very skeptical. I wondered why the banks would even settle the accounts for less than what is owed. After working at the bankruptcy firm, I learned that many banks (original creditors) are not only willing to settle out the debt, but actually prefer to settle out the debt, before the client files for a bankrupcty.

Once the borrower defaults on the debt, the creditor would like to collect all of the money due to them. However, this isn't feasible in all cases. Often, the borrowers are going through financial hardships, such as a loss of job, that prevent them from re-paying back the credit cards. Other times, the clients just overextended themselves with credit cards, and it became too difficult to even make minimum payments.

In these cases, the creditor would like to collect as much and as soon as possible. Sometimes the debt can be settled for as low as $0.10 on the dollar. In fact, our law firm settles credit card debt on average of $0.20 on the dollar. Now the acutal percentage of discount you will be able to get per credit card account will vary on several things. The biggest factor that I've found is who the original creditor is. Along with your financial information, such as income, assets, and debts.

From my experience, Bank of America and American Express are the two original creditors that will offer the lowest rates. Chase is another original creditor that offers fairly good rates, but they are also one of the quickest to file a lawsuit.

The two most difficult original creditors to settle are Capital One and Wells Fargo. It is very difficult to settle these accounts when they are still with the original creditor and often have to wait until they are sold or assigned to a collection agency.

To settle credit card debt, you need to be able to negotiate with the collectors. Most, if not all collectors are paid on commision, so they actually want to settle the debt. They would like to collect as much as possible, so their commision paychecks are larger. However, if you can convince them that you only have a small amount and that that will be all they are going to be able to collect, you have a good chance of getting a good settlement offer.

Once you come to terms on a settlement you both can agree upon, ask for the offer in writing. Most collectors will not email the offer to you, but they will fax or snail mail the settlement offer to you. The settlement offer letter will detail the terms of the settlement. The infomation you will want to make sure are on their is the following:
1) Your name.
2) The original creditor.
3) The original account number (some banks change the account number when assigning to a collection agency)
4) Balance
5)Settlement offer amount with due dates.
6) Verbiage stating that the account is "paid in full", "Settled in full", "Settled as agreed", "Settled for less".

Once you have that letter and make the appropiate payments by the due dates, the debt is resolved and you no longer have any obligations in regards to that debt.

If you would like to hire some one to settle your debt for you, check out the post on debt settlement companies where is list some advantages and disadvantages.

Please leave comments if you have any questions or would like more information. I might answer your questions directly in the comments or create new post if it is a complex question.