How to Negotiate your own Credit Card Debt

I will state right up front this will be a rather long article as I will be going over what credit card debt negotiation is, the benefit of the process, the disadvantages of the process, and I will also explain the differences between how a debt negotiation company works vs. a law firm. There are quite a few differences in some key areas concerning the debt negotiation process and it is important to understand these differences before making a decision.

I would also like to say that this process is not for everyone, some people simply do not have the financial resources to make it happen and others do not have the right mind set.

What is the debt negotiation process?

This is a process of negotiating on past due accounts to reduce the amount owed from the original balance; the benefits of doing this will be saving money on what is owed (in many cases debtors save up to half of what they owe) and getting out of debt much quicker than paying monthly minimum payments.

You will notice I said “negotiating on past due accounts”. You must fall behind for the creditors to be at all willing to negotiate on an account. If you think about it why would they take less than what you owe if you are current? When you just pay your minimums they have you precisely where they would like you. This is referred to by many as the “credit treadmill” the cycle of paying monthly minimum payments at high interest; these schemes are set up to keep consumers in debt for over three decades and lose at least five times the original balance in interest alone. Thus making the fact of getting out of debt within 2-4 years through debt negotiation such a motivating factor for many people stuck in this position.

Unfortunately the prospect of falling behind for many debtors is quite scary. Naturally when falling past due on these credit card bills your credit score will go down, there is simply no avoiding this. The trade off for saving thousands on what you owe is a temporarily lower credit score. Now I say temporarily because the damage is not permanent and once you actually begin putting the negotiations through and show you owe no more credit card debt your score will naturally rebound. Approximately one third of your credit score is your “debt to credit ratio” which will be in much better standing after you clear out your debts.

This brings me to where a credit card debt negotiation firm can offer a vastly different and more beneficial service than a standard company; because most of the benefits a law firm can offer have to deal with the negative effects of falling behind on these accounts.

One of the negative side affects of falling past due is the creditors will be attempting to collect the debt, meaning they will be calling and harassing you the debtor. Now for the first few months of falling behind the debt stays in house with the original creditor and no one can legally stop them from calling to collect the debt. However once the original creditor passes the account to a third party collector is where things can change. If you have a firm representing you they will notify the collector upon them being retained, that you are a client. This is a huge benefit and can greatly reduce the level of collection activity you will receive while going through the debt negotiation process.

Another adverse affect to falling past due is the possibility of a law suit. The creditors hold the legal right to take you to court in an attempt to collect the debt. However you must realize that this is not their normal course of action it simply costs to much money and time to take you to court with no guarantee of collecting any money.

One more issue you must realize is that a debt negotiation firm must offer full disclosure to potential clients. Meaning they must fully explain both the good and bad concerning credit card debt negotiation and then extensively review your individual financial situation to determine whether this would be the right path for you.

Many debt negotiation companies just go on and on about how great their program will be and never discuss any of the potential pit falls to this process. This behavior is what often times gives the debt negotiation industry a bad name.

I hope after reading this article you feel more educated as to how this process works and what to look out for when you are interviewing companies to potentially help you out.