Navigating Debt Settlement with Thomas K. McKnight:
Your Trusted Santa Ana Debt Settlement Lawyer
Understanding Debt Settlement
Debt settlement represents an agreement reached between a borrower and a lender, where a substantial lump-sum payment is made towards an outstanding balance in exchange for the forgiveness of the remaining debt. For instance, an individual carrying a $10,000 debt on a single credit card might approach the credit card company with an offer to pay $5,000. In return for this one-time payment, the credit card issuer consents to absolve or erase the remaining $5,000 debt.
But why would a credit card provider willingly relinquish a significant portion of the debt owed to them? This decision is typically driven by the lender's financial constraints or concerns about the borrower's potential inability to repay the entire balance. In both scenarios, the credit card company endeavors to safeguard its financial well-being—a fundamental consideration as you embark on debt settlement negotiations.
It's important to note that credit card debts are unsecured loans, meaning there's no collateral that your credit card company or a debt collector can seize to recover unpaid balances.
While the idea of negotiating with a credit card company to settle a debt might seem too good to be true, it is indeed a viable option. Understandably, creditors are not inclined to promote settlement, and although independent statistics on success rates are scarce, the Federal Trade Commission (FTC) approximates that approximately half of debt settlement cases reach completion. If you find yourself significantly delinquent in payments and teetering on the edge of bankruptcy, your lender may be willing to accept a reasonable settlement, providing you with a final opportunity to regain your financial footing.
The Debt Settlement Process
Embarking on the debt settlement journey involves a systematic process. Here's a step-by-step guide:
1. Initiating Contact: Begin by reaching out to the primary customer support department of your credit card issuer. Request to speak with a representative from the "debt settlements department," ideally a supervisor. Clearly communicate the urgency of your situation, emphasizing your commitment to settling one of your accounts promptly, using the funds you've managed to set aside. Mention that you are simultaneously exploring debt settlements for multiple accounts, which can enhance your chances of receiving a competitive offer.
2. Negotiating the Settlement: Propose a specific dollar amount equivalent to roughly 30% of your outstanding account balance as a starting point for negotiations. It's common for the lender to counter with a higher percentage or dollar figure. If the lender suggests an amount exceeding 50%, you may consider pursuing settlement with a different creditor or saving the funds for future monthly expenses.
3. Formalizing the Agreement: Once you've successfully negotiated a debt settlement with your lender, ensure that you obtain a written agreement. Verbal agreements are not uncommon in these scenarios, but they may leave room for complications. A written agreement should specify the exact amount required to absolve your entire balance, protecting you from further payment obligations.
At Thomas K. McKnight, we specialize in guiding individuals through the complexities of debt settlement. Whether you're seeking debt relief or exploring Chapter 13 bankruptcy options, our team is dedicated to assisting you in Santa Ana. We offer a free consultation to help you navigate your path towards financial stability.
