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Negotiating Credit Card Debt

 Debt Solutions - Posted: 2/10/2009
Secured creditors finance things like homes and automobiles. If you default on your loan, a secured creditor will put your home in foreclosure or repossess your automobile.  Secured creditors expect to be paid in full, and there is little room for negotiation.

Unsecured creditors issue things like credit cards. If you default on your credit card, a credit card company will turn your account over to collections.  A bill collector will then call you until the account is paid up.  

Credit card companies rarely sue their customers for non-payment because it is too expensive and time consuming. Nonetheless, not paying your credit card bill will have a negative impact on your credit. A “charge off” will stay on your credit report for seven (7) years.

Most credit card companies will accept a settlement. The more delinquent your account, the better your chances are of getting a good settlement. A settlement of 50 cents on the dollar is not unusual. Credit card companies would rather receive something than nothing at all. Nonetheless, a severely delinquent account exposes you to the risk of being sued for non-payment.

Credit card companies do not want you to file for bankruptcy because it reduces their chances of ever getting paid. If a credit card company believes that you are about to file for bankruptcy, they will want to settle with you.  Again, credit card companies would rather receive something than nothing at all.

A credit card company may agree to settle for 50 cents on the dollar if the debtor agrees to pay the reduced balance off in full.  Unfortunately, many debtors are not able to pay their debt off in full, even at 50 cents on the dollar.  A debtor could offer to make a large lump sum payment followed by smaller regular payments until the reduced balance is paid off in full.

Credit card companies want you to make regular payments. Most will agree to an affordable payment plan in order to avoid the expense of collections. They may agree to drop late fees and penalties, and/or reduce the annual percentage rate (APR).

Credit card companies act in their own interest.  However, sympathy can be a factor in their decision making.  If you are unable to make your credit card payments due to a loss of income or illness, it is generally a good idea to share this with the credit card companies. 


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