Credit Card Debt Settlement - Why Credit Card Companies Are Making Debt Settlement Deals
Credit card delinquent accounts are rising at unprecedented levels as many consumers simply cannot afford to pay back their balances. In order to avoid bankruptcy, many debt relief solutions were introduced one of which is debt settlement.
Online, July 28, 2010 (Newswire.com) - There are more American consumers deeply in credit card debt than at any other time in history. The lending standards over the past decade were irresponsible and it has finally caught up to us. Credit card companies have been raking in millions in interest payments over the years however they too are starting to feel the financial pain. Delinquent accounts are rising at unprecedented levels as many consumers simply cannot afford to pay back their balances. Bankruptcy filings have been on the rise as well. Considering bankruptcy is a bad situation for both the creditor and consumer, new debt relief methods have been introduced to the market one of which is debt settlement .
So how does the debt settlement process work?
The process of debt settlement basically works like this. Instead of making payments to creditors, consumers will pay into a savings account until enough funds are built up to begin the debt negotiation process. The average debt settlement deal in 2009 was negotiated for 50% of the balance however results vary case by case. A lot of it depends on how skillful the debt negotiators are which is why it is very important for consumers to know how to locate legitimate debt negotiation programs .
By not making payments to creditors and going delinquent, consumers are conveying that they are experiencing a financial hardship and are on the verge of bankruptcy. Creditors of unsecured debt know that if the consumer were to declare bankruptcy they would likely receive nothing. Knowing this most creditors are willing to engage in a debt settlement deal. Getting 50% of their money back is better than nothing.
With the rapidly increasing rise of delinquent accounts the debt negotiation process has gained much more prevalence than just a few years ago. There has to be a middle ground here. Most consumers who enter into a debt settlement program legitimately cannot afford to make their payments. So instead of filing bankruptcy the debt negotiation process lets them pay back at least some of their debt balance. At the same time, creditors are able to collect money that they would have taken a complete loss on had the consumer filed for bankruptcy.
Credit card companies and other creditors of unsecured debt are willing to make deals. They are worried of the increasing amount of bankruptcy filings and would rather collect 50% of their money rather than nothing. Consumers that are experiencing a legitimate financial hardship and have at least $10k in unsecured debt will qualify for most legitimate debt settlement programs . Not all programs are legitimate however which is why it would be wise to speak with a debt relief specialist who will go over all your options.
To speak with a debt relief specialist for a free consultation check out the following link:
