How to Negotiate Credit Card Debt

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If you are someone who, as a result of the recent recession, is behind on credit card payments and is running out of cash or simply facing a Financial difficulty in general, you may be able to negotiate your credit card debt.

Negotiating, or settling, your debt means paying it off for much less than you owe your creditor. The amount you pay is agreed to by both you and your creditor, and usually professionals (often lawyers) come in to help you reach that negotiated amount.

While debt settlement is often a last resort because of the damage it can cause to your credit score, it could be worth it for anyone struggling with an unmanageable credit card balance that might otherwise go unpaid. .

Below, CNBC Selection spoke with Leslie Tayne, a debt relief lawyer and founder of Tayne Law Group, where to start negotiating credit card debt, how to find the right support, and what to expect.

Where to start

If you think you fit the criteria for someone in need of debt settlement, which means you just can’t afford to pay your past due debt and can’t make the minimum payments, your first step is to do your research.

When looking for debt resolution programs, look for a local debt lawyer or professional like a credit counseling by visiting a credit counseling company, like National Foundation for Credit Counseling or the Association of independent consumer credit counseling agencies. You can also check with your state attorney general and / or local consumer protection agency for a reputable law firm specializing in debt relief. The best debt settlement companies should be accredited and have a Better Business Bureau A + rating.

Tayne suggests finding someone who is familiar with not only creditors, but tax and credit matters as well. They will know the ins and outs of the process and already have relationships in place that you can benefit from.

“Because they do this for a living – and you should only go to someone who does it exclusively – they will have ongoing relationships with creditors, which may allow for greater leverage. and an understanding of what different creditors are looking for in settlements, ”she says.

What to watch out for

Unfortunately, finding the right professional to help you manage your debt takes time and effort.

“A lot of companies claim they can help you, but you have to be careful about who you work with because credit card debt settlement has so many implications,” says Tayne.

Not all debt resolution programs are valid, so it’s important to check with the sources we’ve listed above before going ahead.

When looking for the best debt professionals, your first clue is to make sure it’s a human on the other end of the line associated with a real business address, not a PO Box. . Check the company’s website first to find their contact details where a physical address would be listed and feel free to call them yourself and confirm.

Settler debt scams are all too common and you need to be careful about them as they like to solicit new clients.

“It’s easy to buy information about you and your debt, so it might sound legitimate, but you’ll need to do your due diligence,” says Tayne. “Nothing should be under pressure and nothing should have any promises.”

This is a red flag that debt settlement could be a scam if it makes outright promises or guarantees about how much money it can save you or how long it will take to save you money. come to an agreement.

“There is simply no collateral in debt resolution,” says Tayne. “Creditors frequently change their policies, and anyone who promises you … is not acting in your best interests.”

In essence, if it sounds too good to be true, it probably is.

Tayne adds that the cost of these services depends on who you’re talking to, but there shouldn’t be an upfront fee to pay to see results. Reputable professionals will not charge you until they have done the work for you. This means that the call to the debt relief company, along with any conversation about services and potential solutions, should be free.

“We don’t get paid until a client’s account is resolved,” Tayne says.

How to prepare

Start by knowing the exact amount of your debt and to whom you owe it. Make a list of who your creditors are and gather all of your financial documents, such as your credit report and credit card statements, that contain this information. You can check your credit report for free every week of each of the three credit bureaus at AnnualCreditReport.com.

“The professional you work with will use this information to better understand your overall financial situation and how much you can afford in monthly payments,” says Tayne.

She also suggests writing down any questions that arise as you prepare your documents and taking your time to choose a professional to help you. If you feel comfortable, set up a Zoom meeting instead of a call (in case you can’t meet in person during this time).

“You’ll want to make sure that all of the work is done with one office and not a call center,” says Tayne. Call centers operate like sales centers, and they don’t have the personalized service that a reputable credit company would provide. This makes it a frustrating experience for you as a consumer and proves to be much more difficult to get status updates or responses.

“You want someone who works for you who understands the financial piece of the puzzle and who doesn’t work from a sales script,” she says.

What you can expect for your credit

A very important part of negotiating your credit card debt is understanding what to expect along the way so that there are no surprises. Be aware that your credit score will likely be affected in the process as you work to reduce your debt.

Your credit will continue to be affected by the accumulated late fees and balances continue to rise as you trade, but once your debt is fully paid off your score may bounce back.

The timing of the whole process will depend on each client’s case. Some cases may require a few phone calls, while other cases benefit from one or more in-person meetings that last an hour or more. “The total debt settlement process takes between one and five years, depending on creditors, budget and complexity on average,” says Tayne. “But that doesn’t mean it can’t be done sooner.”

Tayne notes that while you may see a drop in your credit rating, most of her clients report that their ratings go up before the negotiation process is complete. And at the end, your accounts will be up to date and your credit utilization rate will be much lower than before because you’ve paid off your balance and got rid of your debt. These are two factors that help increase your credit score.

If you are in a temporary stalemate

At the end of the line

If simply paying off your credit card debt isn’t an option right now, and your balances are piling up, negotiation can wipe it out for much less than the original amount.

“You can then consider planning for the future and setting new financial goals without the weight of your debt,” says Tayne.

The information on the Citi Simplicity® card was independently collected by Select and was not reviewed or provided by the card issuer prior to publication.

Editorial note: Any opinions, analysis, criticism or recommendations expressed in this article are the sole responsibility of the editorial staff of Select and have not been reviewed, endorsed or otherwise approved by any third party.

About Sharon Joseph

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