How to settle credit card debt for less than what you owe

Category: Credit Cards


Did you know that you can settle your credit card debt by more than half of what you owe? Depending on how old the debt is, you might even be able to settle thousands of dollars of credit card debt by just paying a couple hundred dollars. Although your credit score will likely still be negatively affected, settling your credit card debt will help to avoid other potential problems, such as judgments and wage garnishment. You might even be able to negotiate with the credit card issuer or collection agency, and have them completely discharge the debt from your credit report, even by settling for less. The following are some tips for settling credit card debt for less than what you owe:

Settle before your account is turned over to a collector

If you’re just a few months behind on your credit card payments, you should try to settle the debt before the bank turns your account over to a collection agency. Once this happens, a second negative mark will show up on your credit report, in addition to the initial mark for the missed payments. If you’re hoping to salvage your credit score as much as possible by settling your debt for less, you’ll want to act quickly and before this happens.

Plead your case

When you contact the party attempting the collect money from you (whether it’s the credit card issuer or a collection agency), be ready to plead your case when asking about settling your debt for less. Explain why you’ve had trouble making payments, and why you don’t have the money to settle the account in full. If they realize you’re truly experiencing a financial hardship and that you won’t be able to pay what you owe in its entirety, there’s a good chance that they will just want to take what they can get.

Negotiate the settlement amount

This could be a little bit trickier when you’re dealing with a collection agency, as opposed to the credit card issuer, but it’s not too late even if it’s gotten to this point. Bear in mind that collectors often inflate the amount you owe by rolling in penalties and other fees. When you’re negotiating the settlement amount, be sure you’re beginning with the initial balance as your starting point, and don’t be too quick to agree to the first offer you receive. Some collection agencies will agree to monthly payments, but the discount on your overall debt won’t be as significant. You’ll often have the upper hand if you’re willing to make a lump sum payment.

Wait for the right time

If your account has gone into collections, you might have better luck with debt settlement towards the end of the month, as many collectors will need to meet monthly quotas.

Get everything in writing prior to paying

Once an agreement has been made, be sure to get everything in writing before making any payments. Written agreements should state that you’ll no longer be legally liable for the debt once you make the payment, even if the payment is substantially lower than the overall amount you owe. If part of the agreement was that the entire delinquency would be removed from your credit report, make sure this is also in writing.

If you need to pay off credit card debt, Peachtree Financial Solutions may be able to help if you’re receiving long-term annuity payments. You may have the option of cashing in some or all of your future payments and receiving that money upfront in the form of a lump sum. Having a lump sum cash payment can make it much easier to eliminate that credit card debt.  Contact us today to learn more about selling some or all of your future payments for cash now.

Nothing above is meant to provide financial or tax advice. You should meet with appropriate professionals for such services.

Tags: debt, debt collectors

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