The Difference Between a Debt Negotiation Agreement and Credit Card Debt Settlement Letter

Being delinquent on credit card debts is no laughing matter. The endless annoying collection calls, torturous threat of lawsuits, and fear of bankruptcy can create many sleepless nights. But, a debt negotiation agreement can take away a lot troubles. The following statistics explain why so many people are opting for a credit card debt settlement letter via this superior form of debt elimination:

Many consumers and small business owners live unconsciously enslaved to their revolving debts;
"About 51 percent of the U.S. has at least two credit cards" according to Experian;
"Americans pay each year approximately $20.5 billion in card fees alone", declares industry consultant. R.K. Hammer;
"Credit cards are the most common source of financing for the small business community", states the National Small Business Association.

Fortunately, a debt negotiation agreement can get you out of the monstrous debt trap. It also beats credit counseling, which only reduces interest rates. In contrast, a good debt negotiation can drastically reduce your credit card balances. There is magical ingredient. The remarkable debt relief is based on real numbers and averages as you're about to see...

When Credit Card Companies Lose Billions - You Win!

Each year, well over one million bankruptcies strip billions of dollars in profits from credit card companies like Chase, Capital One, and Discover. Additionally, each quarter banks charge off about $20 billion in outstanding credit card balances.

Capitalizing on the above deficiencies, a debt negotiation agreement helps creditors recover funds they might lose if you declare bankruptcy or stop meeting your financial obligations. They can also collect more money than having to pay as much as a 40% commission to a collection agency. And what it means for you is ultimate peace of mind! No more debts. No more bills. And no more need to file bankruptcy.

Next, we will discuss the mechanics between the debt negotiation agreement and the credit card debt settlement letter...

The Debt Negotiation Agreement

The debt negotiation agreement is basically an accord between you and the credit card company to reduce a delinquent balance. This reduction permits you to pay less than the full amount of the debt as "payment in full." For example, if you owe a $12,000 balance, they may accept $6,000 as a full payment.

The debt negotiation agreement initially manifests from a verbal negotiation or debt arbitration. The fruit from the negotiation is a written settlement offer from the creditor known as the "credit card debt settlement letter."

The Credit Card Debt Settlement Letter

The credit card debt settlement letter is commonly referred to as the "settlement offer." This settlement letter is a written confirmation from the creditor addressing the terms of the finalized settlement. To reap the rewards of their settlement offer, you must remit full payment of the settlement.

A word of caution: If you fail to pay the settlement by the date specified on the settlement letter, the credit card company will void the settlement offer and demand immediate payment of the original balance. Thus, to avoid sabotaging a good settlement arrangement, you must clearly follow the payment instructions on the settlement letter.

(Note: You can Google some great examples of debt settlement letters.)

Keep Records of the Settlement Letter for Your Protection

It is important that you retain a copy of the credit card debt settlement letter with proof of the settlement. This way, if in the future the creditor or any collection agency claims that you still owe the debt, which happens regularly, you can show them proof that the debt was paid.

Another reason for keeping copies of these records is that the credit card company must contact the credit report bureaus so that they indicate on your credit reports the debt was settled and brought to a "zero" balance. If you find that this information is not on your credit report after sixty days from the date of the settlement, you should immediately mail certified proof of the settlement to the credit report bureaus to have the issue corrected.

The Term Settlement Letter

Now, let's examine another type of letter, the term settlement letter. In lieu of a lump sum settlement, the credit card company may accept a "term settlement." This would produce a term settlement letter, which helps you extend the debt repayment period.

A term settlement allows more time to pay off the balance, but it also generally weakens the settlement offer. For example, on a $5,000 card balance, the credit card company may agree to spread the debt repayment to two to six months. However, instead of asking for a lump sum $2,000 settlement (40% of the balance), they may ask for $3,000 (60% of the balance).

Another issue is that you must ensure to make every scheduled payment on the term settlement letter. Otherwise, if you miss a payment, the settlement offer will be off the table and you will need to repay the entire outstanding balance.

Vic Chevalier is a financial coach and author. His mission is to help people transition from debt into financial prosperity. You can read more of his debt relief and credit restoration tips at http://www.debtfreeleague.com/

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