Debt settlement is what happens when you negotiate a pay off dollar amount for less than the total you owe on a debt. The lower pay off amount will be something the creditor or debt collector agrees to document and accept as payment in full. The newly negotiated lower pay off amount should be something you can afford to pay in one lump sum, or pay off over time if it is a term settlement agreement.
Settling credit card bills, and other debts you cannot afford to keep up with paying, is a pretty straight forward concept. Let me see if I can make this more complicated. Let’s start by narrowing down the basic principle of the 3 most common debt solutions to one sentence:
- Consumer credit counseling is based on the principle of “What can be paid – should be paid”.
- Debt settlement is based on the principle of “Paying something – is better than nothing”.
- Bankruptcy is based on the principle of “What cannot be paid – won’t be paid”.
If you are looking at debt settlement as a debt solution, it is likely because you are in the middle. You cannot fully afford the debts you have, but can afford something, and would prefer to manage your debts outside of a chapter 13 bankruptcy, or are choosing to avoid discharging your credit card debts in a chapter 7 bankruptcy.
Whoops! That’s not a complicated explanation of what debt settlement is. Let’s try this again….
Credit card bills not paid on time are a banks negative statistic. Debt settlement is a way banks lose less.
Each of your credit card lenders will have a policy for how they handle trying to collect on accounts that go delinquent. Some of these policies include:
- Getting you back on track by offering reduced payment hardship plans that may be temporarily extended to you for 3 to 12 months, or applied over the life of the balance in a 5 year payback schedule. Read more about credit card hardship payment plans.
- Debt collection efforts internal of the creditor.
- Charge off your debt as noncollectable and place your account with a collection agency who will bug you over the phone and through the mail to get you to pay.
- Placing your account with a debt collection attorney.
- Selling your account to a debt buyer.
Debt settlement is a method to resolve you unpaid credit card bills for less in every one of the scenarios above.
That’s more like it! This explanation of debt settlement and negotiating credit card debt IS a bit more complicated. But that’s as complicated as the debt settlement process will ever be.
It’s the “how debt settlement is going to work for me” and “is debt settlement for me” questions that make for details.
Ahhh… the details. Yes, getting the best deals, and the most from debt settlement, is in the details. And the details when negotiating and settling change from one creditor to the next; from one collection stage to the next; and most certainly from one personal set of financial concerns to the next.
That’s what this section of the debt relief system is all about and why it is the largest part of CRN’s publishing effort. The details….
The majority of what happens in the process of settling credit card debts is controlled by the policies, procedures and protocols that are set up by your creditor or outside third party debt collectors. Knowing the policies and procedures for each of your accounts you will settle, in advance of the settling, is a huge benefit. You simply plan ahead financially for the settlement opportunities that will be presented along the way.
CRN helps you settle your debts on your own by providing upfront education about the debt settlement process, supplemented by on the ground and “right now” details provided free in the comments section of this website, and one on one dedicated phone and email support to our paid members.
We know that many people are freaked out by the concept of negotiating and settling credit card debts on their own. CRN members also have access to professional debt negotiators, and at the most reasonable cost found in the industry. But let’s stop with the commercial and move on with the information.
In the next section we will bluntly outline who debt settlement is right for and why debt settlement is a race. You may already be in the race and not know it.
Continue on with the debt settlement section of the CRN online debt relief program – Will Debt Settlement Work For Me.