How can you settle a credit card debt without using a “credit counselor”?
I have credit card debt with 2 companies. I want to try to settle the debt for about 2/3rds of the total with each one. Anyone know hwow I can do this without using a credit professional?
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Hi mawmaw mary!
Looking at the other answers so far, I see some good info mixed with some incomplete info and also some inaccurate info…. So here’s a quick step by step guide for you to accomplish your goal:
Settling for 2/3rds is a reasonable goal.
First let’s clear up a few things, then I have three “keys” for you to follow…
Overall, “doing yourself”, consumers average settlements of about 75%. Professionals average less than 50%, and usually charge about 15% in fees, putting the total cost to use a professional at about 65% or less on average.
Creditors do give professionals “special treatment” because they deal with each other every day. Large professional negotiators are the bread and butter for most collector these days. Also, when a professional representing many clients comes to the table with $ Millions of dollars, this creates serious leverage and creditors are willing to settle for substantially less than any individual would ever be able to achieve on their own.
Still, I’ve helped many folks who have a knack for negotiating, documenting and following up (the three critical skills you’ll need to do this) to get settlements as low as 45-60%. Here’s the keys to accomplish this yourself:
KEY # 1) Your accounts must be delinquent.
Creditors will not settle for anything less than the full balance until your accounts are seriously past due, usually 180 days + after “charging off”. This is because when creditors “charge off” an account (an accounting entry), they are taking a tax benefit on the account by writing it off as a loss. This devalues the account, and it is no longer worth the full balance owed. In fact, the normal course of business is to sell the “bad debt” to a third party debt collector.
FACT: In 2006, “bad debt” was sold to collectors for an average of $0.034 cents on the dollar. That’s 3.4%! Keep this in mind. This is exactly WHY debt settlement works so well, because it’s a better deal to the creditor or collector than any other option, such as a lawsuit, collections or bankruptcy.
KEY # 2) Documentation BEATS Conversation, every time.
DO NOT make any payments by phone. Collectors will almost always ask for a check by phone. Say this:
“Unfortunately I’m unable to make a payment at this time; and am hoping to bring resolution to this matter as soon as possible. I understand you want me to make a payment right now, but that just isn’t possible. I will have $_________ (state an amount that’s roughly 35-50% of your balance, not a percentage) soon and want to settle one of my two accounts, whoever will give me the best deal. Can you please send me an offer in writing?’
Track everything (documentation)… who you speak to, their name, phone number and extension, date and time. Keep everything organized in a folder, easily accessible.
HINT: You can do this initially or in response to a settlement offer that’s too high… Write a “Hardship Letter”. Hand write or type up a letter describing your situation, your inability to pay and include information such as, divorce, medical issues, loss of job, disability or reduced income. Any information regarding your personal hardship will help your negotiation, so don’t hold back. Send this letter along with a request to settle the account for $_______ (again, a random amount roughly equal to 35-50% of your current balance).
NOTE: Certain creditors such as CitiBank, Chase if you live in FL, NY or OH and Target will not settle for such small amounts. You should accept 60% to 75% in these situation and consider it good. All three are more likely to pursue legal action as well.
KEY # 3) Use certified mail with return receipt.
Once you get an acceptable settlement offer in writing, send a check, but first… Write your account number for the account you are settling on the check and in the memo write “FOR PAYMENT IN FULL”. Send the check along with a COPY of the settlement offer certified mail with return receipt.
BULLSEYE LETTER? In over seven years full time in this debt and credit business, I’ve never heard of a bullseye letter. I’m an optimist, but it’s unrealistic to think you can settle your debt for about half of what you owe and at the same time have the creditor send you a letter to have the account removed from your credit report. However, once the account is paid to a zero balance, then you can do the normal process of credit repair and quite possibly have the account removed through disputing it and requesting verification.
FYI: “credit counselors” do not settle debt. They usually are able to reduce interest rates but collect the full balance through a debt management plan where you pay them one single payment each month while they turn around and pay your creditors for you (hopefully), in full.
** If you ever consider professional debt settlement, be sure to READ THIS WARNING FIRST: http://ezinearticles.com/?Debt-Settlement-WARNING!&id=1275007