Negotiating With Credit Card Companies Could Get You Out Of Debt

Your credit card bills are piling up, the balance is more than you can afford, and you’re wondering if you should try to negotiate credit card debt. Is debt settlement right for you?
If you’re in a position where you’re deep in credit card debt but think you can build up enough money to pay a chunk of what you owe, you may want to try to negotiate with your creditors. You could end up escaping much of your debt and avoiding bankruptcy.
You can negotiate credit card debt, or settle your debts, by agreeing to pay off a portion of what you owe — 40 to 60 percent, typically — in lump sums. You would keep much of your good credit and escape much of your debt while the credit card companies would collect much more than they’d get from you in a Chapter 7 bankruptcy proceeding.
You’d be most likely to try to negotiate credit card debt if your options were already limited to settlement, bankruptcy or payment plans. Chapter 7 bankruptcy erases debts, but it also decimates credit scores, and it’s very hard to qualify for. Payment plans, meanwhile, cut back on interest payments but don’t touch underlying balances.
The bad economy and tight bankruptcy regulations, plus a desire to save credit scores, have made debt settlement more popular than ever before. And creditors are more open to the idea than they were in the past. Their pocketbooks are hurting, too, forcing them to write off a growing number of accounts, and they’ll often settle for some of what you owe them when the alternative is nothing.
If you decide to negotiate credit card debt, you could attempt it solo or you could hire a professional debt settlement company. It’s rarely a good idea to take the solo approach, however.
As an individual, you’ll have little bargaining power, and you likely won’t be able to negotiate top rates. You’ll have to negotiate out your creditors’ bureaucracy alone, too. And you could run into credit card companies that won’t talk to you unless you have a professional representative.
Using a debt settlement company to negotiate credit card debt, on the other hand, gives you the advantage of a firm that works with creditors on a regular basis. You may get a more favorable rate from a debt settlement company because of its business contacts. You’ll also have an experienced voice in negotiations, a guide through difficult process, and a buffer to protect you from collection calls and other communications from credit card companies.
When you decide to negotiate credit card debt using a debt settlement company, you’ll take certain steps to encourage settlement talks. Here’s how it generally works:
The first thing you’ll be told to do after hiring a debt settlement company is to stop payments to the credit card companies. The money instead will go from your bank account into a trust established by the settlement company.
This money will be used to pay off your creditors in lump sums once settlement agreements have been reached. And since credit card companies won’t bargain if you’re still making payments each month, withholding this money gives them a reason to come to the table.
Debt settlement, like any financial avenue, carries some risks, and you should always keep your eyes open. But the industry is regulated by the Federal Trade Commission, which provides protection against fraud and abuse.
The best thing you can do in dealing with your debts is be informed and choose the right professional help. If you decide you want to negotiate credit card debts, there are professional advocates who can secure fair settlements for you.