Credit Card Debt Settlement – A Legitimate Solution To Avoid Bankruptcy

If you want to learn about credit card debt settlement

, then you will want to read this article. Specifically, we will discuss what credit card debt settlement is, how it works and how it will impact your credit. After reading this article, you should be able to determine if credit card debt settlement is a good option for you.

Credit card debt settlement is when a creditor agrees to take less that full balance on an account and consider the debt satisfied. This means that they can't come after you at a later date for the additional amount that you didn't pay. The reason that they will settle debts rather than just go after you for the balance is that litigation is very expensive and there is still no guarantee that they will get anything. If you are able to convince them that it is their best interest, most creditors are happy to settle debts. After all, they are in business to make money and something is better than nothing.

Essentially, what you need to do is contact the lender and see if they would be open to a settlement on the account. You should know that this is a process and you aren't going to get an answer right away. While if everyone is on board it can happen fairly quickly, the reality is that banks are not known for their speed. It can take up to six months or even a year to reach a settlement. When you do reach a settlement, you need to make sure that you get it in writing prior to making any payment. It is CRITICAL that you have in writing that the account will be satisfied, especially if you are dealing with a collection agency. Many people have had the unfortunate experience of not getting it in writing and finding out that the remaining balance of their account that was not paid has been sold to a new collection agency.

You should expect to receive a settlement of somewhere between 40% and 60% of the account balance. If and how much the bank settles for is largely related to how likely they believe that you may file bankruptcy. Obviously, if they believe that you can and will file a Chapter 7, they are going to be quite motivated to get what money they can now. On the other hand, if you have an income that prevents you from filing Chapter 7 and your credit is otherwise in fairly good shape, they may be reluctant to accept a settlement. Some lenders prefer to either sue you for the balance or take their chances with a Chapter 13 repayment plan - especially if they believe that you have job stability that will allow them to eventually collect.

A common question about credit card debt settlement is how it will impact your credit score. It will count the same as if the account had been charged off. How much this will impact your credit depends on what your credit report looks like now. If all of your other accounts have been paid on time and there are no major problems, then debt settlement will have a huge negative impact on your score. In this case, it probably isn't a good idea for you because when the lender sees your credit report they aren't going to be very motivated to settle. So, you will likely end up destroying your credit AND not getting a good settlement. On the other hand, if your credit is already in bad shape, settling a debt may have very little impact. It is certainly better than going through the emotional and financial trauma of bankruptcy.

Credit card debt settlement is not for everyone, but it can be a good option over bankruptcy. Hopefully you now have a good idea of what debt settlement is, how it works and how it will impact your credit score. Now you just have to decide if it is the right option for you.

Credit Card Debt Settlement A Legitimate Solution To Avoid Bankruptcy

By: Clyde Archer

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