Commonly Asked Questions about Credit Card Debt Settlement

Do I have a legal right to settle my credit card debt?

While credit card debt settlement firms may assert otherwise, settling a credit card debt does not involve a legal secret.

Credit cards are contracts between consumers and credit card companies. These contracts can be legally modified if both sides mutually agree to the changes. According to the Credit Card Debt Survival Guide, for the consumer the most important LEGAL feature of a credit card debt settlement is getting the negotiated debt amount and the terms in writing and signed.

Can you settle a credit card debt without being late in your payments?

Credit card companies will only settle with those consumers who have missed monthly payments. If the banks negotiated debts with current account holders, most consumers would want to settle for less than the full amount.

In most cases the reality is only those consumers, who can make their monthly credit card payments, can afford to settle. To negotiate their credit card debt with the bank, they must first take the risk of not making monthly payments to get the bank's attention. Then they have to save those payments for the lump sum payment they hope the bank will take.

How much of a balance reduction do credit card companies usually settle for?

On Web discussion boards, consumers report negotiating credit card balance reductions of 20 to 70 percent. Debt settlement teacher Charles Phelan reports credit card companies would rather negotiate with the account holder and not a debt settlement firm, and that consumers get the best deal of they do the negotiating themselves.

According to the Credit Card Debt Survival Guide, banks are most likely to settle for the lowest amount right before they write the account off as a loss. Six months after payments on an account stopped is generally when that happens. At this time it is common for a bank to approach the consumer with a settlement offer. Before this period, when a consumer in arrears approaches the bank with a settlement offer, the bank wants to see evidence of need such as low income, job loss, family death, illness, etc.