Credit Card Debt Settlement Letter: Understanding The Fine Print

A credit card debt settlement letter is a letter written to or by a credit card company to settle existing credit card debt. Sometimes the borrower writes the credit card debt settlement letter to the creditor in an attempt to negotiate a lower payment amount. Other times, creditors write the letter to the debtor in an attempt to get at least part of the debt owed to them.

What a Settlement Letter Contains

A credit card debt settlement letter contains the following information:

  • the card holder’s account number and misc. personal information;
  • the outstanding credit card balance;
  • the proposed and/or agreed upon settlement payment total;
  • the settlement payment due date.

Why Creditors Issue a Settlement Letter

You may ask yourself why a creditor would initiate a credit card debt settlement letter if it means getting only part of the money owed to them. There are two good reasons for this.

Something Is Better Than Nothing – It is in the creditor’s best interest to get just part of the debt amount than no money at all. If the borrower repeatedly ignores letters from the creditor regarding their outstanding debt, and has proven that they have no intention of paying the full amount, the creditor hopes to at least negotiate a settlement payment (even if it’s only half of what the debtor owes).

Collection Agency – If the delinquent account has been in poor standing for a few months, the creditor may have already sold it to a collection agency for a partial amount of the outstanding balance. In order to receive at least some of the money they’re owed, the creditor will write a credit card debt settlement letter to the debtor.

How Debtors Can Initiate a Settlement Letter

Possibly the worst thing you can do with debt is to ignore it. If you are unable to make the minimum payments for your credit card debt, contact the creditor immediately. Ignoring their requests and letters, or making them chase after you, will only result in them assuming that you are a delinquent borrower. You will then be aggressively pursued by a collection agency, and your credit score will be seriously affected.

When you contact the creditor, explain your financial situation and tell them the amount you are able to pay on your debt. They may not initially accept your settlement proposal, but if you keep trying to negotiate a lower amount, they will most likely agree to it.

Get It In Writing

If you initiate a settlement over the phone, be sure to get a hardcopy of the credit card debt settlement letter before making any payments. Once you receive the letter, read over it to make sure it is accurate (including the fine print), and then mail the creditor a check for the agreed upon amount. File the credit card debt settlement letter and keep it for your records, so that you can easily dispute future errors in the account or in your credit report.

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