If you are having problems managing your debt by yourself, you might consider outside help. You decide you don’t want to have your property repossessed, you certainly don’t want your credit score to plummet, and you definitely don’t want to declare bankruptcy. What else can you do? Well, be cautious if going this route, but you could consider a debt settlement.
Debt settlement is the actual reduction of the amount of debt you have to pay. It’s a difficult route to take because it takes some people skills, and the higher number of credit cards you have, the more difficult it will be. The first step to take is to contact the collections department of each credit card. When you contact them, you will have to persuade them into accepting less than what you owe. Whether it’s on the phone or in a written letter, you need to tell the collections department about your financial situation and the amount of money you can pay.
Only unsecured debts can be settled in a debt reduction settlement. These are debts that do not have collateral, or a pledge of specific property if the debtor cannot pay the debt. For the most part, this consists of credit card debt, although medical bills also apply as a type of unsecured debt. Therefore, do not go this route to negotiate your car payments or your monthly mortgage payment.
More often than not, your credit card company will agree to make some amount of reduction in your debt. If you are on the verge of bankruptcy, they want to help you out. If you declare bankruptcy, after all, your creditors will risk losing the entire amount of money owed by you, and they don’t want to see that happen. But if you are not persuasive enough, you might be turned down.
If you credit card company denies your attempt to reduce the debt, you can try a third party. You can contact a collection agency or junk debt buyer and tell them about your financial situation. The agency or buyer may purchase your debt from your creditor, and you can negotiate with them. Be aware that collection agencies often have fees involved, unlike negotiating with your credit card company. A positive of turning to a third party, however, is that you can request to have the collection removed from your credit report. This could improve your credit score, but it might cost a pretty penny.
Whichever way you decide to approach a settlement, you must be able to make the payment once the settlement is made. If negotiating with your credit card company, your debt reduction must be paid in full within 60 days. If you turn to a debt settlement company, be careful to avoid debt settlement scams and understand that you might enter a program that requires a monthly payment for up to five years. This route is not easy, but if you have the patience and the negotiation skills, debt settlement may be an option for you.