A severe recession will make credit card companies more willing to negotiate partial payments in order to cut their losses. In some cases, a creditor might accept as little as pennies on the dollar as payment in full. There is, however, a price to pay. It could significantly tarnish your credit rating.
Economic Conditions
If you are in dire financial shape, contact your credit card company and request debt forgiveness. In order to be considered for a reduced payment, also known as a write-off or charge-off, you must generally be at least 90 days behind on your payment. You might also have to prove via your credit report that you normally have a solid payment track record. While your creditor might not agree to forgive a portion of your debt, it might offer to waive late fees and penalties and be willing to lower your interest rate.
Changing Circumstances
Credit card debt forgiveness is an attractive option for consumers who are deep in debt because of unemployment, illness or divorce. Consider retaining the services of a debt negotiation firm in your efforts to obtain credit card debt forgiveness. According to the Federal Trade Commission, debt negotiation companies advertise their services as an alternative to bankruptcy. They might claim to be able to negotiate up to a 50 percent reduction in the balance owed. Keep in mind that these firms often charge significant fees. You might have to pay a setup fee as well as a monthly service fee. You might also have to remit a percentage of the amount the company negotiates off your credit card balance.
Bankruptcy Alternative
A credit card company might be agreeable to debt forgiveness because if you choose bankruptcy instead, it will most likely be forced to write off your entire credit card balance. Although your credit card company might be willing to forgive part of your debt, the deal won't be forgotten soon. The nonpayment will stay on your credit report for seven years. Keep in mind that if you negotiate a settlement that forgives all or part of your credit card debt, that credit will be considered income by the Internal Revenue Service and you will be required to pay taxes on it.
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