By financen | June 21, 2010 - 4:36 pm - Posted in credit card debt settlement

Being in debt is a very stressful situation. A person in this situation can easily get frustrated on anything happening around him. For example, the phone ringing off the hook because of collection calls from the creditors or the collection agencies or the mailbox getting filled by collection notices can easily make him furious and nervous. Even though these things can be miserable to experience, but there are ways to come out of this mess. If you notice carefully, these collection calls and notices by the creditors are giving hints that they are willing to settle the accounts with you according to what you can afford and clear the past dues. Most of the creditors will be willing to offer you a debt solution plan that can help you get out of the credit card debts.

Agree to a single part payment : If the creditors have sensed that you will not be able to make payments towards your debts and that you are considering to file for bankruptcy, they will allow you to make a single part payment, if that’s what you can afford to pay back. They will like to get back as much as possible from you so that the balance can be adjusted towards the principal amount. fortunately, this could work well for you too if you don’t intend to file for bankruptcy.

Most of the credit card companies will be willing to settle the debts if the accounts are delinquent for more than ninety days. However, if you have just made a small payment towards your debt, they will not offer you this kind of debt solution.

Make sure that when you are negotiating with the credit card companies to knock down the outstanding balance to less than half, you should put yourself at an advantage before the process starts.

Keep in mind that that all the credit card debt solution plans will not make your entire balance go away after the settlement is offered. There are some unique cases where the unpaid balance of your credit card debt will be sent to some outside collection agency to handle. They will add all their interests and fees and try to recover as much as possible from you. Make sure that you get everything in writing after you have settled the account with the original creditor and you are not bound to pay back the balance waived off by the creditor.

Be aware that the unpaid debt whose balance is $600 or more is considered by the IRS as an income earned and thus it is taxable. This amount will appear on the 1099 tax form sent by the creditor after the account gets settled.

Credit card debt solution will hurt your credit ratings. Try to work out all possible arrangements with the creditor directly before the account gets “charged off” and is sent to some collection agency. A negative remark is bound to appear on your credit report if you are considering a debt solution, but it is better to have an account reported as “settled for a lesser amount” rather than waiting for it to get “charged off” and damage your credit ratings severely.

This entry was posted on Monday, June 21st, 2010 at 4:36 pm and is filed under credit card debt settlement. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

1 Comment

  1. September 4, 2010 @ 12:33 am

    I think Debt Management programs are better in the long run, than debt settlements.

    Posted by Techbud