Key Tips for Settling or Reducing Credit Card Debt

Credit card debt is one problems most Americans face at one point or another, and it can seem insurmountable. But settling your debt is a viable option, and can help you get started on the road to recovery.

In a debt settlement program, you agree to pay a lump sum that is less than the full amount you owe to eliminate the rest of your debt. Generally, you will stop paying your creditors and pay instead into an escrow-like account with set monthly payments until you’ve reached the settlement amount. Sound too good to be true? It isn’t, but it is important to know what you’re getting into and what your other options are. Here are some tips for navigating the debt settlement process:

1)      Request debt verification. Just to be sure, request a debt verification or validation letter from your creditor to prove the debt is yours. If the debt is past the statute of limitations, it is considered zombie debt, and is no longer your responsibility. Starting a settlement program on zombie debt will reactivate it.

2)      Try to reduce your balance. Because debt collectors bought your debt from a creditor for a small amount, they’ll often negotiate a reduced payment from you. Ask to pay just 70 percent of what you owe and go from there, although be warned they probably won’t allow you to reduce your payment plan as well.

3)      Research debt settlement companies. Do your research and make sure it’s a reputable company or organization providing the service before agreeing to a settlement. Some companies are not actually able to settle with your creditors, who are under no obligation to agree to it, even if you’ve already paid the settlement amount, so be sure to look into the company’s rate of success.

4)      Get it in writing. Be sure you get the agreement in writing as proof if the creditors don’t honor it. Also ask that they report your agreement as “paid as agreed upon” rather than “settled” on your credit report.

If you negotiate the terms of your agreement carefully, you’ll be able to finally eliminate your debt and improve your credit score. A debt relief attorney in Pennsylvania will help you navigate this process safely and with more success.

By Harold Shepley | Published March 6, 2015 | Posted in Credit, Debt | Tagged balance reduction, Credit Card Debt, debt settlement, debt verification | Leave a comment