How to Negotiate Your Credit Card Debt Yourself Without Lump Sum Payment

If your credit card debt gets beyond your ability to pay, your best bet may be to cut up your card and plead for a negotiated settlement.

If your credit card debt gets beyond your ability to pay, your best bet may be to cut up your card and plead for a negotiated settlement.

If your credit card debt has gotten out of hand, you might consider negotiating with your credit card company to reduce your balance. While there are plenty of debt settlement companies that will offer to help you negotiate your debt, many of them charge high fees and can ultimately prove ineffectual. In many cases, your best option is to negotiate directly with your creditor. Your success at negotiating your balance down without a lump sum payment depends on your skills as a negotiator and your ability to convince your creditor that it is making a wise business decision.

Calculate how much you can afford to pay. It won't do you any good to negotiate terms with your lender that you cannot honor. Determine how much money you can pay over a given time period so you can make a good-faith offer.

Ask for an offer. Call your credit card company and tell them you simply cannot afford to pay your full balance and that you do not have cash currently to make a lump sum payment toward that balance. If you have already missed a few payments, your creditor may be more likely to extend some type of payment arrangement or settlement offer for fear of not receiving any payment at all. You may get more mileage out of speaking with a credit supervisor rather than a customer service agent.

Counter with a more aggressive offer. As in any negotiation, your lender is not likely to offer you the best possible deal just because you ask for it. After receiving its offer, make your own suggestion. For example, if your lender asks for payment of 90 percent of what you owe in three months, ask if you can pay 50 percent of what you owe over six months, or whatever you can afford.

Make a deal before six months of delinquency elapses. After a borrower has been delinquent for six months, a credit card company must "charge-off" the account, meaning you still owe the money but your creditor has written off your debt as a loss. After this point, your debt usually ends up in the hands of third-party debt collectors, and your ability to negotiate with your original creditor is lost.

Get the deal in writing. As with any business deal, having the specific of your negotiation in writing can help prevent future legal problems.

Save enough money to pay your taxes. If you ever pay less than the full amount you owe on your credit card debt, even if you pay over time, you will receive a Form 1099-C from your creditor. The IRS regards debt settlement or negotiations to be "forgiven" debt, which is taxable. Your Form 1099-C will show the amount of your forgiven debt, which you must report as income on your tax return.

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About the Author

After receiving a Bachelor of Arts in English from UCLA, John Csiszar earned a Certified Financial Planner designation and served 18 years as an investment adviser. Csiszar has served as a technical writer for various financial firms and has extensive experience writing for online publications.

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