Did You Stop Repaying Your Credit Card Debt?

With the economy still struggling, consumers are having a hard time paying off their credit card debt. Some have ceased making payments to credit card companies all together and have been ignoring collection calls. Law suits are filed against these consumers, and when a judgment is issued, unless a bankruptcy is filed, a creditor will most likely (sooner or later) obtain their money along with interest, costs and attorney fees.

If you are in this position, you should attempt to settle your debt with your creditors to the best of your ability without going to court. There are a few things you should take into account when attempting to negotiate the reduction of your credit card debt. If a creditor obtains a judgment, and  is successful in garnishing your wages, for example, there will be nothing (short of bankruptcy) that will persuade the creditor to cease the garnishment. Therefore, it is better to settle the debt when you still have some bargaining power. Creditors are usually willing to settle for a fraction of the total you owe.

Prior to your negotiations however, there are numerous points you should consider. One important aspect is assessing the chances that the creditor will actually pursue you and file an action against you. Therefore, the total amount of debt you owe to that creditor is an important consideration. The less you owe, the less the chance that the creditor will pursue you in court if you do not reach an agreement with them. If the amount of debt is under $3,000 for example, you should try to settle the debt for $2,000 or possibly even $1,500. Depending on the creditor, it may be cheaper for the creditor to settle with you for this number than to take on more expenditures to pursue you in court. You should also take into account factors such as whether your debt was assigned, your occupation and potential for earning in the future (since judgments are good for a long time, especially if properly renewed), and whether you have valuable assets (or may have valuable assets in the future).

Thus, a creditor may decide to pursue you in court if they believe that after they get a judgment against you, they have a good chance of enforcing it and recovering their money plus fees, interests, and costs. As such, they may be able to garnish your wages, lien your property, or levy your (and your spouses) bank accounts. Sometimes, they may also go after your vehicles or other valuable property you own or that should be coming to you. Therefore, once you receive a Notice of Authorization to File Suit, you should either hire an attorney to negotiate on your behalf, or contact the creditor directly to see if you can reach a settlement before a case is filed.

The creditor should save money if you reach a settlement before an action is filed, and your cooperation may allow the creditor to be more flexible with their numbers. Once the creditor files an action against you, however, settlement negotiations may get more complicated. Assuming you want to settle for less than what you owed, you should keep in mind that the creditor's numbers for settlement may increase because now its costs for collection have increased. However, this is also a case-by-case situation. In some cases, the creditor may actually be willing to settle with you for a lesser amount after they filed a law suit in order to avoid being involved in messy and expensive litigation. This is even more likely if the creditor has reason to believe that a judgment against you may be futile or difficult to enforce, and thus may be willing to settle with you at this point to ensure they get something on your account.

However, if the numbers at stake are high, and the chances for a judgment against you are pretty good (as well as a high likelihood of a successful enforcement of the judgment) the creditor may be more inclined to continue litigating instead of settling with you, and seek to recover all  of its costs and fees from you in your judgment.

In conclusion, if you understand how collection works, you may be able to settle for a good low amount with the creditor. If you are in this situation and are looking for an attorney to negotiate your debt(s) with a creditor for a reasonable fee, please contact my office.

DISCLAIMER: The information in this post should not be construed as legal advice. Every case is different and results vary based on the facts of each case. The above information is intended to provide general information about debt settlement.