When you borrow money from a creditor, you have a legal obligation to repay it. As a result, having unpaid credit card debt can lead to a lawsuit from a credit card company you owe.
If you’re behind on debt, getting back on track is in your best interest before you’re taken to court. Debt settlement may be an option. Understanding how to settle credit card debt can help you see how you can get debt relief and avoid being sued.
What are delinquency and default?
Delinquency and default are used when a borrower is behind monthly payments, but they are not interchangeable.
- Delinquency typically means the borrower has missed a single credit card payment. Depending on your creditor, the days past your due date when you become officially delinquent may vary.
- Default is when you have several missed payments over some time. Default, therefore, is a step beyond delinquency. Once again, your lender determines the amount of time at which you go into default. It may only be 30 days for some, while it may be several months for others.
Understanding where you stand on your debt can help you determine whether you’re at risk of being sued and whether you should consider settling your debt.
Should you settle your debt?
How can you know when you should settle your debt or if you’ll be able to? If you’re past due, it may be worth a shot in these cases:
- Your debt is in collections: If you are delinquent or in default, your original creditor may have sent your debt into collections, selling it to a third-party agency. These are typically the companies you receive collection calls from. Receiving these calls can be stressful and can have a major impact on your quality of life. Settling your debt can help stop these calls.
- You’re struggling to manage it on your own: If your debt is at such a point that you’re having trouble fathoming how you will get out of it, debt settlement may be an option for you. Debt settlement is generally best suited for a large amount of debt.
- You’ve been sued for your debt: If you’ve been sued for your unpaid debt, settlement may be one of your only options. If the credit card issuer takes out a judgment against you — meaning you don’t show up in court or you lose the case — settlement is generally one way to satisfy the suit.
- You’ll have negotiating leverage: Additionally, having debt that you’re delinquent on or in default on can give you leverage in settling your debt. Often, creditors or collections agencies are more willing to settle if you haven’t made debt payments. The creditor may feel that settling is the only way to recoup any debt. They would rather receive a percentage of the balance than none of it. This isn’t always necessarily the case. It’s not advisable to go into default to gain negotiating leverage for a settlement agreement.
Keep in mind there are many consequences to owing the debt. Missed and late payments will be reported to the credit bureaus, appear on your credit report, and harm your credit score. You can also rack up late fees and other fees that cause your debt to grow. The lender may eventually charge off the debt, harming your credit history further.
How do you settle debt?
Knowing the ins and outs of how to settle your credit card debt, whether you’re doing it yourself or working with a professional, can help make the process run as smoothly as possible. Settling debt involves contacting the creditor with a settlement offer in mind. The creditor will require a description of the situation. They then may allow you to make a lump sum payment to settle the debt.
Persistence is key — the creditor may not agree to the offer on the first contact. While learning how to settle your debt is possible, a debt professional will likely have more success and help take some of the stress out of the process.
Should you work with a debt professional?
A debt professional will be well-versed in how to settle credit card debt. Working with one, such as a debt attorney, can have several advantages in the settlement process:
- Experience with debt negotiation tactics: A debt professional will know what tactics work best when working with creditors. Professionals will understand the ins and outs of successful negotiating. As a result, they will likely be more successful than you would be on your own.
- Existing relationships with creditors: Debt professionals will likely have existing relationships with many creditors and lending companies. As a result, the creditor will know they’re working with a reputable source. When a creditor knows they’re working with a professional that will get them their money on time, they’ll be more likely to settle.
- Legal guidance: If you’re specifically working with a debt attorney, you’ll have built-in legal counsel if and when you’re sued for your unpaid debt. If you haven’t been sued before you begin the settlement process, there’s a chance you will be in the midst of it. This may happen because you will continue not to pay the debt. Having a debt attorney on your side can help you navigate the stressful and overwhelming legal process. This can help you avoid making costly mistakes.
A debt professional can help you deal with debt collectors and find the right repayment solution. That could include debt consolidation, a debt management plan, lump-sum settlement payment, or another repayment arrangement.
How do I know if a debt professional is reputable?
Lots of debt settlement companies exist. Working with the wrong debt relief company could cost you more and leave your debt unresolved. Some strategies exist to help you find a professional who knows how to settle debt and still has your best interest in mind.
- Do your research: Read online reviews and ask around to family and trusted friends. You can glean much from what others say about a company or professional. You can also check if they’re accredited and have had any complaints with Federal Trade Commission (FTC).
- Know the red flags: Scam debt settlement companies are known for making promises they can’t keep. If a company advertises that they can settle your debt for a certain percentage or in a specified amount of time, they’re likely a debt settlement scam. Because every consumer’s financial situation is different, it’s impossible to make such a blanket statement. Scam companies may also have a PO box, rather than an actual address. They may also only have recorded phone menus that don’t allow you to speak to a real person.
The bottom line
Knowing how to settle your credit card debt before going to court can help avoid more stress and expenses. Debt settlement is generally reserved for significant amounts of debt or when you’ve been sued for your debt. You can undertake this process yourself, but working with an experienced, trusted professional is generally in your best interest.
If you’ve been sued for debt or are wondering if credit card debt settlement is right for you, Tayne Law Group, P.C. can help! Our team of seasoned debt professionals can guide you through the process and help get your finances back on track. Call us for a free consultation today at 866-890-7337 or fill out our short contact form and we’ll get in touch!
