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Debt settlement, step by step.

54 posts in this topic

People seem to be overwhelmed here, so I am just going to make a little step by step sticky.

Don't be offended if it seems too elementary. People have the best success when they accomplish little tasks along the way, it gives them the feeling that a large unmanageable task is possible. It may also be beneficial to read this:

http://www.creditinfocenter.com/debt/settle_debts.shtml

Most people I talk to say something like "my situation is unique" when they begin to tell me about their situation. The good news is that they are totally wrong. The formula for dealing with debt is exactly the same, every time.

Also, don't get caught up in how you got in trouble. Don't feel guilty, then you'll be stressed because you're beating yourself up AND you have this debt to deal with. It really doesn't matter at this point how you got here - you're here, let's deal with it.

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Step 1: Next time you're at the store (grocery, OfficeMax, Target, whatever), pick up a spiral bound notebook (one with divided sections in it), paperclips, a highlighter and some file folders. Label the notebook in large letters "Debt Settlement Log". Label one of the file folders, "Credit Card Bills". Label another "Collection Accounts". Put these somewhere where you are likely to see them. Leave them alone for a day, an hour, or some time period where you feel ready to move on.

Step 2: Collect all of your credit card bills and collection notices. Put them in a pile on top of the other items you just purchased. Leave the pile alone until you feel ready to proceed.

Step 3: Order your credit report via the internet, mail or some other form. Getting your score is not important for the time being.

Feeling ready to go on?? OK. If you have no credit card statements or collection notices, skip to Step 8.

Step 4: Sort the credit card statements and collection notices into two piles. Put all of the collection notices into the file labeled (you guessed it) "Collection Accounts". Put all of the credit card bills into the folder labeled "Credit Cards". Leave the folders alone until you feel ready to proceed.

Step 5: Sort the credit card statements per company (for instance, put all of the Citibank statments together) and paperclip them together. Place back in Credit Cards folders. Do the same with the collection notices, sort by the company name and paperclip them together. Place back in Collection Accounts folder. Leave the folders alone until you feel ready to proceed.

Step 6: In your log book, Start a section called "Credit Cards". List one credit card per page and list:

  • Today's date
  • Account number
  • Total
  • Last Time you Paid, and how many days late you are with your payment
  • Last time you got a letter
  • Last time you spoke to anyone in the company and what was said.
  • Phone and fax number of the company if you have it (it should be on the statements)

Leave the folders/notebook alone until you feel ready to proceed.

Step 7: In your log book, Start a section called "Collection Accounts". List one collection account per page and list:

  • Today's date
  • Account
  • Total amount owing
  • Last Time you Paid (if you have)
  • Last time you got a letter
  • Last time you spoke to anyone in the company and what was said.
  • Phone and fax number of the company if you have it (it might be on the statements, if not, look it up online)

Leave the folders/notebook alone until you feel ready to proceed.

Step 8: Once you get your credit report, update your log book with any account information you didn't have in your folders. Pay attention to any lates on credit cards. Are any of them 90 days down or more? Highlight them in your log book with your highlighter. Place your credit report in another folder and label it, you guessed it, "Credit Report".

Step 9: In your log book, on the inside cover, write down what the statute of limitations for your state is on open accounts. If you don't know, look it up.

Step 10: In your log book, Start a section called "Money I have". Make a list of all the money have that you can put towards the accounts. Leave the folders/notebook alone until you feel ready to proceed.

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At this point you should have a clear grasp of:

  • How much you owe
  • Who you owe
  • What has been happening on each account

You shouldn't be spending a whole lot of time on this stuff, one phone call a day or even week is enough to show clear progress.

Ready? OK, let's move on.

The first things you should take care of is any account that is 90 days down or more and is still with the credit card company. If you have any of these accounts, these are the easiest to settle. The credit card company knows they better take the money and run. However, there is a bottom limit, which is about 50%. Why? Because at this point the tax benefit of bad debts is about the same, so usually they are not going to go to elaborate efforts to make a deal with you.

Also, this will stop the accounts from going to collections, which is just more hassle, because you might have an additional negative mark from both a chargeoff from the original creditors, and the fact that any collection agency getting your account may report it to your credit report.

Step 11 Pick the most delinquent account of your credit cards. If you have no accounts still with the original credit cards, skip to Step 18. Do you have any money to use to settle with the credit card company? If you don't have the money to settle, it might just be better to let it go to collections, where, although you may have additional bad marks, a chargeoff and a collection, you can really get a really cheap settlement with a collection agency. You need to be able to pay the whole thing off in 3-6 months.

Step 12 If you do have the money, then get ready to call. If you don't, then skip to an account you can afford. If you have no money, then there is really not much more to do here. Skip to the end of the tutorial.

Step 13 Don't be afraid to call. Don't expect rudeness or the third-degree. Most customer service reps at credit card companies are starving for pleasant customers, and if you are nice, 9 times out of 10 they will reciprocate. Remember that they have heard it all before; don't tell them your problems. These guys are not mean like the reps at the collection agencies.

Take as long as you need. Breath deep. Keep in mind that a professional, can do attitude is the most effective. Have a smile when you pick up the telephone, as well as the amount of money you have to work with in mind. Research shows that even if you are not feeling cheerful and friendly, the tone of your voice changes if you have a smile on your face, even if it is forced.

Step 14 Allow 15 minutes to a half hour for the call, and try to arrange for no interruptions. Make that initial phone call to the credit card company and ask for customer service. Explain the situation and ask for a settlement. I'd start at 50%. If they say OK, take it and run. Gently push for a "Settled" rating on your account. You don't really need a written agreement with a credit card company. Don't get frustrated, yell or raise your voice if things don't go your way, even if you feel the customer service rep is being rude.

Step 15 If they didn't take your offer, are you OK with what they did offer? Can you counter? Most of the time they will easily give you 70%-80%. If you can't do what they want, don't get frustrated and yell. Consider just letting it go another month and trying it again. The more you are delinquent, the easier it is to get a lower settlement, but remember your credit gets more black marks this way. Also remember, in especially delinquent accounts, there is a danger of charge off. If you're ok with that, then this may be the way to go.

Step 16 Record the results in your log book. There, now that wasn't bad, was it?

Step 17 Repeat Steps 11-16 with the next most delinquent account, and down the line. I'd wait at least a day, maybe a week in between calls.

Step 18 Once a month, revisit cards that wouldn't settle and see if they will now meet your terms.

Step 19 Once you have gone through all of your delinquent accounts, take a break from this, celebrate your good work. No matter what happens, believe me, you are making progress.

Does this seem too easy? Well, yeah. IT'S REALLY THAT EASY. The reason I'm writing this is to discourage people from hiring someone when with very little time and effort, you can do it yourself.

If you have 1 credit card account, I would estimate that you've spent an 1-2 hours total on it so far and was able to settle it for hundreds or thousands of dollars less. Add a half hour to an 1 hour for every other credit card account. If you equate your work to an hourly rate, you could be making $500 - $2000 an hour by putting in the time.

If you spread your hours over a week or a month, it really doesn't seem like much work at one time.

Step 20 next....(collection agencies)

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Some companies are sending out letters these days before charge-off offering 40% of current charges. My, how times have changed! The default rate must really be climbing.

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Please let us know what step 20 is. If a debt collector is an attorney and they have sent a complaint for a court hearing. If my attorney writes a letter for debt validation and they write back they have decided not to give you the thirty days to investigate. are they allowed to do that or do they have to cease their complaint and give you the thirty days to investigate the debt validation?

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I made the call. I offered to settle at 50%, they countered with 80% and refused to budge. I pushed for the settled status, they said that my credit would still reflect the lates. The settlement also required an application with financials before the settlement would paperwork would be accepted. They wanted a reason for the late payments and the settlement.

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Very Good info. The step x step procedures listed appear to be very simple. I have already spoken with a debt settlement co. (SDS West), and with the step x step procedures outlined above, I beleive that I can do the same thing that SDS West will do.

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I have a tradeline with MBNA that was paid off for less than the full balance in 11/05. Since then, the tradeline reports every month (up until 10/06) that the account is 120 days past due in the history section. It also reports twas settled for less than full balance. What should the letter say from MBNA (now b of a) to get rid of the all of those 120 days late, even the several that occurred prior to the settlement date? reage? Please advise.

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i spoke to dicover card today and they flat out told me not setelments. that it is policy

then she said if i was 6 months or more maby they will talk to me

i want to get it handeld befor it gets to that point

any one got info on this

thanks

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Guest tigger7588

I am so in love with steps 1-19 but all my accounts are collections or charge offs really looking forward to step 20!!!!!!!!!!!!!! PLEASE where is the rest of this post- don't leave us hangin'

MMF

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:)++Step 20 next....(collection agencies)

You forgot to put it in! We sure would like to see it. Many people are requesting step 20.

Help we need you! :)

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I've read the steps - which creditor have you heard of that sends out debt settlement letters automatically?

I've been robbing from Peter to pay Paul, now my cc debt exceeds $130,000 with my last transfer balance checks last month - I can only make payments for two more months and if my business doesn't turn around - I'm done - can't make another payment. My fear is that the credit card companies will sue me because of all my balance transfers - has anyone else been in this situation and stop making payments - I just want it all to go away and I'd love to settle this mess - but I don't want them to garnish my wages and lose my home in the process - I'm so embarrassed now. The credit card companies lobbyed until they change bankruptcy laws, bankruptcy 13 makes it so hard to pay you usually can't and if you settle (when you are already down) the IRS wants a piece of the action. In Bankruptcy 13 the IRS also says how much money we should be spending to live and that's the figure they use - aren't they kind of forcing people to settle so they can get a piece? If your debt is discharged, then you don't owe the IRS - interesting how it all works.

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Guys, the original post is well over a year old. I don't think Kristy is going to continue this now. There are plenty of step by step aids here already that are posted in stickies in the various forums.

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I think I'd still better report it one last time so we can all be positive that there won't be any new information added to thsi thread.

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