How to Negotiate a Credit Card Debt Settlement

credit card debt

If you have credit card debt and do not pay it within a certain period of time, the company can file a lawsuit against you to recover what you owe. Truthfully, few of these lawsuits ever get to trial. It is in the best interest of both you and the credit card company to negotiate a settlement for the debt instead. This is a faster way for them to recover their money, and allows you to pay a smaller amount and still be free of the debt.

You can go into these negotiations alone, particularly if you follow the tips below. For the best results though, you should always have an attorney by your side that will give you a much better chance of obtaining the settlement you want.

Determine What Company Owns the Debt

When you fall behind on payments, the credit card company will likely try to contact you for at least six months before selling your debt. If you do not pay the debt within that time, they will sell it to a debt collection agency at a discounted price. Before you attempt to negotiate a settlement, you have to determine which of these two companies owns your debt.

If the credit card company still owns the debt, they’re probably not going to agree to a settlement. This is particularly true if you are employed or have assets, such as a car or home. If a debt collection agency owns your debt, you’re much more likely to achieve a settlement because they didn’t pay the full amount of your debt.

Choose Your Highest Number, but Start Low

Before going into negotiations, you have to know the maximum amount you’re willing to pay to settle the debt. Do not tell the collection agency this number right away. Simply know when you’re going to be willing to walk away from negotiations, putting pressure on the collection agency to settle.

When it’s time to go into negotiations, you should start by offering a settlement much lower than your highest number. Collection agencies expect this and will rarely, if ever, accept the first number you offer.

Don’t Bid Against Yourself

Bidding against yourself occurs when you make an offer, and then increase it without receiving a counteroffer. Sometimes people do this because they don’t feel confident about their first number. Other times, collection agencies trick people into doing this. They’ll tell you the first offer was ridiculous and ask you for another. Don’t take the bait. Ask them for a counter offer instead.

Be Persistent

Don’t expect to walk away with a settlement after your first contact with a collection agency. This is a process that typically takes many calls and many negotiations. Patience is important when trying to get a favorable settlement.

Offer a Lump Sum

Collection agencies favor one lump sum payment over payment plans that last for an extended period of time. If possible, offer to pay the settlement in one lump sum, which will allow them to collect on your debt and move on to their other files. It also allows them to get their money more quickly. Also, if you call at the end of the month and offer to make a lump sum payment, you may be more successful. Many of the people in these companies must meet quotas every month and so, will be more eager to come to a settlement agreement.

Get the Agreement in Writing

If you reach a settlement with the collection agency, you must get the agreement in writing before you pay off the debt. If you don’t, you risk the collection agency denying the agreement and forcing you to pay off the remaining amount. A written agreement will prevent them from trying this tactic.

Be Aware of the Tax Consequences

Federal law requires all creditors, including debt collection agencies, to report forgiven debt to the IRS. They do this because you will have to pay taxes on the forgiven amount. Before negotiating a settlement, it’s important to be aware of these tax consequences. If there was a lot of debt forgiven, the taxes on it could be significant.

Consider Bankruptcy

For those with very high amounts of debt, bankruptcy is sometimes a better option than negotiating a settlement with creditors. Debt discharged in bankruptcy is not taxed and can therefore bring huge savings depending on the amount of debt you have.

Hire an Attorney

It’s true that you could take these steps on your own when trying to reach a debt settlement. However, that doesn’t mean you should. Attorneys are professional negotiators and will give you the best chance of not only reaching a settlement but one that is reasonable for you to pay.

An attorney can also determine which company owns the debt, help you determine a number satisfactory to you, and won’t fall for the tactics the collection agency will use to get you to pay more. If an offer cannot be reached, or the tax consequences will be too great for you, an attorney can also advise on whether bankruptcy is a good option for you.

Contact a Florida Debt Defense Lawyer for Help With Your Negotiations

If you are considering negotiating a debt settlement with your credit card company, you should speak to a Fort Lauderdale debt defense lawyer first. These negotiations are anything but easy, and for those not familiar with the process, often unsuccessful.

If you’re struggling with debt, our attorneys at Loan Lawyers can help. We will review all of the legal options you have to deal with your debt and, if a settlement is possible, we will negotiate one that is fair to you. If bankruptcy is a better option, or a collation agency has already filed a lawsuit against you, we can help with that, too. Call us today at (954) 523-HELP (4357) or fill out our online form for your free consultation. There are many possible options available, and we’ll help determine which one is right for you.

Loan Lawyers has helped over 5,000 South Florida homeowners and consumers with their debt problems, we have saved over 2,000 homes from foreclosure, eliminated more than $100,000,000 in mortgage principal and consumer debt, and have recovered over $10,000,000 on behalf of our clients due to bank, loan servicer, and debt collector violations. Contact us for a free consultation and find out more about our money back guarantee on credit card debt buyer lawsuits, and how we may be able to help you.