What is Credit Card Debt Negotiation?
Credit card debt negotiation, otherwise known as settlement; is when you, or a company acting on your behalf works with the credit card companies to have your total debt lowered. Lenders will often lower the total balance and/or interest owed because they are concerned that if they don't accept a settlement, you may file for bankruptcy and they will get little to nothing. Credit card companies will generally only negotiate your debts if you are behind on your monthly payments.
While amounts vary depending on your particular creditors, situation, and the negotiations themselves; many debt settlement organizations advertise they can have your total debt and monthly payments cut by anywhere from 20 to 70 percent.
How Does it Work?
You can negotiate/settle with the credit card companies alone, but you're going up against a formidable opponent. Many people attempt to negotiate themselves only to get nowhere with their lenders and eventually give up. Some companies are much easier to deal with than others, every lending company will have their own settlement policies in place.
Debt negotiation/settlement companies tend to have a much better success rate than individuals due to their existing relationships with the credit card and collection companies. As with most important financial concerns, when you're not familiar with how to do something it's usually better to get the help of an expert.
Settlement & Taxes:
A common misconception is that debts settled from credit card debt negotiation must always be taxed as personal income. This is often not the case; those with a negative net worth can offset the settlement amounts with their liabilities.
Those with a positive net worth still pay only a percentage of their total savings in tax, so it's not possible to 'lose' financially through negotiation due to potential taxes outweighing the settlement amounts. Speak with an accountant or tax professional for more details.
When Will Lenders Not Negotiate or Settle?
Credit card companies will generally not negotiate or settle credit card debts if you:
- Filed for chapter 7 bankruptcy in the last seven years.
- Recently used your cards for large luxury items, or showed poor budgeting in general.
- Are currently being taken to court by your lenders.
If you're struggling with your finances and none of the above are an issue, then debt negotiation might be a good option for you to consider. Before you can get started, you'll need to decide if you want to go it alone or use a company that specializes in dealing with credit card companies and other common lenders.
Credit Card Debt Negotiation hopes to help by providing information on the process of credit card debt negotiation and it's considerations, as well as other options available to help with your financial situation such as consolidation, and even bankruptcy. Use the menu to the left to navigate the site and learn more about the processes, benefits, impacts and for more finance help.