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Three FAQ on Credit Card Debt Settlement

 Is there a legal secret to settling credit card debt?

Contrary to debt settlement firms advertising the SECRET credit card companies do not want you to know, there is no secret to eliminate credit card debt by legally settling it. 

A credit card account is a contract between two parties.  That contract can be changed if there is agreement between the consumer and the credit card bank.  In this context, the most important part of LEGAL is for the consumer to get the negotiated debt reduction and its terms in writing, according to the Credit Card Debt Survival Guide.

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.

How much of a balance reduction do credit card companies usually settle for?

Online consumer forums have stories of consumers settling for as little as 20 and as much as 70 percent of their credit card account’s original balance. According to credit card debt settlement expert Charles Phelan, consumers who settle on their own get the best settlements.  Phelan also says credit card companies would rather deal directly with a consumer, rather than go through a debt settlement firm.

When approaching a bank for a debt settlement, a consumer must present a convincing case with low income, damaged credit and legitimate hardship issues.   According to the Credit Card Debt Survival Guide, credit banks are mostly likely to settle for the lowest amount of money and may offer to settle right before the account charges off, which is usually around six months of arrears.