Settling With Your Credit Card Company
posted Monday, October 26, 2009, 13:41 pm
Dear Mary Hurlburt,
I owe $15,000 to my credit card company. I've received a personal loan for $10,000. I talked to the people at my credit card, and they implied that they might take a lump sum payment of $10,000, and forgive the rest of the debt, IF I first refused to pay them anything for at least nine months. I've been current on my payments up till now. They said that if they forgave any part of my loan, it would do terrible things to my credit rating, plus I'd have the nine months of non-payment to make it worse. Did they tell me the whole truth? I've been carrying a very high balance, and paying on time, for two years. Is it true that they'll send credit collectors after me, and ruin my credit for seven years, if I tell them up front what I can pay, and that it’s not the full amount?
San Angelo, Texas
Essentially, your credit card company told the truth. Financial institutions have no incentive to “settle” an account while it is current. That’s why they suggested that you don’t pay for nine months. Yes, nine months of non-payment is going to destroy your good credit but it shouldn’t take seven years to reestablish it.
Bill collectors will certainly hound you during the nine months you refuse to pay. That should stop, however, once your credit card company accepts your settlement offer.
You don’t say why you can’t continue making payments. Before you make any decision that will destroy your good credit, I urge you to seek professional help from a trustworthy credit counseling service. A financial specialist will examine your entire financial picture, help you develop a workable budget, and present you with all your current options given your specific circumstances.