|Debt Consolidation, Debt Settlement
Negotiations and Credit Repair
The Personal Financial Management Page
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It is amazing how many people create serious problems for themselves by over-extending their credit. As a consequence, a whole industry of debt consolidators and credit repair counselors, some of them working as non profit organizations, have sprung up around the country.
What Credit Repair can and what it cannot do
An important word about Credit Reports and Credit Repair: No one can legally remove accurate and timely, negative information from a credit report. But the law does allow you to request a reinvestigation of information in your file that you dispute as inaccurate or incomplete. There is no charge for this. Everything a credit repair clinic can do for you legally, you can, if you have the time, do for yourself at little or no cost.
If you are short of time, or if you are intimidated by talking to your creditors, there are services that can help. People working in debt collection are not the most sensitive people in the world. Therefore, expect some really harsh and often insulting remark from them. The more they think you are intimidated, the more abusive they can be. One way to reduce their insults is by telling them that you are taping your conversation with them. Because, they are legally not allowed to abuse their position, keeping a record will help somewhat. But remember, you have to tell them, that you are recording your conversation.
By law, credit repair organizations must give you a copy of the "Consumer Credit File Rights Under State and Federal Law" before you sign a contract. They also must give you a written contract that spells out your rights and obligations. Read these documents carefully before signing the contract. The law contains specific protections for you.
Debt Negotiations with Credit Cards
When you start to be late with payments on credit cards the excessive interest charges and late penalties quickly cause your balance to balloon, making it even more difficult, to pay down your balances.
If you are on the brink of bankruptcy, you might consider debt negotiation. This can result in wiping out 75% of your credit card debt balances without the need to declare bankruptcy.
Why Credit Card Companies would settle
Credit card companies,, be they VISA, MasterCard, AMEXCO or Discover Card, are usually owned by banks or financial institutions. They obviously have to generate profits for their shareholders. When a loan, and a Credit Card Balance is a form of an unsecured loan, is defaulted on, it becomes non-performing. Because this has an immediate impact on the profitability of the lender, the bank or credit card company wants to get as much of the outstanding balance back as it can. They will do this by closing your account and by placing your account, after an initial period, with a group of people - the collection department - either within the bank, or subcontracted. They will start getting in touch with you, asking for their money back.
How Credit Card Companies deal with default
During the initial phase of default, usually about three to four months, the account will be handled by the bank or credit card company themselves. The account officer, who most likely handles several hundred accounts, or one of his minions, will attempt to contact you and see whether there can be a settlement of sorts.
It is likely that you have to talk to the customer service agent several times. Most likely the negotiations will happen over several days. Always be prepared for these "discussions" and record the details in writing as well as on a tape. The important part for you is that you have to reiterate your dire financial position and that it will not improve any time soon, if at all. If you are credible and consistent with your story (and we believe it is true, otherwise you would not read this page), it is likely that you will be successful. You will also have to be prepared to talk, at some stage, to a rather "nasty" and aggressive lawyer from the lenders side or, more likely, the subcontracting debt collector. Don't get intimidated! They are "professional nasties" and have heard it all before!
Naturally, you can use a lawyer or debt negotiation company yourself. But both will cost you, maybe a not insignificant amount!
One final most important point: You have to be absolutely sure that you can keep to the payment agreement with the lender or his representative. Not just for next month, but for the full term. Don't enter into a financial agreement that you cannot fulfill. Remember, your credibility with the lender is already at a low level and you do not want to make it worse!
The Costs of a Credit Card Debt Settlement Agreement
There is a "cost", if you make a credit card settlement. The costs is to your credit rating and your pride! However, since you have already defaulted on payments, the credit rating impact might be limited. The credit card company you negotiated with, will report the settlement and the amount of the settlement to the credit agency. You might make a point in your negotiation, that they will state "Credit debt paid in full" and they may or may not agree to that. Whatever agreement you make, it has to be done in writing. You negotiate on the phone, but you confirm the details in writing!
A credit card debt settlement agreement can be an effective way for you to avoid bankruptcy and for the credit card company to recover some of their money. And don't let yourself be stopped because of false pride. Take the temporary pain, and begin getting your financial life back on track.
And, next time round, think before you commit yourself to debt!