What Can I Do To Resolve Credit Card Debt On My Own?

Is it possible to pay off a credit card debt without the aid of a "credit counselor"? This is a fairly widespread misconception, since credit counselors don't actually perform that task. Nevertheless, who really knows the complex system of debt and credit?

By the way: So called "credit counselors" do not resolve money issues. A lot of the time they can lower your interest rate, and collect the balance with a debt management plan that has you pay them one payment a month until your creditors are paid in full.

There is a lot of information available, but some of it isn't accurate or complete.

This is a fast detailed guide to help you meet your goal of settling credit card debt by yourself. To begin with, I need to explain several things. Then I will give you three steps to follow:

* It takes a lot of time to record, speak, haggle and follow up to get the desired results.
* There are multiple methods and conditions to think about that effect your results.
* There are a lot of traps to stay away from.
* It's a good goal to reduce the debt by two-thirds.

In my years in the business, the inside buzz has overall been "doing-it-yourself": on average, 75% of consumers settle their credit card bills by themselves. I have some dear friends who found themselves in dire straits recently, and because of their knowledge and persistence, were able to settle on quite a few personal credit card accounts for around 10% of the original debt. That is not the case for most people.

A lot of people cannot reduce their debt by themselves, and they can't get relief from high interest rates either. These people never dig themselves out of the mountain of debt that they are buried under.

Attorneys, arbitrators and other professional negotiators settle debts for clients about half of the time, with varying degrees of success; and the charge is 15% in fees generally speaking -- which means, for you, around 65% more or less of your total unsecured debt will go to paying the professional service for settlement.

Professionals do receive the perk of "special treatment" from creditors, since these professionals make up a big chunk of debt and are therefore the collectors' most valued prospects. They work together on a daily basis. When a professional debt settlement negotiator goes to the negotiating table with a single major creditor owing several millions of dollars - that automatically generates a nice leverage for other clients represented by the same professional. Creditors are more likely to settle for a great deal less than people would regularly be able to achieve doing it by themselves.

There are four important talents needed in this endeavor: communication, negotiation, documentation and follow-up; and I have regularly helped people with these skills to negotiate settlements as low as 45-60%.

You need to be committed to doing the communicating, negotiating, documenting and following through.

So if you are. . .

These are the main points that will help you do this yourself:

Key # 1) It's mandatory for the accounts to have a delinquent status.

Creditors won't take anything less than the entire amount you owe until you are very far behind in payments, typically more than 180 days after being charged off. The reason for this is when an account is charged off by the credit company, the company gets a tax advantage when the account is considered a loss. This makes the account less valuable, and the complete balance is no longer owed. Typically, what usually happens is that a third party debt collector buys the "bad debt" from the business.

The Surprising Truth: In 2006, "unpaid debt" was sold to collectors for a measly $.034 cents on the dollar. This is 3.4%! Don't forget. Settlement with the lender is by far a better option when compared to collections, lawsuit, or bankruptcy.
The worsening economy, with forecasts of doubled bad debt for this year, means more savings and better settlements for you, especially with the value of bad debt likely to drop.

Key # 2) Documentation is always better than conversation -- ALWAYS.

One of the most important things to remember is that you should never make a payment over the phone.
Collectors usually request a check over the phone.

Tell them: "Sadly, I can't make a payment but I wish to resolve this matter in the near future. It is simply impossible for me to make a payment at this time. I am interested in settling at least one of my accounts with the person who offers me the best deal, with the understanding that I will have in my possession $_____ soon (quote a sum roughly 35-50% of your outstanding balance -- a round number, not a percentage).

Are you able to put that offer in writing?

Suggestion: This can be done in the beginning or as a response to an unreasonable settlement offer. Write a "Hardship Letter." Explain your inability to pay in detail with information about medical problems, divorce, unemployment, or any other extenuating circumstances, and put it in writing. Your negotiation will be helped by any information about your personal hardship. Send the letter with a request asking to settle for an amount that is approximately 35-50% of your balance.

Speaking sincerely about your financial problems, lack of money, and inability to pay your bills will help when you are asking for a settlement over the phone. Be genuine but sell your sad story. However, in this situation. . . writing down information is better than talking.

Record all of the information. The name of the person you spoke to, their contact information, and the date and time. Organize everything in a readily available folder.

Note: Particular creditors are less likely to decrease the debt by a big amount if you live in Florida, New York or Ohio or if you are negotiating with CitiBank, Discover, Kohls, Target, or Chase. When this happens consider yourself lucky if you can get 60% to 75%. They favor using legal action more than others.

Key # 3) Get a return receipt by using certified mail.

You should only send the check after you have received an acceptable written offer of settlement. However, prior to that… On the blank space on the check, fill in your account number for the particular account to be settled; and state "FOR PAYMENT IN FULL" in the memo. Following this, use certified mail to send the check together with a facsimile of the settlement offer with return receipt.

You can proceed with repairing your credit once the account is completely paid off, and may even be able to dispute it and have it permanently removed from your record.

Settling your debt by yourself is similar to completing your own taxes or medical exams.

You can do it. Some people can do it well, and have fun doing it, but most people want to hire someone who knows what they are doing so that it gets done as soon as possible.

This adds up to the method for paying off your debts. It makes sense to hire a debt settlement company if the cost will be similar or less than just doing it yourself because then they can do most of the work.

Engaging the proper professional is another topic entirely. You must be vigilant since there are precious few good ones. There are a lot of shady salespeople who will mislead others for their own financial success.