Are you aware of the concept of credit card debt settlement? Not entirely sure what is it all about? Well, credit card debt settlement is nothing but a debt settlement method in which the lender will allow you to pay off your credit card debt for less than what you originally owed without you having to face Credit Card Debt Lawsuits. This is mainly done through a third party agency.
There are also a lot of benefits of going for Credit Card Debt Relief. You will be able to get out of your debt really quickly. You will also be able to save your business from any kind of financial crisis. There are also a lot of different methods of credit card debt settlement. Let us have a look at what those methods are:
Types of Credit Card Debt Settlements:
Debt Management Plan (DMP)
A Debt Management Plan, or DMP, is a type of credit card debt settlement where you work with a credit counseling agency to create a repayment plan that fits your budget. The credit counseling agency will negotiate with your creditors to lower your interest rates, waive fees, and reduce your monthly payments. You'll make one monthly payment to the credit counseling agency, who will distribute the funds to your creditors. A DMP typically takes three to five years to complete.
Debt Settlement
Debt Settlement is a type of credit card debt settlement where you work with a debt settlement company to negotiate with your creditors to settle your debts for less than the full amount owed. You'll make monthly payments to the debt settlement company, who will hold the funds in a trust account until there's enough money to negotiate a settlement with your creditors. Debt settlement can take two to four years to complete, and there's no guarantee that your creditors will agree to settle.
Bankruptcy
Bankruptcy is a legal process that can help you eliminate your credit card debt. There are two types of bankruptcy that you can file for: Chapter 7 and Chapter 13. In Chapter 7 bankruptcy, your non-exempt assets will be sold to pay off your creditors, and your remaining debts will be discharged. In Chapter 13 bankruptcy, you'll work with a bankruptcy trustee to create a repayment plan that fits your budget. You'll make monthly payments to the trustee, who will distribute the funds to your creditors. Chapter 7 bankruptcy typically takes three to six months to complete, while Chapter 13 bankruptcy can take three to five years.
Workaround agreement
A workaround agreement is basically an agreement where the credit card issuer lowers your interest rate or temporarily waives the interest of the loan amount. This can make it easier for you to pay your debt. Credit Card Debt Lawyers can also help you in preparing the agreement. However, this method can cause a heavy blow to your credit card. You may have to work a lot in future to improve your score.
Hardship agreement
In hardship agreement, you have to get in touch with your credit card issuer with details of your hardship. This mainly happens if you have got a huge financial setback in life or you have suddenly lost your job. In such situations, your credit card issuer may agree to lower your interest or even suspend your late fee or reduce the minimum payment for a temporary period of time. Here also your credit card score might be at risk and you may face a lot of hardships in improving your score later on.
Lump sum settlement
In this negotiation method, you offer to settle the outstanding debt in one payment. This can be a really good way of getting out of your trouble. For example, you may be in $4,000 debt but you ask the lender to accept $2,500 to settle the amount and the lender agrees. It means that the remaining amount will be forgiven. This can be a really smooth way of settling your debt in times of difficulty. You can also take the help of a Credit Card Debt Lawyer for your lump sum settlement.
FAQs:
Q: Will credit card debt settlements hurt my credit score? Ans: Yes, credit card debt settlements can have a negative impact on your credit score. However, the impact will depend on the type of settlement you choose and how it's reported to the credit bureaus.
Q: How much does debt settlement cost?
Ans: Debt settlement companies typically charge a percentage of the total debt that you owe, which can range from 15% to 25%. You should also be aware of any upfront fees or monthly maintenance fees.
Q: Can I negotiate with my creditors on my own?
Ans: Yes, you can negotiate with your creditors on your own. However, it can be difficult to get them to agree to a settlement, and you'll need to have the funds available to pay the settlement amount in full.
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