Credit Card Debt Settlement Process

Credit card debt is only second to student loan debt in American for the highest type of unsecured debt.  Unfortunately, many people are forced to use credit cards to pay for unexpected emergencies, medical expenses, living expenses, and other bills when they do not have enough money to make ends meet. For some people, they simply got in over their heads with credit card debt and did not realize it until the debt was too much to pay.  Regardless of why you cannot pay off your credit card debt, there are several credit card settlement options available to you.

Debt Settlement

Most credit card companies won’t settle with you unless you have already defaulted on the debt. Often this occurs when the account is charged off (180 days from the last payment date). During and after this time, a collection agency starts harassing you for payment.  You need to be careful with these agencies because they often “lose” the payments that you make to them or they simply tack it on to the total balance when you thought it was a settlement.  For this reason, you MUST get a valid debt settlement agreement before you pay anything.  It’s usually a good idea to have someone help you with this.

Debt Settlement Companies vs. Law Firms

Debt settlement programs are offered by profit and non-profit organizations for consumers who need help with the credit card settlement process. The company negotiates with your credit card companies to accept a lower, lump sum payment to pay off the debt, to reduce the amount owed and accept lower monthly payments, or to accept lower monthly payments for a longer term.  You pay the debt settlement company a monthly amount and the company disburses the money to the various credit card companies.   Most of these debt settlement companies are scams.

In many cases, you may have to make payments for three years or more to pay off your credit cards. Many people have trouble making payments for this long and the debt settlement company usually takes a huge fee.  Your creditors are not required to negotiate or work with the debt settlement company; therefore, you may have creditors that you must deal with directly.  In addition, if the debt settlement company advises that you stop making payments to the credit card companies during the process, your credit score may fall due to negative marks on your credit report.

You must also beware of scams associated with debt consolidation companies.  Some companies require that you pay expensive monthly fees for the company to handle your credit card settlement.  If a company guarantees that it can settle all of your credit card debt, tells you to stop communicating with your creditors, or charges fees before it settles your debt, you should avoid doing business with this company.

Hiring a Law Firm for Debt Settlement

A reputable law firm can also help you resolve your debts.  We have helped thousands of consumers with debt related issues and defended over 5000 debt collection lawsuits.  A standard debt settlement company typically disclaims any responsibility if the creditor sues you.  However, if you have been sued, or you are expecting to be sued on a defaulted debt, it’s a good idea to take preventative measures and retain a debt defense law firm.  We only charge Flat Fees for Debt Settlement.

Negotiating the Credit Card Settlement Yourself

Some people are successful when they negotiate directly with their credit card companies to get out of debt.  The key to settling your credit card debt is to communicate with the companies and try to settle the debt before the account goes into collection.  Prepare a good argument to present to the credit card company for why it should work with you to settle the debt.  Be prepared to explain your financial situation and explain why you cannot repay the entire debt.  Reviewing your income and expenses before you begin the credit card settlement process is very helpful when discussing your financial situation with your creditors.  Always get the agreement in writing before you begin payments or pay a lump sum to the credit card company.

This credit card settlement process has its risks too.  Your creditors are not required to work with you to pay off your credit card debt.  If you are using the equity in your home or other assets to make lump sum payments to the credit card companies, you are transferring unsecured debt to secured debt and placing your home or other assets in jeopardy if you cannot pay the loan payments.  Lastly, you could face tax consequences when the credit card companies report the write-off of debt as income at the end of the tax year.

Filing Bankruptcy

Bankruptcy offers a way for you to get out of debt and get a fresh start to recover from a financial crisis.  For many people, filing bankruptcy is the best solution when they do not have money left over each month to pay toward credit card debt after paying their necessary living expenses.  The only way to be successful with the credit card settlement process is to have sufficient money each month to pay toward your credit card debt.  Bankruptcy wipes out credit card debt when you cannot otherwise afford to settle with your credit card companies.

The advantages of bankruptcy include:

  1. The chapter you file is based on your current income and expenses.
  2. Bankruptcy will release your legal liability to pay the credit card debt.
  3. Creditors must cease all collection attempts and cannot resume collection efforts once the debt is discharged and the case is closed.
  4. Bankruptcy is a permanent solution to your financial problems.
  5. Bankruptcy gives you a fresh start so that you can rebuild your finances for a stronger financial future.
  6. Bankruptcy can protect your assets from creditors.
  7. Creditors do not have a choice whether to participate in the bankruptcy process.


Contact an Experienced Debt Defense Law Firm

If you are dealing with overwhelming financial problems and harassing debt collectors, contact Weston Legal, PLLC to discuss your debt resolution options.  We will help you find the best solution to solve your debt problems.

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