A time may come when you are struggling to pay the large amounts of credit card debt you've accumulated over the years. In many cases, people start looking down the road and visualizing bankruptcy in the near future. If this describes you, then take a minute and breathe before you hit the "panic" button. There are thousands across the country in your shoes, which means that you may be in the position to settle your credit card debt and avoid bankruptcy.

Unsecured Debt

There are a few things you need to understand before you start the negotiation process. The only type of debt that is negotiable is unsecured debt. If you default on a secured loan, you will lose the property you secured the loan with. Debt, such as medical bills, student loans, personal loans, store credit lines and credit cards, are considered unsecured debt and this is the debt that can be negotiated.

Before Contacting

Before you pick up the phone to call the first creditor, you need to create a list with all of your expenses--putting your secured loans and other non-negotiable bills at the top. Then you finish with your unsecured debt at the bottom. It is wise to organize your unsecured debt from the largest amount owed to the least amount. You need to know how much you can afford to pay to each creditor before you call them.

Speak to Someone in Charge

When you call your creditors, talk to someone who has the power to change the terms or interest rate of your credit card. Explain your situation and read your list to them, explaining how much you can afford to pay the creditor. Remember to stay calm and polite, no matter how frustrated you may be. Kindness goes a long way in these situations.

Have a Plan

If you can provide the creditor with a plan of action to repay the amount owed, you may be able to negotiate a lower interest rate. Or, you may even be able to settle the bill completely, if you have the necessary resources. For example, if you owe $10,000 and can afford to make a lump-sum payment of $3,500, then ask if the creditor would be willing to write off the remaining balance. Many times creditors are excited to know they will be able to make some of their money back and are willing to settle the account to do so. Whatever terms you agree on with the creditor, you need to follow up with a written letter outlining the conversation. Be sure to send it certified, return receipt requested. Just remember, when negotiating with creditors, have a list detailing where your money is going so they can see your financial need for leniency.

Source:

The Atlantic: Negotiate With Credit Card Companies, But Do So Carefully; Daniel Indiviglio; 2009

Federal Trade Commission: Knee Deep in Debt

California Department of Consumer Affairs: Take Charge of Your Credit Card Debt!