Identification

• Debt settlement allows you to pay off credit card debt for less than the full amount owed. The Federal Trade Commission says it is an alternative to bankruptcy, which also eliminates credit card debt. However, like bankruptcy, debt settlement will have a negative impact on your credit.
  
  

Time Frame

• Your card company's customer service department can help you with routine inquiries while your account is current, according to MSN Money. The account will be transferred to internal collections after it has become three months past due.
  
  

Considerations

• Debt settlement negotiations become possible once the account is three months behind, according to SmartMoney.com. Trained negotiators in the collections department will consider your request for a settlement. People attempt to negotiate their credit card debt for many reasons, including a job loss, illness, or other financial problems. Settlements are possible for 20 to 75 percent of the balance according to SmartMoney, with the best offers more likely just before the account becomes six months past due. MSN Money says that at six months, the card company will close your account and list it as a write-off for accounting purposes. However, you will still be responsible for the entire balance.
  
  

Effects

• When your account is written off, the card company may assign or sell it to an outside debt collector or attorney. After that happens, you won't be able to negotiate directly with the card company. However, MSN Money says settlements are possible even after the account has been written off and listed on your credit report as a "charge-off." The debt collector or law firm assigned to the account will be listed on your credit report, and you can call them to negotiate.
  
  

Warning

• Negotiating with a lawyer or outside debt collector can be more difficult than working with your credit card company, MSN Money says. If possible, try to negotiate your debt before it is written off.