Can You Really Negotiate Credit Card Debt?

In the financial world, almost everything is negotiable, including credit card debt. Excessive credit card debt is a serious problem in many households. The average person with credit card debt owes over $9,000. With average interest rates exceeding 21 percent, once people get on the credit card debt treadmill, it’s almost impossible to get off it.

DIY credit card debt negotiation hardly ever works. Regardless of what TV commercials imply, big banks simply don’t care about individual borrowers. Additionally, most debt negotiation companies are very adept at charging fees, but not very adept at anything else. If credit card debt is holding your family back, a partnership with a Chicago debt reduction lawyer is usually the best option.

Negotiation Strategies

Something is better than nothing, borrower equity, and perhaps best of all, the bankruptcy bluff, are usually the most effective credit card debt negotiation strategies.

Banks usually loan money based on financial history, not financial potential. Tony the law student may be a successful Chicago bankruptcy lawyer one day, but a loan officer only sees a poor law student.

The same thing is true in reverse. If life threw Tony a major curve ball, he may be unable to repay credit card debt. An attorney must shift the bank’s focus off what Tony should pay and onto the amount he can pay.

Next, labels like “predatory lending” are very powerful, even if they’re only partially true. When the trials of a struggling family and the unfeeling response of a bank make the rounds on social media, no one much cares about the why and how. Banks who are concerned about their public images are often willing to pay to preserve them.

As mentioned, the bankruptcy bluff may be the most effective credit card debt negotiation strategy. Banks know that credit card debt is dischargeable in both a Chapter 7 and a Chapter 13 bankruptcy. So, if debtors file voluntary petitions, these companies usually get nothing.

The debtor may be unwilling or unable to file bankruptcy for one reason or another. But the creditor doesn’t know that, as long as the Chicago bankruptcy lawyer handling the negotiations has a good poker face.

A bankruptcy bluff is much more effective if a bankruptcy lawyer makes the bluff. A veiled threat to file bankruptcy from a non-bankruptcy lawyer doesn’t carry the same weight. That’s like a skinny guy threatening physical violence.

Possible Outcomes

Realistic expectations are part of the picture as well. A lower interest rate is the most likely outcome. For example, if Tony’s bank charges 27 percent, it may be willing to reduce the interest rate to around 22 percent, which is more in line with other credit card companies. That simple change could save Tony thousands of dollars a year.

UPB (Unpaid Principal Balance) reduction is available in a few cases, especially if there’s solid evidence of predatory lending.

A few words of caution. Settled credit card debts often negatively affect credit scores. In some cases, the negative effect is tantamount to filing bankruptcy. Furthermore, the IRS could consider debt reduction as taxable income.

Rely on a Compassionate Cook County Lawyer

No matter what kind of financial problem you are having, there’s a way out. For a confidential consultation with an experienced debt reduction attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. Convenient payment plans are available.

Source:

fool.com/money/research/credit-card-debt-statistics/