Credit Card Settlement

Consumers seeking to settle credit card debt should consult a professional debt management firm. Delinquent credit card charges don't accumulate overnight and there's no quick fix for making them disappear. Debtors need qualified financial management agencies to help reduce or pay off outstanding accounts and satisfy creditors. Such agencies help debtors formulate a workout plan and negotiate with card issuers to come to favorable terms. The goal of the negotiator is to convince the creditor to settle for less money than the debtor owes in order to clear up accounts. But, debtors shouldn't try negotiating on their own. Irate bill collectors and emotionally stressed consumers generally don't mix. Dealing with delinquent obligations can present a powder keg of emotions: the creditor needs to be paid in order to stay in business, but the near-bankrupt debtor doesn't have the cash. A qualified credit card settlement negotiator can serve as a mediator between the two. But debtors and creditors are not the only ones in need of a mediator; all mankind needs someone who can negotiate with God to grant a pardon from the overwhelming debt of sin. That mediator and advocate is Jesus Christ: "For there is one God, and one mediator between God and men, the man Christ Jesus; Who gave himself a ransom for all, to be testified in due time." (I Timothy 2:5-6).

Professional negotiators are debtors' advocates, highly skilled in bartering the best settlement for distressed consumers. Knowledgeable of the tricks of the trade and the legalities of collection, negotiators know how to approach creditors to elicit positive outcomes. Counselors can help borrower/debtors develop and implement a master plan to pay off credit cards, one at a time, within a specific period. Most creditors will gladly accept a reasonable plan because they recognize that half of something is better than all of nothing. In most cases, an average adjustment of 30% to 50% of the original unpaid balance is acceptable. Occasionally, creditors will accept less, especially if it appears that the debtor is on the verge of bankruptcy; in which case, creditors could easily end up with nothing. If debtors are forced to file Chapter 7 or Chapter 13 bankruptcy, unsecured credit card claims will likely be discharged. Negotiators can appeal to creditors on behalf of clients to avoid litigation and keep delinquent borrowers out of the courtroom. Once credit card settlement proceedings begin, creditors must cease all collection efforts and communicate only through the debtor's agent.

The counselor's method of handling a case depends on several factors: the amount of delinquency, the debtor's financial balance sheet, the creditor's policy regarding charge account adjustments, and the length of time it takes to work out payments. While small amounts of outstanding obligations usually require debtors to pay a lump sum, larger accounts can take nearly six months to resolve. Tens of thousands of dollars in delinquent accounts may require the negotiator to devise an installment plan over several years before settlement can be reached. The borrower's income and ability to make regular payments will largely determine the amount of time needed to reach a zero balance. The negotiator will review the debtor's complete financial statement to determine how much disposable income is available. In addition, debt relief counselors must comply with the creditor's charge account adjustment policies. An extended period of time may be required for debtors to accumulate enough funds to settle credit card debt. Remember: credit card settlement requires payment of delinquent charges -- one obligation at a time. Distressed borrower/debtors may have as many as five to ten revolving accounts; and a savvy financial manager must deal with each issuer to negotiate a favorable resolution. To amass funds, debtors may choose to regularly deposit money into an escrow account held by the debt management firm, or into a separate savings account earmarked for settlement.

In addition to determining when and what amount creditors should be paid, financial management firms charge debtors a professional fee. Most credit card settlement plans will incorporate the fee into a debtor's master plan. Payment options include: a flat rate, a percentage of the debtor's overall indebtedness, or a fee based on the amount of money debtor's save through negotiations. If a professional negotiator can save a debtor 50% to 70% of a delinquent account, the fee would have been spent. Without the debt management firm's expert intervention, borrower/debtors would have to face harassing creditors, defend themselves against lawsuits and wage garnishments, or declare bankruptcy. The services of such firms are invaluable safeguards against undue emotional stress and potential financial ruin.

Depending on the debtor's credit report prior to negotiating, credit card settlement can have a negative or positive affect on ratings. A documented effort to settle credit card debt may reflect favorably on debtors who previously had numerous charge offs and unpaid delinquent balances. But for someone whose payment history has been exemplary, settlement may mar an otherwise blemish-free report. Before making a decision to proceed to settle, borrower/debtors should seriously consider if creditor payments can be made consistently for the duration of a proposed plan. The decision to settle credit card debt is a good one if the plan can be followed through to completion. Debtors may need to find additional sources of income, take on a second job, or deplete savings to complete a long-term plan. But a second chance at financial stability and relief from the burden of credit card indebtedness may be well worth the sacrifice!

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