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At the time of incurring credit card debt, consumers generally have every intention to live up to their financial obligations. Unfortunately, most people go through unforeseen circumstances, which at times, can make it impossible to live up to their share of the agreement. If this is your situation, you may wonder if it’s possible to settle your own credit card debt. Fortunately, although each person has a different set of circumstances, the majority of consumers can settle their own credit card debt. Here are a few tips to help you in this regard.

Credit Card Debt & Your Budget

It would be unwise to settle a credit card debt and then lose your apartment because you can’t pay your rent. Examine your family or personal budget first. If you don’t have a budget, it’s a good idea to make one. A budget can help you see exactly how much you’re bringing in and how much you pay out each month. A budget can also help determine if you need to trim or even eliminate certain spending areas. 

Make sure that you budget for your basic needs such as shelter, food, utilities and transportation first. It’s also practical to create am emergency fund before attempting to settle an unpaid debt. Dave Ramsey, Personal-Money Management Expert, recommends saving $1,000 for emergencies before attempting to settle your credit card debt.

Credit Card Debt & Your Creditors

Contact your credit card company and make sure that it still owns the account. Card companies often sell off accounts that are six months delinquent or longer. Even if the account has not been sold, a collection agency is likely handling the account.

Collect all the information you need to settle your credit card debt. Such information includes the total balance on the account. If a third party is handling the account, ask for the company’s name and contact number. Don’t attempt to settle the debt on the first contact. Simply gather the data you need.

Negotiating a Settlement on Your Credit Card Debt

Considering the balance on your credit card account, determine how much you can pay. Depending on how old your debt is, card companies often settle for 50 percent or less.

Contact your creditor either in writing or over the phone. Explain to your creditor that you would like to pay off your credit card debt in full, but unfortunately, you cannot do so at the time. However, you don’t want to leave the debt unpaid and would like to settle it. Whatever offer you make, you’ll likely receive a counteroffer, so offer less than what you can afford to pay.

Reaching a Settlement Agreement on Your Credit Card Debt

Once you reach an agreement on your credit card debt, if you’re negotiating by phone, the representative helping you will likely pressure you to pay the same day by electronic transfer or online. Don’t make any payments until you receive the terms of the agreement in writing.

Ask your creditor to mail or fax a written agreement to you. Specify that the document should contain the following:

  • The company’s letterhead
  • Your credit card account number
  • The balance on the account
  • The negotiated amount
  • The negotiator’s name and title
  • Date by which the offer expires

Moreover, the document should clearly state that the company will accept the settled amount as settlement in full or payment in full, depending on the terms of your agreement.

Mailing Your Credit Card Debt Settlement Payment

Review the written agreement and make sure that all the terms that you agreed to are included. Mail a cashier’s check or money order via certified mail. Select the “Return Receipt” option.
Make a copy of the check. Include a brief note reminding your creditor that cashing the check or money order constitutes acceptance of the amount as settlement in full. Include your name, account number and full amount due on the account as well as the settlement amount. Make a copy of the note and save it for your records along with the copy of the check.

Miscellaneous Tips for Settling Credit Card Debt

  • You might reach a lower settlement if you negotiate toward the end of the month when companies and agencies are often trying to meet a quota.
  • If possible, request that your creditor or collection agency report the debt as “Paid in Full” to the credit reporting agencies. Otherwise, the credit card debt will appear as “Settled” on your credit report.
  • Make sure that the credit card debt is updated as agreed. Check your credit report about 60 days after mailing your check.

Unpaid debts generally drops off your credit report after 7 years. However, you’re still responsible for the debt and your creditor can still pursue payment. If you plan to take out a loan or mortgage in the near future, it’s in your best interest to take care of any unpaid credit card debt.

Disclaimer: Research and knowledge of credit card debt is the basis for this article. The author does not have legal or financial background. Consult a legal advisor regarding your particular circumstances.

Copyright © 2011 Ana Jackson. All Rights Reserved. Reproduction in whole or in part constitutes plagiarism, is illegal and strictly prohibited.


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