I am drowning in credit card debt. How does a credit card negotiation work? Is a debt settlement company my only option?
Professional debt settlement is an option, but it is not your only option. Most consumers don’t know that they could attempt to do debt settlement with their creditors as individuals. There are advantages and drawbacks to attempting it yourself though.
The first advantage is that it’s free, sort of. There won’t be a fee involved but there will be time and effort involved. How much time and effort are worth depend on the individual but it’s usually a significant investment of both to do it yourself. The other side of that is that you won’t be paying someone else a percentage of your debt to take care of it.
The process is essentially that the borrower will offer to pay a lump sum that is less than the amount owed to the creditor. If the creditor is sufficiently convinced that this is the best they can get, then they take it and close the account. The drawback here is that the borrower has to convince the creditor that this is the best deal for them. Individuals will have a hard time convincing creditors and, often, will not be successful in negotiating a deal.
Another disadvantage is that not all creditors will even consider settling with individuals. Some creditors will, others have a policy of never doing it. Most consumers don’t know which ones will and won’t negotiate. Almost all will tell you flat out that they won’t, but that’s sort of like the sticker price on a car. The consumer will have to spend a bit of time and effort to find out how true that is.
Finally, there is a disparity in bargaining power. Some good companies have good relations with creditors and hold some sway in the negotiation. Attorneys who specialize in debt management are likely to get more prompt responses from creditors when they send official legal letterhead advising them of actions being taken. Individuals usually have no such leverage.