In a perfect world, you’d never have to make a debt settlement offer. The credit card company would automatically give you the perfect settlement offer of 30% without you having to do anything. But, since this isn’t a perfect world, you’ll get to put your negotiation skills to good use and work out settlement offers with your creditors.
Wait Until You Have the Money
If your credit account reaches 90 days past due and you don’t have the money to pay a reasonable settlement, you are probably wasting your time trying to negotiate a settlement deal. Most credit card companies want the settlement money all at one time and within a few days after the settlement offer has been extended. Many settlement offers are one-time deals so if you agree to a settlement and you can’t pay it, you may never get the chance to settle that account again.
So, it may be best to wait until you have enough money saved up for a reasonable settlement before you tell your creditors you intend to settle. In the meantime, when you talk to your creditors, assuming it is true of course, tell them that you’re having a hard time with your finances and you hope you can work something out with them soon. Staying on good terms with your creditors could put you in a better negotiating position.
Wait Until the Right Time
It is probably a waste of time trying to work out a settlement before your account is at least 90 days past due. In fact, you should avoid mentioning debt settlement to your creditor before that time because the creditor might send your account to its legal department or to a collection attorney to push for immediate payment. Yes, your account must almost always be delinquent before you can settle it.
After your account is at least three months past due, you might mention to your creditors that settlement is an option you’re considering, if true. Make it sound like it’s something you’re thinking about in addition to other options, like bankruptcy assuming it is true of course. Credit counseling and debt consolidation are usually out of the question by the time you are ready to settle your debts.
When you first mention settlement, you should ask your creditors what settlement amount they’d consider if you could come up with enough money to settle your account. If they come back with an amount that’s too high, then you should say you can’t come up with that amount and make a counter offer that’s a little lower than what you really can afford. On the other hand, if they say that they don’t settle accounts, you could simply say ok and wait another month before you bring up the topic again.
You should repeat the process of offering a settlement and receiving a counter offer until you and the creditor reach an agreement. Ideally, you’d like to settle your accounts for 40% to 60% of the balance. When the creditor makes an offer between that range, you should accept the offer. Then, request your creditor to fax you a settlement letter and prepare to send the settlement funds.