Can You Settle Credit Card Debt?

The short answer is yes. Here is how it works and what you need to know before getting started.

Can you settle credit card debt for less than the full amount you owe? Yes. Credit card companies and collection agencies regularly accept reduced payments to resolve outstanding balances. This process, known as debt settlement, is legal, widely used, and has helped hundreds of thousands of consumers reduce their total debt. Yes, You Can Settle Credit Card Debt Can you settle credit card debt for less than the full amount you owe? Yes. Credit card companies and collection agencies regularly accept reduced payments to resolve outstanding balances. This process, known as debt settlement, is legal, widely used, and has helped hundreds of thousands of consumers reduce their total debt. Creditors accept settlements because receiving a portion of what is owed is better than receiving nothing, especially if the account is already delinquent or at risk of being discharged in bankruptcy. How Much Can You Settle For Most credit card settlements result in the consumer paying 40% to 60% of the original balance. The exact percentage depends on the creditor, the age of the debt, the balance, and how strong the negotiation is. Some creditors settle for as little as 30% in favorable circumstances. For example, a $15,000 credit card balance might settle for $6,000 to $9,000. After including program fees of 15% to 25%, the total cost is still significantly less than paying the full balance plus years of compounding interest. Can You Settle on Your Own You can attempt to negotiate with your creditors directly. However, credit card companies and collection agencies deal with self-represented consumers regularly and know how to apply pressure. Professional negotiators have established relationships with creditors and understand what each company is willing to accept. Working with a debt settlement program also ensures your deposits are protected in a dedicated account, settlements are documented properly, and you have professional support throughout the process. What Are the Downsides Debt settlement can temporarily lower your credit score, especially if you stop making minimum payments during the process. There may also be tax consequences on forgiven amounts above $600. However, for consumers who are already behind on payments or considering bankruptcy, settlement typically results in a better outcome. The best way to determine whether settlement is right for you is to speak with a certified debt specialist who can review your specific situation at no cost.

---