The process of credit card debt settlement can seem complex and intimidating. However, understanding the entire process from beginning to end will allow you to be able to take control of your future once more. Debt settlement is a way to resolve debts without paying the full balance due after falling victim to unexpected unemployment, medical issues, or other financial hardships that cause card balances to grow out of control.
Below is a detailed explanation of the credit card settlement process, what each step entails, and how to navigate each step to secure your rights and future financial freedom.
Step One: Identifying Hardship and Initial Assessment
Prior to engaging in a debt settlement process, you need to conduct an assessment of your current financial state and determine if debt settlement is right for you.
Assessing the Status of Your Debt: Banks usually only consider settling debt once an account falls into delinquency – normally around 90 to 180 days late. At this point, the bank knows that the account has gone into default.
Proving Financial Hardship: Banks will request proof of your inability to pay. Having documents such as your medical bills, termination letter, bank statements, or reduced income proof makes your case much stronger in negotiations.
Funding the Settlement: Debt settlement is done through a single lump sum payment or an installment period. During the time in which you are negotiating with the bank, save up a single lump sum.
Phase 2: Negotiation
After putting your account on the severe delinquency list, you can begin formal negotiations either with the bank's own recovery department or with a third-party agency.
Initiating Contact: The first step involves making contact with the recovery department of the credit card issuer through your authorized representative and stating your intention of settling the matter.
Receiving the First Offer: Normally, creditors offer small reductions in interests and penalties in their first offers as a starting point for negotiations. Your initial offer should never be considered your settlement amount.
Counter-Negotiations: Using your negotiation skills, you can get the attention shifted towards the reduction in the principal balance. Settlement amounts usually vary according to the period of the debt and your hardship proof, but normally fall within the 30-60% range of the outstanding balance.
Phase 3: Getting the Written Settlement Agreement
Never send any money based on a verbal offer made over the phone line. A settlement is legally valid if put in writing.
Getting the Formal Offer Letter: The creditor needs to give you a formal settlement offer on its letterhead and this letter needs to include the total settlement amount, the exact payment deadline and a statement to the effect that the amount will discharge the debt.
Reviewing Terms & Conditions: Make sure that the offer states no future actions will be taken after sending the settlement amount.
For more Details Click Here
