Tips For Negotiating Debt Settlement

Tips for negotiating debt settlement

When you have more months at the end of your money and more bills to pay than you can handle, you are at risk of being in debt. You can tell you are in bad debt when you have outstanding bills or can only pay the minimal amount for your credit card payments. Debt is damaging to your credit score since it makes it difficult to get financing from lenders. Debt can even affect your ability to get employment. The situation gets even worse when the creditors decide to involve debt collection agents who will call you day and night.

If you are wondering how to get out of debt, then debt settlement is the way to go. Debt settlement is the process of negotiating with your creditors and getting them to scrap away part of your debt in exchange for a lump sum payment. If you are in a really bad place financially and facing the risk of bankruptcy, most creditors will be willing to settle in order to avoid losing out of being paid altogether once you are bankrupt.

Negotiating Tips

Negotiating debt settlement is easier said than done. You may need to hire a debt arbiter to help with the negotiations. Most companies will not advertise that they offer debt settlement for financial strained consumers, but they will be willing to settle if approached the right way. The following are some of the things to consider during negotiations.

  • Offer only what you can afford: the settlement you agree upon with the creditor is a new commitment that you need to fulfill. You need to review your budget and decide how much you can afford to pay in order to avoid creating a new problem. When starting negotiations, begin by offering a lesser amount than what you have and work your way up slowly.
  • Clear your credit records: debt settlement should also influence the quality of your credit records. In case the creditor had added any negative information to your records when you failed to repay the loan, you can also tell them to have this information removed.
  • Ask for a written document: get the debt settlement agreement in writing before you start making any new payments. When working with debt settlement companies, they often have the resources to manage the legal documentation involved. The written agreement should clearly indicate how much you agree to pay, the payment format, the due date, the mode of payment and any concessions from the creditor.
  • If you are handling your own debt settlement and find a creditor who refuses to negotiate, hire a professional. They may be more convincing in terms of giving facts to the creditor as compared to what you present to them in the negotiations.

It is important to remember that you may owe more federal income tax since whatever you do not pay is reported to the federal tax agency. Therefore, you need to contact the tax agency and find out if you are eligible for insolvency, which means you will not need to pay these taxes.