Posts Tagged ‘avoiding bankruptcy’

Avoid Bankruptcy By Paying Off Your Credit Card Debt

Credit card debt is one of the main reasons why so many consumers become bankrupt. However, it is important for you to keep in mind that there are several alternatives still available to avoid bankruptcy no matter how worse your debt and financial situation is. Following is a brief step-by-step guide on how to do this.

Assessment Of Your Financial Situation

When it comes to paying off your credit card debt, the first step is to do a thorough assessment of your current financial situation. Make sure you are using accurate details, whether it is about the outstanding debts, your regular and irregular income, or anything else. You have to be very specific while you are assessing liquid assets in terms of cash or anything that can easily be converted into cash. This step to avoid bankruptcy may also involve doing a garage sale, where you will be selling things from your home that you no longer use. The idea is to do everything possible to get as much cash as possible. This will make the negotiation process very easy for you.

Emotional Assessment

Once you are through with financial assessment, the next step is to do a thorough emotional assessment. You will have to be very honest while you do this. The objective is to find out if you have good negotiation skills. If not, you may consider getting help from a professional mediator. In order to negotiate a good alternative arrangement, you or the mediator must be strategically focused, resilient, optimistic, socially skilled, influential, and knowledgeable.

Choosing The Right Mediator

If you are considering hiring a mediator to help you with the settlement of credit card debt so that you can avoid bankruptcy, there are several things you must keep in mind. For example, besides possessing the above skills (as mentioned in step 2), he/she should also charge a very reasonable fee (it is better if you are lucky enough to find one who doesn’t charge a fee at all). There are various credit card settlement companies available in the market; make sure you choose one with a solid history of success.

Negotiating An Agreement

You or the mediator can now begin the negotiations by having a meeting with an authorized supervisor at the credit card company. You will have to give them a proposal that should include what kind of favors you want from them. Your proposal should also explain with certain facts and evidences that convince the lenders that you will not make further defaults if the new repayment plan is accepted. While you do such negotiations to avoid bankruptcy, it is important to note that the first proposal is not the final one; it only opens the door of negotiations. In most cases, the first proposal is never accepted. Therefore, a good idea is to offer your creditors a quarter (25%) of the full amount in your first proposal, but you must have a clear picture about the final settlement that you can afford. Skillful negotiations, either by yourself or with the help of a mediator, can help you achieve an agreement that requires you to make 50% of the outstanding payment within a certain period of time.

Get The Final Plan In Writing

Once a mutual agreement is reached, request the supervisor to provide you a written copy of the same that must be duly signed by both you and the authorized person from the credit card company. Always remember, verbal agreement does not have any legal value. A proposal becomes an agreement only when it is in writing.

Overall, these five steps should help you reach a favorable agreement with the creditors, allowing you to pay off your credit card debt on easier terms so that you can avoid bankruptcy.

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