Credit Card Debt Negotiation! How Does it Work?

I have been working in the credit card debt negotiation industry for almost a decade now and have helped thousands of people find the right path to debt freedom. I will state right up front this will be a rather long article as I will be going over what credit card debt negotiation is, the benefit of the process, the disadvantages of the process, and I will also explain the differences between how a debt negotiation company works vs. a law firm. There are quite a few differences in some key areas concerning the debt negotiation process and it is important to understand these differences before making a decision.

I would also like to say that this process is not for everyone, some people simply do not have the financial resources to make it happen and others do not have the right mind set.

For starters what is the debt negotiation process? This is a process of negotiating on past due accounts to reduce the amount owed from the original balance; the benefits of doing this will be saving money on what is owed (in many cases debtors save up to half of what they owe) and getting out of debt much quicker than paying monthly minimum payments.

You will notice I said “negotiating on past due accounts”. You must fall behind for the creditors to be at all willing to negotiate on an account. If you think about it why would they take less than what you owe if you are current? When you just pay your minimums they have you precisely where they would like you. This is referred to by many as the “credit treadmill” the cycle of paying monthly minimum payments at high interest; these schemes are set up to keep consumers in debt for over three decades and lose at least five times the original balance in interest alone. Thus making the fact of getting out of debt within 2-4 years through debt negotiation such a motivating factor for many people stuck in this position.

Unfortunately the prospect of falling behind for many debtors is quite scary. Naturally when falling past due on these credit card bills your credit score will go down, there is simply no avoiding this. The trade off for saving thousands on what you owe is a temporarily lower credit score. Now I say temporarily because the damage is not permanent and once you actually begin putting the negotiations through and show you owe no more credit card debt your score will naturally rebound. Approximately one third of your credit score is your “debt to credit ratio” which will be in much better standing after you clear out your debts.

This brings me to where a credit card debt negotiation law firm can offer a vastly different and more beneficial service than a standard company; because most of the benefits a law firm can offer have to deal with the negative effects of falling behind on these accounts.

One of the negative side affects of falling past due is the creditors will be attempting to collect the debt, meaning they will be calling and harassing you the debtor. Now for the first few months of falling behind the debt stays in house with the original creditor and no one can legally stop them from calling to collect the debt. However once the original creditor passes the account to a third party collector is where things can change. If you have a law firm representing you they will notify the collector upon them being retained, that you are a client. According to the FDCPA (Fair Debt Collections Practices Act} at this point the collector legally cannot call you and must deal with the law firm only. This is a huge benefit and can greatly reduce the level of collection activity you will receive while going through the debt negotiation process.

A standard debt negotiation company does not have the legal power to stop any collection calls. Many times they will tell you to go and send out cease and desist letters on your own time, which is the extent to which they will help you concerning calls. Any companies that are not law firms and claim to you to have the ability to stop calls are not telling you the truth and it would be wise to avoid using them.

Another adverse affect to falling past due is the possibility of a law suit. The creditors hold the legal right to take you to court in an attempt to collect the debt. However you must realize that this is not their normal course of action it simply costs to much money and time to take you to court with no guarantee of collecting any money.

Nevertheless a law suit is a possibility and you want to have all of your bases covered when making any important financial moves. If you retained a law firm they will still have the legal right to contact the opposing collectors’ attorney and negotiate a settlement, keeping you from ever stepping foot in court. This is favored by the collectors because they know for sure they will be receiving money without the hassle of going to court. On the other hand if you hired a standard debt negotiation company they will not be able to legally do anything for you if you were to get sued; they cannot offer legal advice nor can they contact the opposing attorney and work out a settlement. You will be left trying to figure out what to do on your own and may very well end up with a judgment. This is a huge benefit the law firm has over a company.

This next issue I am bringing up is very important to understand; many people do not and end up finding out the hard way. This has to do with how the organization is set up to work in compliance with your states laws and regulations concerning debt negotiations. The vast majority of standard debt negotiation companies are not correctly set up to work in all states, and quite frankly many of them are not even set up to properly run in their own state. This can cause huge problems for their clients! Why? Because the FTC (Federal Trade Commission) has been severely cracking down on debt negotiation companies that are not set up right and promptly shutting them down. When this happens often times the company does not have the funds to refund its clients their fees for services they will now not be able to carry out. Leaving people still stuck in debt with no one to negotiate for them and having lost in some cases thousands in fees.

When you retain a law firm they will be in compliance with all state laws to properly execute the negotiations; they will also have a sound working knowledge to how the laws work within your particular state, whereas many national debt negotiation companies do not. Please do not allow yourself to fall into this nightmare of a scenario this can be the difference between you losing money and having to file for bankruptcy or you achieving debt freedom effectively through credit card debt negotiation.

One more issue you must realize is that a law firm must offer full disclosure to potential clients. Meaning they must fully explain both the good and bad concerning credit card debt negotiation and then extensively review your individual financial situation to determine whether this would be the right path for you.

Many debt negotiation companies just go on and on about how great their program will be and never discuss any of the potential pit falls to this process. This behavior is what often times gives the debt negotiation industry a bad name.

I know I have been pretty much focusing on the negative aspects of credit card debt negotiation because I feel it’s important for people to understand the whole picture; but for millions of people this process is helping them escape a financial nightmare. Especially with the state of economy right now people are in dire need to save as much money as they can and get out of debt quickly to get ahead in life. And the facts are credit card debt negotiation if done properly will save you a tremendous amount of money and you will be debt free very quickly. Imagine all the money you put out each month for minimum payments being able to stay in your pocket? How would that change your life?

Like I said I have been in this industry for almost a decade now and currently
I work for an outstanding law firm with a great history and an amazing record with the BBB. If you want an up front and honest evaluation of your situation to see if this is the right fit of consumer debt relief for you than follow the link below in the signature file and fill out an application. I will go over in extensive detail how this process works and whether you are an ideal candidate. I hope after reading this article you feel more educated as to how this process works and what to look out for when you are interviewing companies to potentially help you out.