How to Settle Credit Card Debt on Your Own

You can settle credit card debt without assistance from a settlement company. When you use a settlement company, you will pay for the service. Settling the debt alone can save you money at a time when you truly need the savings. However, since you will not be guided by an expert, you will have to be careful to assure you are lawfully and aggressively settling your debts for the future. Be wary of the affect this will have on your credit, and always ensure you are following legal guidelines on settlement that protect both you and the lender.

#1 Ask for a Payoff Statement

Contact your credit card lender and ask for a complete statement of your payoff quote. You will want a statement that goes back at least five years, or up to the statute of limitations for your state. Most states put this somewhere between three and six years, with only Montana, Iowa and Wyoming pushing the statute to seven years. If your statement includes any debt that has persisted beyond the statute of limitations in your state, know you do not have a legal obligation to repay this debt at this point in time.

#2 Dispute Incorrect Debts and Fees

Start by reducing the principal sum you owe by disputing any incorrect information on your statement. Submit a request to your creditor in writing to verify all of your debt information. If a debt is beyond the statute of limitations in your state, inform your creditor in writing you are aware of this legal requirement and request to have the debt removed. Also, be sure to pay on time when you are negotiating incorrect debts. Continue to make minimum payments to avoid excess fees. 

#3 Notify Lender of Intent to Settle

Notify your lender of your intent to enter a settlement discussion. For example, you can tell your lender you have recently become disabled and the financial stress of your many debts will result in bankruptcy. In the absence of this type of hardship, you will have difficulty getting a settlement. Show your lender settlement is in their best interest. Credit card companies often receive very little in a bankruptcy case; therefore, many will be willing to work with you if you are in danger of bankruptcy.

#4 Settle Your Debt

It is important to document your discussions and communication with the lender while you are in settlement discussions. Your lender may give you permission to stop paying your debts while the settlement process is underway. However, failure to pay your debts can result in a penalty to your FICO score. As a result, it is wise to save all letters from the lender, including statements that allow you to skip payments. Make an offer to settle. If the company accepts your offer, follow up to be sure that all of the debt has been removed from your credit report. If you are contacted by an agency after settlement has occurred, ask the agency to verify its right to collect.

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