Credit Card Bankruptcy - Why Some Debt Settlement Programs Work
Credit Card Bankruptcy - Why Some Debt Settlement Programs Work
There are various debt relief programs to help customers negotiate and settle their debts for less than what they owe to the creditors. There are many agencies which helps debtors choose a suitable debt relief option and assist them with its execution.
The first step towards a debt settlement is to stop making payments on your account. The credit card companies encourage settlement talks only if the account is on the verge of going into collections. If the card companies have to sell the account to collection agencies then the money that they will get out of this account is as less as penny to dollars.
Another reason is that now the customer can claim that he is close to bankruptcy and debt settlement is his last hope. The credit companies lose a lot of money if the customer takes up bankruptcy. After filing a bankruptcy the creditors cannot recover any money from that customer. Hence the threat to file for bankruptcy comes in handy.
The creditors are willing to take a single lump sum payment in exchange of the settlement. Hence if the customer has some savings he can use it to negotiate on his account. Some of the creditors are even willing to work out a monthly payment plan for their customers.
A good negotiation can get the customer a debt reduction of about 40 % to 60 % of the total amount that is due. The reduction of debt is purely dependent on the amount that is due to the credit company and also how much the creditor is convinced that his customer is going to default completely. Hence any debtor who has an unsecured debt of about ten thousand dollars or more can be a part of this program.
Debt settlement is a legitimate alternative to filing bankruptcy. If consumers are experiencing a financial hardship and have at least $10k in unsecured debt then debt settlement can be a legitimate way to eliminate up to 70% of that balance.