Credit Card Debt Settlement
credit card debt settlement-a strategy
Credit Card Debt Settlement is crucial if you decide to settle for credit card debt relief. Credit card debt forgiveness isn't and shouldn't be viewed as a free ride because it's going to cost you plenty. Yes, you may settle for cents on the dollar, even pennies on the dollar in some cases, but it isn't over yet. The emotional, psychological and financial burden can be a lot to handle.
You really do need to prepare yourself if you decide to take this path. The emotional burden of dealing with creditors, even from India cannot be underscored enough. Fighting for money and negotiating debt is hard and may take it's toll on you. Then there are all sorts of psychological burdens that may come into play, the most notably is that we are all raised to pay our bills. If we owe a dollar to the corner store, asking them to take less as payment in full somehow goes against our values. Finally, the financial stress of having to rebuild your credit can be overwhelming. Like starting over, people have told me and I understand because I have touched most every step in the debt and financial world.
Stay cool and calm because you need to detach yourself
My advise is to try to detach yourself from the entire process when dealing with a creditor. Credit card debt settlement is not exactly water cooler chatter. Society tries to label us with what we have, what we drive and soon we believe this is who we are. This is especially true with money and credit. Many people believe a credit score tells a lot about them and most people are proud of their fico score. the truth is that a credit score does not define you and it is a prediction of what you will do in the future based on your past history. You are not your credit score and to get too attached in this myth is setting yourself up for some serious heartache.
You could also enlist the help of a credit card debt settlement company. This may bring you relief and shield you from the drama and hassles of dealing with a debt management plan yourself. A credit card debt negotiation service earns money by the amount you save. basically, they take a cut of your savings. This credit card help is not free and it is not cheap.
You are not your credit score
Do you qualify for credit card debt settlement? Probably, but you should know that you can settle for less than you owe, but be aware of the tax bite that follows. Maybe it's just not about money, but all the other stress that comes with your decision to negotiate credit card debt will create tremendous tension in your household. At one point in my life, I had five cards and settled all of them. I actually had nine, but wanted to keep the other four in good standing, but as soon as I paid the others in full, the good ones were canceled. My credit scores went from 850 to the low 500's. Why? Am I a slacker and irresponsible? It's possible some people will make this judgment and at one point in my career I may have also looked down on people fraught with this misfortune, but here I am writing about it. I don't recommend the journey to anybody, but you sure learn a lot about yourself…and others.
Let's get started-How long will it take?
Credit card companies suck and want nothing to do with credit card debt settlement. Plain and simple. They do not care if you have a job or what your financial picture is unless it involves them. They are in business to make money. Period. And they are in cahoots with each other and Wall Street and the Feds so if you settle credit card debt, you are never really done with these guys unless you never want credit again. Our society is built on credit. You can't ever really win and it's like these guys play poker together every Thursday night and compare notes.
No kidding. After settling several accounts for less than I owed I was surprised to learn that the cards I had in good standing were also canceled. As soon as I paid my good standing cards in full, they were canceled. Bastards. It's part of the price you pay for credit card debt settlement.
A cancellation of debt will hurt your credit,and like comparing notes at the poker table, they all know it. Remember this before you make the decision to try to settle credit card debt.
What is your plan? Advantages and Disadvantages
Anyway, I had five credit cards that I decided to settle and each creditor called me an average of six time each night. That was fun and it did rekindle ideas of curried chicken for dinner a few times. We finally turned off the ringer, but we missed some calls from friends and family members when we did this. That's why the whole family should be board. Husband and wife and let the kids know what's going on. It'll be a good learning experience for everybody. I'll admit that I didn't do this and my wife really got pissed off with me. Some of the credit cards were in her name and some in mine, so we both took the hit, but the incessant calls were very troubling.
I think people try to hide from these debt problems. In the end you are not hiding from anybody except yourself and it will be a lot less stressful to be open and honest about the entire situation.
The overall plan should be to settle for twenty cents on the dollar.
If you owe ten thousand dollars to the credit card company, your goal is to settle credit card debt for two thousand dollars. But if it's three thousand, so what? My philosophy is that you don't need to pick up the last dollar on the table. Yeah, I know credit card companies suck and I know you're probably going to be talking to someone in India, but remember the overall plan is credit card debt reduction. You will end up settling for much less than you owe. If it's twenty or thirty percent you're doing good.
What else can you do?
The other credit card debt solutions are to get on a payment plan with the interest frozen. This will allow you to debt service the bills at a reduced interest rate and pay the entire amount and will provide some card debt relief. It will take time to do this and most of the time the account is closed. It is a good option for many people and I urge you to consider this as a solution. Think long and hard about pursuing a credit card debt settlement.
These guys are going to call you.
Don't kid yourself. The banks enlist collectors to follow up on late pay customers. They will call up to ten times per day and the constant ringing will eventually grate on your last nerve. It doesn't do any good to pick up the telephone receiver and immediately hang up. Why? Because it's a computer calling using predictive dialing software. If you answer, the computer signals that you are home and available to receive calls.
Besides calling you at home during the evenings, the credit card companies will call you at work and they will call your cell phone if they have a record it belongs to you. This will be embarrassing and it will piss you off. So what do you do?
I already told you not to hang up. Don't lift the handset and hang up. Bad idea. Don't be rude because you have to remember that these people are just worker bees making a dollar per hour. They don't know what the hell is going on in your life. They have no idea you have money problems or that your wife is sleeping around with the neighbors. Give the people in India a break. In fact, you can have some fun with them. I'll show you how.
You have to send a letter to the Correspondence Department of that particular bank.
Ask the person calling you for the fax number of the correspondence department. That should be a hoot as they look through their manual of frequently asked questions. If you get an American bill collector who knows what this actually means, you can ask him or her what the fax number is, but I warn you…these faxed requests get lost. You are not interested in any type of card debt negotiation at this point. Just get them to stop calling.
My suggestion is to send a letter to the address where you send your credit card payment asking them to contact you only by mail. No telephones, just mail. Make sure this is sent Certified Mail Return Receipt. Once they receive mail that was sent Certified, it becomes very hard to lose or misplace.
If they continue to call you after a reasonable time period, inform them that they have a letter on file with this request. Calling you and talking it up after receiving a letter like this is bad news for the credit card companies. Guaranteed you will no longer get any calls about your past due account because the law protects consumers from this harassment.
This is also bad news for you.
This is bad news and good news of a credit card debt settlement. Of course, you don't have the constant, incessant ringing of the telephone, but it's bad news because you don't really know when they plan on charging this debt off. You do not want a charge-off on your credit report. This will be very hard to redeem and more than likely, it will stay on your credit report for the entire seven years.
Pay attention-this is important
You're going to have to mark your calendar and at exactly 120 days from the time you first started being late. This is when you need to call them. Of course they will be shocked. Kind of like when those distant relatives show up on your doorstep with their suitcases in hand.
We were just driving through and thought we'd stay over with y'all. Before the shock wears off at credit card headquarters, ask if they are interested in a bulk settlement.
You will have to tell them your story but before you do that check your pulse and assess the conversation.
Since you're calling them, chances are you will not be connected to New Delhi, so you could actually get an American who is coherent, intelligent and understands that the economy really does suck. It always sucks in India so don't expect any sympathy from those guys, but if you are talking settlement and you are making the call, they will listen. I promise you this.
It is crucial that you develop a rapport with this person who does the negotiating. If you can't establish a rapport, tell them you changed your mind and hang up. Like every other situation in the world, people do business with people they like. If they don't like you and you don't like them, it just isn't going to work. No worries because the next time you call, you will get another person in another city across America. Find someone who you connect with.
What is your story?
You're going to have to tell this person your story. In my case, and now you will learn the rest of my story, my wife was diagnosed with cancer and I wanted to deal with a woman. Was I looking for sympathy? Not really, but I wanted to be able to reach somebody on a deep level.
Whoever you start negotiating with will have to take the offer to their boss and as you wait on hold, you want someone who is selling your story. Do not, and I repeat, DO NOT GET PISSED OFF. Don't be rude, and if you are several thousand dollars apart on the settlement, thank them for their time and say good bye.
Your story can be made up, but it's better to be real.
My recommendation is to be honest because in the end all you really have is your integrity. Sure, you can't pay your debt and that's because stuff just happens. People get sick. We lose our source of income. We have kids going to college. All sorts of life's treasures confront us and sometimes we just hit the wall. If you just screwed up and spent too much money, well, you're going to have to face this battle too because settling credit card debt is just part of the process.
You're going to have to raise your credit score once again and you're going to have another credit card some day. If you have a spending problem or a budgeting issue, now is the time to work it out-to get your house in order, so be honest about the situation and promise yourself you'll do better.
You still have a little time.
Most charge-off's don't occur until 180 days, so the pressure mounts for the card company to make a deal. If the credit card company has to write the debt to zero, they will get about ten cents on the dollar. You are going in offering them twenty cents on the dollar. It's in their best interest to settle, but like all things in life, they want the most they can get and if they don't have to make a decision like right now, there is no urgency. Get the name and extension of you new, good buddy at credit card central and mark your calendar to call them back in two weeks. Remember, they can't call you and you really don't know when they'll write this debt off, so you've to keep tabs on them.
Make a deal to settle your credit card debt but what about later?
You're going to need some very specific and sophisticated help to get your credit scores back up and I'll introduce you to the best credit coach on the market. In fact, it's a book I wrote. MY own scores shot up 215 points in 90 days and you can do the same. You will have to buy credit reports because you're going to need them. You want to know that the settlement is being reported properly. Your contact at credit card central will be of no help and calling them will not work to correct credit reports. To raise your credit score and to keep your report in good shape, you have to deal with the credit reporting agencies: Experian, Transunion and Equifax.
Your credit report should show the account as settled for less than full amount and as a result your scores will go up because you are no longer carrying the debt. This is still a negative mark, but it isn't a charge-off. What happens to the rest of the debt? The forgiven part? Remember, credit card companies suck and they want to make sure everybody pays their fair share and that the pain is spread out. They make sure you are not forgotten because your forgiven credit card debt is considered a gift and with any income you will pay taxes on their gift. Yes, expect to get a 1099 in January and remember to report it as income because the IRS will also get a copy of the notice of that generous gift. I told you they sucked.
What is a charge-off and how does it affect your credit?
Accounting rules dictate that at some point the non preforming debt a bank is carrying be written to a zero balance. This is strictly an accounting procedure and it has very little effect on the rest of the world. In other words, you still owe the money. No free rides, baby. When the debt is charged-off, the bank packages your debt into a huge pile along with a bunch of other slackers and sells these charge-off's in bulk. Usually the mud dwellers –aka collection agencies, buy this type of debt and they pay five to ten cents on the dollar. I admit, I used to be one of them. Yep. All this crying and whining and stress and some guys carrying baseball bats pick up your credit card debt for pennies. If you owed ten thousand dollars, the selling price would be less than a thousand dollars. And this depends on the market and basic economics. Supply and demand. It's possible your debt may only bring pennies on the dollar. Keep this in mind when you negotiate with them.
When you finally decide the time is near for a charge off and you need to make a deal to settle your credit card debt, don't try to get the last dollar. I've settled debt for twenty cents and some for thirty cents and sure, I could have beat them down even more, but I never did. Because of this philosophy, I have always been given ninety days to pay the settlement and have saved thousands of dollars.
There is also no interest due but very strict dates when I would pay. Not bad, right? Make sure you pay as agreed, but before you start the settlement procedure, get this in writing. Usually, they send a letter within a week and I will admit, I've paid before I had the agreement in my hot hands. Why? It's because of the rapport I established with my credit card rep. We had a sense of trust and my story was compelling and I had no thoughts whatsoever that the credit card company would renege. I recommend this only if you have the same gut feeling. Otherwise, wait for the mail. After you've paid the settlement in full, wait thirty days and get a copy of all three credit reports.
Dealing With Collection Agencies
Well, you can imagine what happens when greed is in place and if you are dealing with a collection agency, you will confront this. Technically, you owe the entire credit card debt amount and the new owner, or assignee of the debt is into it for next to nothing. They won't tell you that they only paid a dime on the dollar when they start calling you–day and night.
In fact, because this is now a commission based matter, you will have a lot of pressure to begin making payments.
Try to remember that like everyone else, these people are trying to make a living. They have kids in baseball and they have a car payment too. It's not personal. Just remember if you get to this point that you have a lot of leverage and the negotiating field is much wider, but you are dealing with people who will be much more aggressive than those nice people from India. You'll be praying to speak to those guys in India once again! If you make payments to settle credit card debt with collection agencies I will share my personal thoughts with you on how I would handle the situation.
Collection Agency Strategies That Work
- I would never pay more than twenty cents on the dollar to a collection agency.
- I would never give them my bank account number or access to any account I own.
- I would send them a letter telling them never to call but to correspond in writing.
- I would make sure the statute of limitations has at least five years left before I made payments.
- I would only pay with a money order or cashiers check and I would always make copies.
- I would be prepared for a lawsuit because if I have a job they will go for a garnishment.
- For these reasons, I would always try to settle credit card debt before a charge-off.
In the end what do you do now?
You might consider credit counseling if your situation is past your ability to deal with finances in a healthy way. Many people opt for a consolidation loan as a part of debt relief. You will probably need another credit card because as I have stated, this country relies on credit. Your choices are limited for the first year and I suggest Applied Bank® Visa® Gold Credit Card. They currently have the lowest interest rate on secured credit cards.
Learn more about debt consolidation where you will learn about your options.
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