Credit card debt settlement – What happens in settlement?

In the case of credit card settlement, your outstanding debt amount gets reduced in general by 40-60%. Debt settlement or credit card settlement is one such process that helps you to pay off your debts when you are in a financial crisis. When you have low cash flow, debt settlement can be one of the most helpful debt relief options for you to become debt free.

Debt settlement process

When you opt to settle your debts or bills, you are required to negotiate with your creditors and settle on the debt amount that you think you will be able to pay. However, you should be aware of this that not all creditors agree to debt settlement. But, even if your account has been handed over to a collection agency, you can try to negotiate a settlement with them.

Another thing that you need to remember about credit card settlement is that not any of your secured debts can be settled. Only unsecured debts like credit cards, medical bills, utility bills, payday loans can be settled.

In addition to this, you should also know that debt settlement hurts your credit. This is because, you are required to miss payments on your credit cards before settling the debts or else the creditors or the collection agencies might not believe that you are in a real debt problem.

But, if you are in a real financial problem, you can go for credit card settlement and negotiate with your creditors to lower your debt amounts. The amount by which your debts will be lowered will depend on your affordability and the creditor to whom you owe the money. You will have to furnish papers of your income and expenditures in order to prove that you are going through a financial hardship. Moreover, you should also get a written agreement from the creditors or the collection agencies so that you face no kind of problems later.

Credit card settlement help

If you think that you won’t be able to settle your credit card debts on your own, you can take the help of a debt settlement company or a credit counseling company. If you go to a settlement company for help, the company will first analyze your finances and your debt obligations. They will then ask you to save money through budgeting and will negotiate with your creditors to lower the outstanding debt amount that you have. You will have to forward the money to them and then they will disburse the money amongst your creditors.

However, you should also know that it is essential for you to check with the authenticity of the company. You need to find out if the settlement company is accredited with the Better Business Bureau. Other than this, you should also check if the company abides with the rules set by the FTC or the Federal Trade Commission in 2010. The company should not charge any kind of upfront fees from you before they are actually able to settle at least one of your credit card debts.

Contributed by Debt community Member