Because plastic money is easy and convenient to use, you need to have a great degree of self-control not to succumb to the lure of an endless spree of good living without worrying about repayment. It is certainly not unusual for people to suddenly wake up one day buried under a mountain of credit card debt, and struggling to make the monthly minimum due payments with mammoth interest charges and stiff late payment penalties driving them more under by the day. In this situation, daily subsistence can prove difficult, and people are faced with the unpleasant prospect of having to declare bankruptcy to stop being harassed by debt collection agencies.
Pulling Back From the Brink
If you are one of those who have fallen into very serious credit card debt, you may have received advice to file for bankruptcy. Before you do that you could consider going in for debt settlement with the credit card companies. This is a technique by which, credit card companies agree to waive off a substantial part of the outstanding, if you are agreeable to put some money on the table upfront or agree to a strict repayment schedule. Depending upon how bad your track record is and your negotiation skills, the best debt settlement you can possibly achieve is a 75% wipe out of your debt, making bankruptcy unnecessary.
Why Do Credit Card Companies Agree To Negotiate and Settle?
Credit card debt is unsecured and is not backed by physical assets of the borrower. The credit card company knows fully well that in case you file for bankruptcy, it would not be able to possibly get a dime from your estate. Like any other business, credit card companies need to protect their bottom lines and reduce operational risk as much as possible. If it becomes evident to them that your track record of debt repayment is not good and there is every chance that you would default soon, they come under pressure to extract as much as possible from you.
The Process of Debt Settlement
If you have already missed out on your monthly payments of a card on which you have a large amount of outstanding, the situation is ripe for a debt settlement negotiation. While it is entirely possible for you to negotiate directly with the credit card company, it may be more beneficial to engage the services of a debt settlement company that has considerable experience of dealing with tough finance professionals. These companies will assess your financial situation as well as examine your credit card statements and tell you what to do so that you present yourself as a good case for debt settlement. Often, debt settlement companies will advice you to stop making the monthly payments to make your desperate financial situation more credible.
While this action will incur additional penalties that will increase your dues and attract attention from collection agencies, you can use this to demonstrate your inability to pay the monthly dues, and that the only option for you is to file for bankruptcy. Offer to pay them around 25-30% of the sum due in full and final settlement and that this is the best you can genuinely offer them. While debt settlement companies cannot charge you upfront fees, you should be aware that they will charge a percent of what they are able to save you. While engaging in debt settlement, you should also ensure that the credit card companies do not report this as settlement to avoid it being reflected on your credit score and affecting your creditworthiness for future transactions.