Is a Write Off the Right Option for You?

Are you one step away from having to file bankruptcy? Before you allow your financial troubles to result in taking this extreme action, you might want to consider entering into some negotiations with your creditor. Thanks to the current economic troubles, many credit card companies and other lenders are more willing than ever before to make deals with debtors. Why? Quite simply, the banks would rather get something from you now rather than get nothing from you later. Since the economy is only expected to worsen further, the banks believe the likelihood of their customers filing bankruptcy is quite high. Therefore, this fear provides you with a little more negotiating power. At the same time, it is important for you to understand the downside to pursuing this option before you head into negotiations with your creditors.

Leaving a Black Mark on Your Credit Report

Although negotiating with your creditors and getting a portion of your debt forgiven is certainly better than filing bankruptcy, it is important for you to realize that it will leave a negative mark on your credit report. In fact, the information reported by your creditor may remain on your credit report for several years. This is because forgiving a portion of your debt is referred to as a "charge off" or a "write off" and can cause your credit rating to take a significant nosedive.

On the plus side, a bankruptcy will stay on your credit report for up to 10 years. A write off, on the other hand, typically remains on the report for seven. Nonetheless, this black mark on your credit report can potentially lead to an increase in the interest rate on your other credit cards or loans. Not only will this result in losing more money toward paying finance charges, it will also take you much longer to get your debt paid off. In addition, if you apply for a loan such as a car loan or a home mortgage loan, you will likely be charged a much higher interest rate than you would have been charged before the write off showed up on your credit report.

Getting a Write Off of Your Debt

If you are still convinced that getting a write off is the right step for you, you will need to contact your creditors and start negotiating. In many cases, however, you will need to be at least 90 days behind on your payments before your creditors will be wiling to discuss the possibility of writing off a portion of your debt. In addition, you might want to look at negotiating your interest rate or getting late fees or other similar fees waived before going for a full write off. If you need some help with the process, however, you might want to contact the National Foundation for Consumer Credit, which is a nonprofit credit counseling center that can help you explore your options and can potentially help you with getting some of the terms of your loan modified.


About the Author: Shannon Kietzman is a well known author and trusted resource. Shannon regularly writes for www.reliacredit.com . For more info and to order your credit report with FREE credit score please visit www.reliacredit.com