These days many are struggling with their share of debt. The credit cards are easy to secure these days. However repayment has become a big problem as with the economic slowdown. Many have even filed for bankruptcy. As far as the credit card companies are concerned bankruptcy is a total loss for them. Hence to recover at least some part of the debt the credit card companies are encouraging its defaulting customers to opt for settlement instead.
Debt settlement is a good option even from the debtor’s point of view as bankruptcy serves a major blow to their credit rating. Settlement would also have a negative impact but it is much better than bankruptcy.
What is Settlement? Debt settlement also goes by the name debt negotiation or debt arbitration. This is an approach in which the debtor and creditor both mutually agree to reduce the total amount of outstanding debt.
How to qualify for settlement: As long as the debtor keeps on making minimum payments towards his account the credit card company will not entertain any settlement ideas. However, if the payments have been missed on the account for 4 to 6 months the credit card companies would like to offer some settlement. The prerequisite for the customer to qualify for debt settlement is that he should have unsecured debt amount of up to ten thousand dollars and he should be citizen of America.
How does it work? A customer will have to convince the creditors of his bad financial status. Once he has done this he will have to save a certain amount in an account for certain period of time. Once the amount is reached the debtor can negotiate a reduction of up to 60% of his total debt in lieu of that amount and can pay off the rest in installments.