Commonly Asked Questions about Credit Card Debt Settlement

Is there a legal basis to settle credit card debt?

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

Unsigned, credit card agreements are contracts between the credit card bank and the applying consumer. Like any contract, these contracts can be lawfully edited with the agreement of both sides. The most important legal aspect of negotiating credit card debt for the consumer, according to the Credit Card Debt Survival Guide, is getting the settlement and its terms in writing.

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

The short answer is NO. Banks will not settle with consumers who are not late in their payments. If they did, they would open up the floodgates to every credit card account holder seeking credit card debt relief.

As far as credit card accounts go, consumers fall in to two categories; those who can pay the monthly minimum, and those who cannot. For those who can pay and who want to settle for less than their full balance, they must risk not making their monthly payments and then banking that money for a lump sum settlement.

What percentage of the balance will a credit card company settle for?

On Internet consumer forums you can read of individuals negotiating credit card debt down to 20 to 70 percent of the current balance. Credit card banks prefer dealing directly with consumers rather than going through debt settlement companies, according to Charles Phelan, a debt settlement trainer. He also says consumers who negotiate on their own get the best settlements.

For a debt reduction agreement initiated by a consumer to work, credit card debt banks want consumers with real hardship issues like low income, job loss, family death, medical catastrophe, etc. The best time to settle, according to the Credit Card Debt Survival Guide, is right before the bank charges off the account. This usually happens six months after payments stopped. During this period, banks sometimes contact the consumer and offer to reduce the balance.