How Do You Get a Credit Card Company To Settle Your Debt?
If you tell them you're struggling with debt, but you haven't missed a payment and always pay on time, then they will probably not listen to you. Experience has taught them that people like you always manage to pay them. Why should they give up such a good deal? You're a cash cow to them. They couldn't care less about your child who needs a chemotherapy treatment. As long as you keep sending in payments, they won't bargain with you.
If you tell them you're struggling with too much debt and you always pay just the minimum, or you have missed a few payments over the past few months, a credit card company might lower your interest rate, but they probably won't settle with you for a reduced amount. They know from experience that people who just pay the minimums or miss payments are at a very high risk of default and bankruptcy, so they are willing to be more flexible in this situation.
If you want a reduced settlement, you're going to have to use the word "bankruptcy" when you negotiate with them, and you're going to have to convince them that the threat of bankruptcy is real. If they believe that you do indeed have one foot in the bankruptcy door, they will negotiate. They would be fools not to.
This doesn't mean that you should contact them right now and state boldly, "If you don't agree to my terms, I'm going to file bankruptcy and you will lose out completely." That isn't the way to approach them for two reasons: (1) they receive such threats a thousand times a day and know that most of them are bluffs; and (2) creditors don't respond well to threats.
A better approach would be to use logic and reason. This will require doing some research. Visit the bankruptcy section (Appendix B) of this kit and find out if you can file bankruptcy, and if so, which type can you file. Also, explore the exemptions available to you under both federal and state laws. If you don't want to do this, you might be able to take advantage of a free bankruptcy consultation that many attorneys offer to potential clients. Specifically, you want the bankruptcy attorney to tell you if you are a good candidate for Chapter 7 bankruptcy and whether or not your credit card debt would be completely discharged if you filed Chapter 7.
After you have this information, figure out how much you can afford to pay your unsecured creditors. Then approach the creditor politely and professionally and say to them, basically: "I am in over my head in debt and I can't take it anymore. I have begun researching the possibility of filing bankruptcy. I have already consulted a bankruptcy attorney and he has advised me that my best option would be to file under Chapter 7 so that my unsecured debts would be discharged. Even though I could have my credit card debt discharged, I don't want to file bankruptcy. I want to find out if I can work out an arrangement with my creditors to pay off my debts in one lump sum with the money I have available. I owe X to creditor 1 and X to creditor 2 [and so on]. I need all of my creditors to agree to this settlement in order for it to work. I have already liquidated my assets by selling my car and buying an older, used one to use to get to work in. I also sold other personal property and managed to get $10,000 for it. The problem is that I have a total of $23,000 in debt, but only have $12,000 in cash. I have nothing left to sell except for the necessities of life. I want to divide up what I have among all of my creditors, giving each one a proportional share. If I can't get all of my creditors to agree, I will probably have to file bankruptcy. I don't want to do this and I know that if I do you will likely get nothing. According to my calculations, if I divided up the $12,000 that I do have among my ten creditors, you would receive X which is _____% of what I owe you. I could send you a check in a week if I can get everyone to agree to the settlement. I know I owe you $________ and it isn't right for me to not pay all of it, but I just can't pay it and I'm sorry. I figured that giving my creditors all that I have is better than giving them nothing, right? What I need to know from you is whether or not your company would be willing to accept a reduced settlement as payment in full. If you can, I can send you a certified check once all my creditors agree to the settlement."
Note that the debtor above has politely and passively threatened the creditor by telling him that: (1) he has already liquidated his non-exempt assets (so there's nothing to seize) except for his wages; (2) this debtor is aware that he can quickly file bankruptcy to stop a wage garnishment if it comes to that, so the creditor would be wasting his time with any plans for a lawsuit; and (3) that he isn't bluffing since he seems to have a general knowledge of bankruptcy laws, exemptions, automatic stays, and has consulted with a bankruptcy attorney.
Most importantly, the debtor managed to state twice that he could get the creditor a check in a week. Any creditor faced with this situation would want to get his hands on that check as soon as possible. So, this motivates them to agree to the settlement. To save face, they might say something like, "Yes, we agree to this settlement provided that we receive your certified check in five days."
Twenty one sample letters are included in the Debt Negotiation section. Some of these sample letters are ideal for negotiating with credit card companies.
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