Debt Settlement Letter
If you find yourself stressing over your unopened mail because another credit card bill may be lurking, you're not alone. Millions of Americans just like you are severely behind on making their credit card payments and are desperately seeking a way out of the debt trap. For some people, debt relief may come in the form of debt settlement, or what some refer to as a debt negotiation.
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Under a debt settlement program, credit card companies may agree to settle your debt for a lesser amount than what you owe (the settlement). Debt settlement services have cropped up everywhere - on TV, online and on the radio - so you don't need to look too hard to enlist the services of one. However, if you choose to do the settlement on your own, usually the first step is to write a debt settlement letter.
Think of a debt settlement request letter as your letter of intent to resolve your debts with your creditors. Before you attempt to start the negotiation process, you may want to set aside some money that you will then use to pay for the settlement. A debt negotiation letter should, ideally, provide creditors an outline of your proposal such as the amount you promise to pay them, the date when you can send the payment or settlement to them, and other comments that you may want to impart to your creditors - such an explanation of your financial situation, the amount of your other debts, and what you're doing to help your chances of paying off your debts.
In your credit card settlement letter, don't forget to include your name, current address, and telephone number, and always refer to your account number. Remember to always photocopy any correspondence you will have with your creditors. When you're ready to send them your letter, it's best to send it via certified postal mail with a delivery receipt.
In some cases, a creditor (i.e., from credit card company) may answer your offer by phone. If this happens, make sure that you take detailed notes - including the date, time, and the caller's name and employee ID number, if available. It's very important that you DO NOT agree to a creditor's proposal over the telephone, even if their offer is acceptable. You may tell the caller that you need the offer in writing before you can agree to it.
Be firm about not accepting any proposal that's not documented in writing. In the event that your creditor does offer you relief from debt in an acceptable amount in writing, make sure that it includes the following information: the agreed-upon settlement amount, the date by which you are to send the settlement amount, and a statement that the creditor will fully resolve your debt and that it will not pursue any more collection efforts.
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Once you have a signed written contract that is acceptable to both you and your creditors, make your settlement payment by the promised date on your agreement. Send the payment by cashier's check or money order, and make sure you keep the receipt included in that check or money order. Just like your debt settlement letter, send your payment via certified mail and get a receipt from the postal service noting the delivery date to your creditor. Experts recommend that you check your credit report every three to four months to make sure that the balance on your settled debt is zero.
In addition to writing a letter to your credit card company, you also have the opportunity to extend an initial offer to settle with a credit card company when they are calling you asking for your next payment. If you are truly behind and in difficult financial straits - but feel you can come up with a reasonable portion of the total amount due, you may want to extend the offer to the credit card company. Recently, reports have surfaced that even "front-line" credit card representatives have been given the ability to negotiate directly with consumers and, considering how tough things are financially in so many areas of the country - this direct negotiating approach may work well for consumers that can come up with a reasonable settlement offer on the spot.
Know Your Debt Relief Choices
Like other debt relief options such as debt consolidation or even bankruptcy, debt settlement has become a popular option among many debt-saddled consumers, in spite of the potential negative consequences associated with it. One risk: Debt settlement can harm your credit score because debt settlement companies will typically advise their clients to stop paying their creditors and instead save up money to pay the one-time settlement -- when you stop making payments to your creditors, they might send you threatening letters or possibly even take legal action against you.
So if you're thinking of hiring a debt settlement company to do the legwork for you, you may want to make sure that you do a thorough check of the company, particularly its fees and services. And regardless of what credit card or other debt reduction method you choose - consolidation, bankruptcy, or writing your own debt settlement letter, make sure you understand how much debt relief is likely to save you, how quickly you are likely to realize those savings, and how any particular debt relief program could impact your personal credit.
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