Get Out of Debt 101 Blog

I was reading in the paper today about how many credit card companies are settling with some borrowers with an amount far lower than what they actually owed. In some cases, they are settling for 50% of the debt! Which means that a $10,000 all of a sudden becomes a $5,000 debt! Now before you get very excited, there is more to it. The reason they do this is to avoid a bigger problem down the road.

See, once a credit card account is past due for over 180 days, it is sold to a collection agency for close to nothing (maybe 10 cents on the dollar). So if they are dealing with a person who has not send any payments for a few months, they may consider settling the debt for a lower amount (say, 65%, or even 50% -maybe even lower-) instead of selling it for 10% in just a couple more months. They might as well get a little more money now instead of very little down the road.

This is not for everybody of course. But if you are strapped for cash, don’t care for your credit and honestly cannot make the payments, try to negotiate with them. Try not to settle for anything less than 50% (you may have to talk to them a few times until you reach the right person). Keep in mind that the credit card company will not negotiate with you if your account is in good standing. Also, be careful if you owe a lot of money and you have real estate property. You can read the article
here .

For a complete system to get out of debt you may want to consider checking out the Get Out of Debt 101 Master Manual