Has anyone negotiated with credit card companies on their own for a debt settlement? I have an option coming up at the end of March to withdraw money I had put aside for my kids’ college. I hate to do this, but hate even more to be so much in debt that I can no longer make the minimum payments, and if I get out of debt, then I will be in a position to restart college savings. That means that hopefully sometime in April, I will have between $10,000 – $12,000 in cash to try to settle over $20,000 in credit card debt, between three separate companies.
Does this sound doable? Would they settle for perhaps 40% of the balance? I’ve been unable to make minimum payments for the last 3 months or so, so I’ve been paying a smaller amount, to at least show I’m trying to pay something.
Thanks for any advice.
If you look through the archives you’ll find a lot of messages from people settling with creditors. My other half and I are in the process of doing that now and many are willing to take 30% just to get it off the books.
You can really get CC companies to take as little as 30%. Try to start around 25% and then negotiate from there. Give them a story, tell them how your dear old aunt left you just _____ amount of money and you want to send it to them to settle. Either way, once they do agree to a settlement in full here are a few major things to remember.
- Don’t ever give them electronic access to your accounts, ever ever!!
- Don’t send any money until you get the agreement in writing!!
- Once you get the agreement, make a copy, sign and return to them with a check.
- Remember that forgiven debt is consider income and the CC company may send you a tax form at the end of the year and you will have to file it with your taxes. But I guess paying taxes on $15,000 is better then paying the $15,000.
One more thing I would add regarding taxability of any debt settlement. Any debt that you are relieved of that you are “insolvent” for is not taxable. See IRS Form 982 and Internal Revenue Code 108. When considering the amount of “insolvency” you can subtract from your assets your state’s exemptions. For example here in New York there is a $50,000 per person homestead exemption. Get some of Nolo’s books at the library on bankruptcy after exploring www.nolo.com and www.legalconsumer.com.
Also watch this video to find out more: