A credit card
debt settlement is an agreement between a debtor and a creditor to
negotiate debt for a reduced percentage of the payoff amount (typically
35%-50% of the total debt). A credit card debt settlement begins when
the creditor agrees to cancel part of the debt and accept the remaining
percentage as full payment. Credit card debt settlement is also known as
"credit card debt negotiation". Consumers who use debt settlement are
those who are having financial hardships, and wish to avoid filing for
bankruptcy. Credit card debt settlement programs are provided by debt
settlement companies who negotiate settlements on behalf of the debtor.
Typically, credit card debt settlement programs can get individuals and
companies debt free in a short period of time.
Benefits
of a Credit Card Debt Settlement Program
Debt negotiation and debt settlement is an option worth considering
because:
You get
out of debt without filing bankruptcy. You will never have to check
the "yes" box to the question "have you filed bankruptcy?"
It is
simpler and quicker (4-18 months) than a Chapter 13 bankruptcy
(36-60 months).
It is
quicker and cheaper than most consumer credit counseling plans.
Credit counseling plans typically last for 3-6 years, and sometimes
longer.
It is
not a public setting. Everything you do is private. You will never
be required to justify your monthly living expenses to the
Bankruptcy Court and a representative of your creditors (the
Trustee).
Credit
card debt settlement companies work only for you. Most credit
counseling firms are there to get the best deal the credit card
companies can squeeze out of you. By contrast, loyalties are to you,
not your creditors.
Is debt
settlement the same as debt consolidation or consumer credit counseling?
No.
With credit counseling, you must pay back all of your debt plus
interest. While they will reduce the interest rates from say 20% to
about 8 or 9%, you still pay interest.
With consumer credit counseling, you have to pay back 100% of what you
owe.
With debt negotiation, you pay back a fraction of what you owe. Also,
Consumer Credit Counselors are paid by the creditors so they are really
working for them and not you. With debt negotiation, we work only for
you, not both sides. Credit counseling can be a good solution if you
have less than about $10-$15,000 of debt and the plan they propose fits
your budget and is less than 36 months long. In most cases, consumer
credit counseling plans are 4-6 years, and that is too long, and it
damages your credit further.
Is debt
settlement right for me?
Debt Negotiation Programs CAN work for consumers or businesses that:
Have a
legitimate financial hardship.
Have
more than $10,000 total in Unsecured Debt.
Are late
on bills, or will no longer be able to pay their bills in full.
Are
facing a potential bankruptcy.
Have
unsecured debts such as credit cards, medical bills, and store
cards.
Debt
Negotiation Programs are NOT for consumers or businesses that:
Have
solid income and no financial hardship.
Can
afford their monthly debt payments.
Just
don't want to pay the full debt amount.
Recently
purchased a number of non-essential items and now want to reduce
those debts.
How do I
become debt free?
Becoming debt free isn't an overnight thing but it is simple. Apply
these basic principles and you will be well on your way to a debt free
life:
Work out
what you need vs. what you want - what's really important? Are there
things you can really do without until you eliminate that debt?
List all
of your debts and prioritize the ones you want to pay off first.
Sometimes it's best to pay off those with the higher interest rates,
but sometimes you get a better outcome prioritizing those with the
smallest balances.
List all
of your income sources and determine any surplus (income minus
expenses).
If you
have no surplus, think about clearing your house of junk - is it
worth having a garage sale or selling your excess junk on eBay?
Commit
to paying off your debts - sometimes you need to suffer "pain" now
to achieve success later.
As soon
as practical, consider setting up a savings account - aim for a 10%
contribution to this account if possible, or build up to that
amount. This is what we call "paying yourself first".
Educate
yourself financially - your school didn't do it, so it's up to you
to make sure you know what you need to know to achieve financial
success.
Remain
focused on your goals - visualizing yourself as wealthy and debt
free is the first step towards achieving success!
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