From debt settlement to debt consolidation — do you really know the right way to get debt relief?
Let’s walk you through it.
Many people want to resolve their credit card debts and personal loan debts on their own. To be honest, I usually advise against this. A law firm like mine has many years of experience resolving debts and as a result has built relationships with creditors that allow us to get great settlements for our clients.
If you are insistent on settling your own credit card debt or unsecured debt of any kind, here are the six steps to help you along the way.
Stop using and paying the card you are trying to settle
We know — it sounds counterintuitive. However, it’s necessary to stop making payments on your outstanding debt. Creditors will not negotiate unless you are behind on the debt.
Believe me: credit card companies would be happy to let you make minimum payments for the next 20 years while interest racks up higher and higher.
Also make sure you stop using all of your credit cards from creditors or institutions you have any debt with. For example, if you have two American Express cards and want to settle just one of them, you have to stop using both.
Finally, don’t open any new cards, especially from the same creditors you are trying to negotiate with.
Be patient
It’s likely going to take some time before creditors will be willing to settle with you. It usually takes anywhere from 60 to 90 days to become open to negotiation.
Negotiate
Firmly negotiate the terms with your creditor to resolve debt. The goal is to get them to settle for less than the full balance. This may take a few attempts.
If you have a hardship, such as a loss of job or medical issue, make sure to explain that to the creditor that have a good reason for not being able to pay back the debt.
Many creditors will take a better deal if you agree to the settlement in lump sum, meaning you make just one large debt payment to the creditor.
However, you creditor may agree to let you make monthly payments in lieu of lump sum. This may be a good alternative that works well with your monthly income — just prepare to pay a higher amount for paying the balance down over time.
Get it in writing
Whatever settlement you agree on, make sure you get it in writing along with a schedule of payments.
Ask your creditor for a settlement letter that outlines your agreement. Have it both mailed and emailed to you with the terms of the settlement.
Have the creditor include the following information in your settlement letter:
- the account number
- the current balance
- the settled amount
- the payment terms (due dates, time period, and amounts)
- who you need to make payments to (the original creditor or a debt collector)
Make all the settlement payments on time and as agreed
A word of caution: Creditors and debt settlement companies might void your entire agreement if you miss or are late with just one payment. Once your debt management plan is set in stone, be sure to make all of your payments on time.
Once you have completed the settlement, you’ll receive a letter that states that there is a zero balance in the account and it has been closed. If you do not get this letter, ask your creditor or debt collection agency to re-send it.
Check your credit report and credit score
Check all three credit reports (Experian, Equifax, Transunion) to make sure that it reflects that the account has been settled and now has a zero balance. Do note that this change can take anywhere from 30 to 180 days to reflect on your credit report.
Be aware that your account may be sold to a different third-party collections company or even a debt collection law firm before or during the debt settlement process. If you notice an unfamiliar name or agency show up on your credit report, call your original creditor to verify that this is the right company. All of your information should be on file and the customer service rep should be able to give you a full history of where your balances went.
Bottom line: Should I resolve my own debt?
Settling your debts on your own can be dangerous because there is a likelihood that you may be eventually sued for nonpayment. Always weigh your options, and look into free to low-cost options such as nonprofit credit counseling.
Consult with a law firm that concentrates solely on debt resolution. Our initial phone consultations are free, so there is no harm in calling to see what your options are. You may be shocked at how affordable our program is, and how fast you start to see the light at the end of the tunnel. Call us for a free consultation at 866-890-7337 or fill out our short contact form and we’ll get in touch!
