Credit Card Debt Settlement and Debt Negotiation

Why should you listen to me? I had $75,000 in credit card debt and I settled it for $21,000.

If you have the money or can get the money, (friends/relatives) to settle with credit card companies...do it! Will settling with credit card companies ding your credit? Yep. Should you care? Yes. But not so much. Obviously everyone is different...but every one's credit is dinged these days, and people with outstanding credit can't buy things like they use too. You can start rebuilding your credit right away and have it back enough to buy a house in a couple years.

QUICK THINGS YOU SHOULD KNOW:

• The credit card companies will send you a 1099 form for the difference for which you settle. In our case we will get a 1099 for $54,000 (ie income on our taxes) at the end of the year.
• IF...you are insolvent (we are) ie, you owe more than you are worth. As I said, in our case we'll get a 1099 for $54,000. But currently we owe more money (credit cards, house, a second mortgage) than we have. So the 1099...It doesn't count against us! As an example, your house being upside down is good in determining this. We are upside down by like $66k...that put us over the top.
• SO..if you are insolvent...it will not count against your taxes. It (the 1099) just goes away.
• Do not charge things on you cards or take cash out for over $600 before you stop paying them. That's fraud. If you have taken out large amounts, you better be able to prove it is not fraud, and you really need to wait at least 3 months before not paying your cards.
• Your credit card companies will not work with you until you are behind on payments. I know...stupid...but true.
• Do not threaten them (credit card companies) with talk of bankruptcy. That's your ace in the hole. Also don't be arrogant with them when they call to collect. They are just doing their jobs and 9 out of 10 of them will be at the least fair and at the most understanding. Now when your debt is sold to a "collection agency"...then the rules change. But lets not go there...you will see why.

 Stop Paying Credit Card Bills Today!

• KEEP VERY GOOD NOTES WHEN YOU STOPPED PAYING, AND THE INFORMATION TOLD TO THE CREDIT CARD COMPANY OVER THE PHONE.   THIS WILL BE VERY HELPFUL IN THE FUTURE.  
• Between 1 month and 3 months they will call you and try and collect. They will actually be understanding and nice. Just be honest, say you are tying to get money together but you don't have enough to pay right now.
• After or around 90 days start asking them things like "is there anything you can do, what options do you have?" They may or may not bring up settlement. If they don't tell them your parents will loan you (whatever 15% of the amount you owe) to settle with any credit card company we owe that is willing to settle...don't say 15%. Give them the amount, not a percentage.   If you have enough cash to settle, never admit it.  As far as they know you are going to borrow it.  Is this fair?  Yes.  Why?  If you can't pay your bills and go bankrupt...the credit cards will get FAR less than you will pay them.  We were in no position to pay everyone back and not file bankruptcy without this option.
• They will come back (almost laughing at you) when you tell them how much you can get.  They will probably say that they can't do that...but they can settle for 85%. "Thank you, but I can't afford that, so let me try to get some money together and see if I can get caught up".  Is your response
• This will happen back and forth for a month or two...it will get down to 50% and it will seem like they will not go lower! They will.
• They may also give you a deal...where the conversation has led to them agreeing with you at 35%. The company person will say, "so you can pay 35%...let me take it to our managers to see if they can do it". It will NOT happen. Unless you are in the 160-180 day range they'll come back and tell you they couldn't do it...but they would take 50%.
• But between 160 days and 180 days the serious negotiations begin. We had 5 credit cards (Chase / Bank of America / Capital One),  Bank of America was the best, easiest to deal with.  I really appreciated that...no games.  At like 165 days Chase who all along said they could not go below 35% threw 45% at me...and when I hesitated dropped down to 30%. Deal!
• There is EVERY bit of a chance we could have gotten them to 20% if not better. I've heard stories. We did not want to take the chance that it would go to collections (agency) and having to start all over with them.  Plus...lets be real. We owed the money, they didn't force us to use the cards. But they sure didn't mind charging us the loan shark interest rates fees.  Nobody is innocent here.. So don't feel bad like you are doing a bad thing...it cuts both ways.
• Once they settle...they will give you 3-6 months to pay (3-6 payments...usually 3-4)...you kinda can pick your terms. They will give you an agreement letter telling what they will do.

THINGS YOU SHOULD & SHOULDN'T DO:

• SHOULD: Answer all phone calls. If you answer calls on say the first day of the week (or whenever), you might not and should not hear from them for another week.  If you avoid them they will make several calls a day and even start to look for alternative ways to reach you.
• If you have voice mail (recorder)...put your first names in the message. This way they know it's you, and they won't try and call anyone else .
• DO NOT give them ANY personal information on yourself or anyone in your family. They will ask about your income, your spouse...where they work...where you work. You are not obligated by law to answer their questions...other than the basic. Just tell them "it isn't relevant where you or your partner works and that you are doing your best to get money together to make a payment...that is what you are trying to do".

Lastly...a website that is very helpful...go to bkforum.com. They have a section in their forum on credit cards and collections. VERY...VERY helpful!