How to Settle Credit Card Debt on Your Own

If you have a significant amount of credit card debt and are wondering how you will ever dig out from under it, this article is for you. 

There are ways to legally settle credit card debt that involve everything from manageable payment plans to interest forgiveness to flat out not paying all or part of what you owe based on specific legal statutes.


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Keep in mind that settling credit card debt often involves paying back only a portion of what is owed. You will find that with a little bit of knowledge going in, it is easy to negotiate with credit card companies.

Babysit Delinquent Accounts

Remember, it costs the credit card company money to babysit delinquent accounts so, in many cases, it is within the company’s best interest to figure out a way to collect something that will take the account out of liability status for them. 

Sometimes that means reducing or waiving interest all together, but you won’t ever enjoy these kinds of accommodations if you don’t ask for them.

What follows is a simple guide to working your way out of credit card debt without being shackled to a consolidation loan or other form of relief. Most of those kinds of solutions merely transfer debt from one place to another. Let’s have a look at how you can eliminate it altogether.

Make Sure The Debt Belongs To You

It may seem silly, considering that you made the purchases on your card, but this is the first and most important step to determining what you legally owe. 

Start with a formal dispute (typically filed with one of the three major credit bureaus) and follow up with a debt validation or verification letter.

The difference between the two is almost purely semantical. A verification letter goes to the creditor. 

A validation letter goes to the collections agency. If your account is in collections, you will want to deal directly with the collection agency as they are the entity who now owns the debt.

Check Statutes Of Limitations

Be sure the age of the debt has not passed your state’s statute of limitations. If it has, the debt is now considered “Zombie Debt.” 

That term applies to years-old debt and is past the statute of limitations that will allow the owner to collect. The statute of limitations clock starts counting down the last time the debt was considered active.

PLEASE NOTE: It is important not to agree to anything via phone conversation or in writing until you receive confirmation on your debt verification/validation letter that yours is not Zombie Debt. 

You can inadvertently reset the Statute of Limitations if you agree to make even just one payment. To learn your state’s laws regarding the statute of limitations, have a look at this page.

If you are contacted about an account that is considered Zombie Debt, the collections agency cannot legally collect, even if you, technically, still owe the debt. If you can prove that the statute of limitations has passed, you don’t legally owe anything.

Debt Reduction Strategies

If it it determined that you still legally owe the debt, you can work with the collections agency to reduce the amount owed. This is not the time to be slowed down by pride. It is neither dishonest nor ethically questionable to try to reduce the amount you owe.

Keep in mind that with credit cards, much of the debt incurred is in the form of interest. Once an account is in collections, both the merchant and the credit card company have been paid. 

Now, it’s time to haggle with the new owner of the debt and come up with an amicable compromise on the actual amount you will need to pay.

Calling near the end of the month can be very advantageous since many companies impose quotas on the number of accounts settled per month. You are likely to get a better deal on January 28 than on January 5.

Start negotiating low. In other words, offer to pay just a small amount to settle the debt. 30 percent is a standard start point. In many cases, you will wind up paying only half to two-thirds of the total.

You are also likely to get a lower settlement if you can promise to pay the amount you’re offering immediately in cash.

Some companies will grab 30 percent in cash as opposed to babysitting the account for another two years waiting for you to make interest-free payments.

Once Your Case Is Settled

As part of the agreement, you should ask that the collector NOT add the agreement to your credit report. Having it on there can be devastating to your credit.

Also ask that tradelines that are associated with the debt be erased. Be sure to get all of this IN WRITING before paying anything.

Finally, keep in mind that you might be liable for taxes on excused debt since the federal government views it as income. Follow these steps and you will not only get out of debt, but also increase your credit rating by eliminating those balances!

Explore Further

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