If you want to learn about credit card debt settlement, then you will want to read this article. Specifically, we will discuss the most common questions people have about what debt settlement is, how credit card debt settlement negotiation works and the overall impact it will have on your credit score. When you are done reading, you will have a good idea about how debt settlement works and be able to determine if it is a good option for you.
What is Credit Card Debt Settlement?
Credit card debt settlement is when a creditor agrees to take less than the full balance on an account and consider an account satisfied.
Why would they do this?
Lenders are in the business to make money. If they believe that you may file a Chapter 7 bankruptcy, they are generally very happy to accept less than the full balance. Obviously this is far better for them than you filing bankruptcy and them getting nothing.
How does it work?
You can negotiate debt on your own or hire a company to work on your behalf. Either way, a call will be made to the lender to determine if they would be open to a settlement on the account. Negotiations then begin. It can take up to 6 months to reach an acceptable agreement.
How much should I expect the lender to negotiate?
If a creditor truly believes that you are going to file bankruptcy, you can expect them to settle for as little as 40% of the balance or less. An acceptable settlement is anything 60% or less.
How will debt settlement impact my credit?
That largely depends on what your credit file looks like now. If your credit is good the impact will be much greater than if your credit is already messed up. Either way, the account will be treated as a charge off.
Hopefully by now, you have an idea about how debt settlement works and can decide if it is right for you.