MoneyINC Logo
Years of

How To Settle Credit Card Debt Before Going to Court

Credit Card Debt

Having a growing pile of credit card bills that you're unable to pay is more than daunting. It's terrifying. With unemployment and poverty growing, it's also a situation that more and more people are facing. If you haven't paid for several months or more, the situation may be reaching a crisis point. Most credit cards company will usually wait for payment for 6 months before bringing a lawsuit to your door. To avoid that happening, there are several ways you can try to work out a settlement deal. Here's what you need to know about how to settle credit card debt before going to court.

Reach out to the credit card company

Burying your head in the sand isn't going to work. If you've got to the point where your credit card provider is threatening to take you to court, you need to take action. The first step? Speak to your provider. As notes, by this point, the provider is probably under no illusions of receiving what they're owed in full. Going to court will simply increase their expenses and draw out the process. It serves them just as much as it does you to reach a settlement. Providers are also aware that if you end up having to file for bankruptcy, the chances of them getting anything at all are next to none. Credit card debt is a non-priority, unsecured debt that, during bankruptcies, comes last in line after you've paid back priority debts like taxes and secured loans. Reach out to them. They have just as much motivation as you to reach a settlement.

Review your finances

If you don't know exactly what you owe in total, now's the time to knuckle down and find out. For some people, settlement isn't the best option. To figure out if it's right for you, you need to know exactly how much you owe in total and how much you can put towards the debt If the original provider has sold on the debt to a collection agency, send them a verification letter asking for confirmation of the debt. When they send it, take a look at the date of the debt as much as the amount. Debt can only be chased within the statute of limitations: if it's past this, you're not obliged to pay anything towards it. Once you know exactly how much you owe, figure out how much you can actually pay off. Evaluate your income, your savings, and any other credit cards or loans you make monthly payments towards. Be realistic: while the provider is unlikely to accept a settlement that's too low, clearing debt from one credit card by building it up on another won't help in the long run. Robbing Peter to pay Paul might seem the easiest and quickest way out of a hole, but it's really not a strategy that's going to move you forward in a positive way.

Decide if settling is the best move

Settlement is a great option for many people, but by no means for everyone. If you have multiple debts and are considering filing for bankruptcy in the future, a settlement is unlikely to be the best bet. When you file for bankruptcy, all collection lawsuits are immediately halted, and any money that you have already paid in settlement within the past three months could be recovered and redistributed to high-priority creditors.

Prepare to negotiate

If you decide that settlement is the best way forward, the ball's in your court to make an offer. Be realistic, both about the amount you can afford to pay back and the amount of time you can pay it within. Go to your provider with facts and figures: if you can say "I can afford X amount by X date", they're far more likely to take you seriously than if you simply ask how long you have and how little they're prepared to take.

Most negotiations are done over a couple of rounds. Be prepared for this. Start with a figure slightly lower than you can afford (but not so low as to be insulting) so you can reach a compromise that's still agreeable. If you can afford to pay the debt back in a lump sum, so much the better. As notes, 'cash is king.' Offering a lump sum settlement will always get you a better deal than an installment plan. Ultimately, most providers want the situation to be over and done with as soon as possible, and will usually take a lower number if it's paid in one go. If you do need to pay over an installment plan, work out exactly how many months you need before going in with your offer. Once you agree to a settlement plan, you need to honor it. If you go back to your provider a couple of weeks after the due date of an agreed payment and ask for an extension or a lowered payment amount, don't expect them to respond positively.

Consider working with a debt professional

As notes, a debt professional is experienced in how to settle a credit card debt. You're under no obligation to work with one, but it's well worth considering if you're struggling to manage the situation alone. A debt professional is well-versed in negotiating settlements: they'll be able to help you work out exactly what you can afford, decide on whether settling really is the best way forward, and then work with your provider to secure the most advantageous agreement. It's also likely that they have an existing relationship with your creditor, something that can only stand you in good stead. Working with a debt professional shows that you're taking the matter seriously: if a creditor feels that you're focused on resolving the issue, they're more likely to take your settlement offer seriously. Last but not least, don't underestimate how stressful the process can be. If you haven't yet been sued, there's a chance you may still be during the settlement process as a result of continued non-payment. Having a professional advocate on your side can make the process less overwhelming and help you avoid any costly mistakes.

Summing up

Debt can feel overwhelming, but it's in your best interest to resolve the issue as soon as possible. Going to court can be costly, time-consuming, and far more stressful than trying to reach an agreement with your creditor. Remember, it's in their interests as much as it is yours to get the matter over with as quickly as possible without going to court.

Allen Lee

Written by Allen Lee

Allen Lee is a Toronto-based freelance writer who studied business in school but has since turned to other pursuits. He spends more time than is perhaps wise with his eyes fixed on a screen either reading history books, keeping up with international news, or playing the latest releases on the Steam platform, which serve as the subject matter for much of his writing output. Currently, Lee is practicing the smidgen of Chinese that he picked up while visiting the Chinese mainland in hopes of someday being able to read certain historical texts in their original language.

Read more posts by Allen Lee

Related Articles

Stay ahead of the curve with our most recent guides and articles on , freshly curated by our diligent editorial team for your immediate perusal.
As featured on:

Wealth Insight!
Subscribe to our Exclusive Newsletter

Dive into the world of wealth and extravagance with Money Inc! Discover stock tips, businesses, luxury items, and travel experiences curated for the affluent observer.
linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram