Credit Card Debt Settlement - How Does A Legitimate Debt Settlement Program Work

Credit Card Debt Settlement - How Does A Legitimate Debt Settlement Program Work

Every individual in America, having a credit card is looking for credit card debt settlement. This situation has arrived because of the recession that had hit the US economy. Thousands of American people either lost their jobs or had their income levels reduced. As a result, they failed to repay the credit card dues on time and became defaulters. This condition still continues. The worst came in when many people started filing for bankruptcy and the rate of bankruptcy increased at an alarming pace. This made the creditors financially unstable and in turn, the economy became weak.

To take care of the situation, the federal government came up with modified bankruptcy laws where the consumers need to first qualify for bankruptcy and it is only then that they can file for bankruptcy. However, with this restriction, many people failed to qualify for the same and they gilded aside to the alternative method of debt settlement.

Settlement as an option of debt relief is now widely practiced because of the fact that is far better that bankruptcy in many aspects. The consumers do lose their credit score and credibility during the process but the fun fact is that they get it back when the settlement process is over. At least 50% of the debt is eliminated in this process and at times, the percentage of elimination can rise up to 70.

A professional negotiator dealing with the case of a consumer first makes a repayment plan based on the income and the expenditure of the consumer and then sends a letter to the creditor which states that the consumer will no longer be able to repay the debt in full. The reasons for the same are also included along with proofs of the claim. At the same time, the negotiator asks the consumer to stop paying the creditor. Once the consumer stops paying, the creditor waits for 12-16 weeks and then sells off the debt to a collection agency. The agency agrees to pay only 20-30% of the total money recovered from the consumer to the creditor.

The job of the negotiator is to keep of track of this deal and when the deal takes place, the negotiator contacts the creditor and offers 30-50% debt repayment in bulk and asks the creditor to eliminate the rest. The negotiator also implicitly threatens the creditor that the consumer will be filing for bankruptcy in case the creditor declines the new offer made. The creditor is no longer left with any other option but to accept the deal and thus wipes off the debt of the consumer by at least 50%.

Once the creditor agrees to do so, a new agreement is signed between the creditor and the consumer and then the consumer needs to repay the remaining amount to the creditor in bulk or in installments of 6 months, whichever is applicable. This is how a legitimate debt settlement program works.

Debt settlement is a viable option to filing bankruptcy and is becoming increasingly popular amongst Americans with over $10k in unsecured debt. Creditors are ready to negotiate. You can literally eliminate 50% of your unsecured debt with a settlement. Check out the following link to locate legitimate debt help in your state.

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