If a company finds that you have not made any payments to your account for a while and they sense that they will be unable to get the full sum that is to be paid by you then they may well set up a discounted debt settlement offer. What this means is that instead of paying the full total of the debt back, the credit card company will agree for you to pay a percentage of the debt and then write the rest of the debt off.
The only problem with this is that they will more often than not
request the agreed amount back in one payment. Do not be surprised or alarmed if the discounted debt settlement offer correspondence comes from a debt collection agency. This is due to the fact that most original lenders sign over your debt to these agencies, who then get paid a proportion of the amount that they recuperate.
So why do companies agree to debt settlement plans?
Once the finance companies have looked at your account and established that you can not keep up the payments they then need to decide whether to pursue you through the courts or undertake to get as much money from you as they possibly can. If they pursue you through the courts, not only do they incur court costs but there is still no guarantee that they will get anything from you. They therefore reckon that it is better to agree to a lower figure from you as an alternative of going through the courts to try and get the total amount.
There are many factors to take into account
before you accept this offer though. The first thing that you want to be aware of is that by agreeing to this offer your credit rating will be affected in a negative way because you have not repaid all of what is owed. That said, agreeing to the offer is almost certainly a better choice than being taken to court and having them take proceedings against you.
Another thing to bear in mind is how you are going to make the payment that they ask for. Will you have to sacrifice the payments on other debts that you have and if you do what will be the outcome of that. The last thing you want to do is end up having to
try and organize settlement payments on other debts that you may have.
If you make a decision to go down the route of the settlement offer, it is always a good idea to try and agree to a lower payment. Call them stating that you cannot meet their demands and offer to make a reduced payment, quite often you will find that this will be agreed to. Every time you speak to somebody on the phone regarding this always take the persons name and make a note of the time and date of the call. If your
proposal is accepted make sure that you ask for a copy in writing, and on no account send any payment until you receive it. When you send off your payment always send a letter saying that this is full and final settlement of the debt and ask for written acknowledgement of this.
You must be aware that if you come to a decision not to accept any offer given, you may then be taken to court. It might be judged that you have to pay the full sum of the debt and court costs. This will obviously mean that you may well end up paying a lot more than you owed in the first place. When accepting any type of offer always make sure that you examine and understand the small print. You want to make sure that the amount you are paying is the full settlement of the debt and any extra is to be written off. This will guarantee that they cannot come back to you at a later date asking for more money from you.
When you have made your payment and the whole thing is done, you then need to examine your credit record file. If you become aware of a mistake on your file, you have to ask for a correction to be made as soon as possible. You will in all probability be asked to send a copy of all of the letters relating to the agreement that you have just made. It is therefore advisable to keep all of the paperwork safe that relates to any settlement of your credit card debt.
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