How to settle credit card debt?

A common misconception is that there is something difficult, tricky, or overly “legalistic” about settling credit debt. The truth is, it’s something you can do yourself, though having an experienced negotiator (see below in your corner) can help. That’s the good news.

The bad news is that there is no “right” to debt settlement—it is purely voluntary on the part of the lender(s). You can and should try it, but there is no guarantee you’ll be able to.

In debt settlement, you offer the lender some fraction or percentage of what you owe as payment in full. The more you offer, the more credible and likely to be accepted your offer will be. You also need to demonstrate to the lender that you are experiencing financial hardship and that your offer is the most they can reasonably expect to recover. Essentially, you want the calculus to be this: “If I, the lender, sue them for the full amount, I’ll have to spend money on the lawsuit—and still probably won’t recover more than I’m being offered anyway.”

So making as a good an offer as possible, while showing why that’s as good as possible, is the basics of debt settlement. You can, as noted, do it yourself, by contacting your lender. You could also have someone help you negotiate with them, but be careful—very careful—of debt settlement companies. Many of them charge high fees for doing nothing that you couldn’t do yourself.

If you do want advice and an advocate, you’re better off going to an attorney, such as a bankruptcy attorney, for help. Most lawyers are experienced negotiators; they know what your legal rights are; they can advise you as to whether you should in fact be considering bankruptcy; and they are also bound by their professional ethics to put your interests first.

Good luck.