Negotiating credit card debt has become a popular alternative to bankruptcy, but it can be expensive when done through a debt negotiation company. If you are considering this option, you may want to try negotiating directly with your creditors first.

When you negotiate credit card debt, your goal is to end up paying only a percentage of your total balance, once you get agreement from your creditor.  Credit card companies typically only want to settle if you are behind on payments, usually by at least three months.  At that point, they are willing to negotiate debt because they fear that you may file bankruptcy, in which case they would lose all of their money, rather than just a portion thereof.  Creditors are also willing to work with you because you make your settlement payment in one lump sum – this is not a reduced or changed payment plan – so they are guaranteed to get that quantity of money.

Negotiating with your credit card company is as easy as making a phone call to the customer service department.  However, you will need to do a little preparation before you do so.  Begin with figuring out how much you can afford to pay as your settlement.  It should probably be at least %25 of your balance due if you are going to get a positive response from your creditor. Then make sure you have a clear picture of your financial situation – this will make it easier to explain over the phone.

When you do call, speak politely and concisely.  Explain calmly that you wish to pay off your debt and avoid bankruptcy but that you cannot afford to pay the total balance.  As part of your debt negotiation, ask that your account be reported as “paid in full”, or better yet, that your account history is deleted upon receipt of payment. Any other status reported will negatively affect your credit score.

Negotiating your credit card debt yourself can save you money, save your credit score, and get you out of debt.

Getting a debt management plan through Freedom Debt Management is a great step toward becoming debt free.  Freedom Debt Management is a non-profit credit counseling company that will help you consolidate your unsecured debt and pay it off within five years.  Although their credit counselors are there to help you, you will need to put in some preparation and commitment to make the debt management plan successful.

Before your consultation with your credit counselor, you will need to gather several items.  Call all of your creditors and find out your current balance, current interest rate, any outstanding fees, and whether or not your account is delinquent.  You should also know your current household income, the amounts of other loans, such as home and auto loans, and estimates of your other household expenses.

Once at your consultation, be sure to be open and honest with the credit counselor.  Although debt can be embarrassing, withholding information may impact the outcome of your debt management plan and may hinder its success.

Once the debt management plan (DMP) has been initiated, it is up to you to make regular, timely payments each month.  Even if your creditors have previously waived late fees, they will likely be either unwilling or unable to do so once you are on a DMP.  Be sure to check your statements each month to ensure that each creditor is being paid. If you notice that a payment has not been made, immediately contact your credit counselor.  Even if the mistake is not yours, you are still held responsible for those payments.  If you find out that your credit company closes or goes out of business while your DMP is still open, make sure that you contact your creditors as soon as possible, and begin making payments directly to them.  Most will not excuse late payments, even if it is because your credit counseling company has closed.

As long as you prepare well and remain vigilant, Freedom Debt Management can help you become debt free.