Credit Card Debt Settlement; better than Bankruptcy

Categorized: Bankruptcy, Credit Card Settlement | No comments

Bad things do happen to good people and, plenty of times, these poor souls see no way out other than filing bankruptcy; it should be known that credit card debt settlement is always the better way to go. When bills and debt are so unmanageable and it feels like there is no way ever to recover, bankruptcy might seem like the answer (like a quick, easy fix) but people should not fool themselves. Bankruptcy is a life-changing event that will cause black marks for as long as a ten years on a credit report and the process itself is demoralizing. Consider that bankruptcy is listed in the top five life-altering negative events that a person can go through, along with divorce, severe illness, disability, and loss of a loved one. While bankruptcy is not as bad as losing a loved one, it does leave severe damages to the psyche and the credit report. On the other hand, settling credit card debt might seem like a daunting task (and it is) but in the end people will still fair better than the gut-wrenching effects of filing bankruptcy.

There is an honest and ethical way to avoid bankruptcy and that is negotiating a debt settlement. It is important to note that settlement will hurt a credit report so this is not a path to take simply to lower payments or not have to pay altogether. This should only be attempted to try to avoid bankruptcy. Also be aware that settlements are only available on unsecured debt like medical bills, department store cards, and credit cards. Mortgages and student loans are in the class known as secured debt and cannot be settled. For that matter, student loans cannot be included in a bankruptcy either.
Claiming bankruptcy is not welcomed by creditors as they will get nothing and they will be forced to write the debt off as a total loss. However, creditors are also in the business to make money and they never want to settle either but that being said, if a creditor believes they possibly may get nothing (which is exactly what will happen if a bankruptcy occurs) then they are more agreeable to accept less than the full balance owed.

Creditors typically credit card debts for anywhere between 30% to 70% of the account balance. This equates to $0.30 to 0.70 of the dollar for the balance owed. Also during the negotiations, it is VERY possible to get the creditor to either remove the entry from your credit report or at the very least mark it as “Paid in Full.” This is one of the best things for a credit report that can come from a settlement, having it erased or reported as paid in full.

Some credit card debt settlement tips to consider:

•    Make sure the settlement is in writing
•    Do NOT allow electronic access bank accounts
•    Overnight a money order or cashier’s check (NO personal checks)
•    Attach the check receipt to the settlement offer and keep it on file


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