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How Does Credit Card Debt Settlement Work?
Credit card debt settlement or debt arbitration is a legal process used by both people in debt and their creditors to negotiate a settlement of an existing legal debt. Typically the debt is reduced in regards to the principle balance. The legal terminology for this process is called an "Accord and Satisfaction" since you are really reaching an accord or new agreement and then paying or satisfying it. The legal terminology for this process if the debt is tax debt is called an "Offer in Compromise." Any person owing credit card debt, or any other debt for that matter, has the legal right to contact and negotiate with the creditors; however, a proper and fair debt settlement requires expert skills to convince the creditors to reduce the ultimate debt amount because it would be in their best interest to get something from the borrower instead of forcing the borrower into bankruptcy.
Credit card Debt settlement is an alternative to bankruptcy, debt consolidation or credit counseling to amicably settle the debts that may arise due to credit card use. Unlike debt settlement, bankruptcy stays on your credit history for up to ten long years, and will have a negative impact on your attempt to get employment or a home loan. Moreover, bankruptcy does not discharge claims for alimony or child support, debts for substantial purchases made shortly before the bankruptcy filing, government insured student loans, and taxes that are less than three years old.
Why creditors settle:
Bankruptcy Is Never Profitable:
Creditors know that going to court will most likely cost them more than the debt you owe and in bankruptcy they will most likely receive nothing in return. That is why they are very motivated to settle accounts outside of court and receive some form of payment, even if it is a reduced amount.
Legal Representation:
Can you attempt to settle with your creditors on your own? Sure, but you won't get the same results that you would with our company representing you. The reason you won't get the same results is because anything a creditor offers you without representation means that they are setting legal precedence and that they must offer the same to all other customers. With an arbitrator representing you the settlements are determined on a case by case basis.
Planning:
When we contact your creditors we let them know that we have established a savings plan that will get them paid approximately half of what they are owed without going to court and in less time then bankruptcy. They are usually willing to work with us because we continue to communicate with them on your progress throughout the program and as soon as you have enough money to settle we are working with them directly.
Debt Settlement Process
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