Can You Negotiate Your Own Debt?

The process of debt settlement can be worthwhile for the individual burdened by high levels of unsecured debt, such as credit cards. Debt settlement takes place when a debtor successfully negotiates a payoff amount for less than the total balance owed on a debt. This lower amount is agreed to by the creditor or collection agency and is fully documented in writing. Ideally, this lower negotiated amount is paid off in one lump sum, but it can also be paid off over time.

Creditors are more likely to settle once a debtor has already demonstrated an inability to pay, so if you’ve already fallen behind on payments by four or five months, it could represent an ideal opportunity to begin negotiating with your creditors for the best debt settlement. Even though it may seem surprising that banks would settle for less than what is owed, the statistical certainty that not all borrowers will actually pay back is built into a bank’s carefully formulated lending model.

Know Your Debt Settlement Timeframe and Budget

Debt settlement can be a lengthy process, but ideally, it is something that you should endeavor to complete as quickly as possible to minimize damage to your credit score. The key to effective debt settlement is possessing the financial ability to settle. Therefore, if you have the means, you should begin saving for an eventual lump sum payment or structured payment schedule that can be completed within two years from initiation.

You can consider a longer repayment schedule if truly required, though it may also be worth looking into a debt management plan (or possibly even bankruptcy) as your preferred debt relief strategy. If you’re still leaning toward debt settlement, the question then becomes whether to pursue the debt settlement process on your own, or to enlist the help of an experienced debt settlement company.

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Debt Settlement is Complex

Begin by choosing a reputable counseling agency staffed with certified counselors who are trained in debt management. Be prepared to discuss specifics related to your income and expenses. In other words, know exactly how much money you have left over at the end of the month after accounting for basic necessities such as rent, food, transportation, utility bills, etc. You should also be able to discuss a clear picture of your unsecured debt situation. Therefore, you should know exactly how much you owe on all of your individual credit cards, their respective interest rates and minimum monthly payments, as well as any outstanding medical bills and other personal financial obligations. These debts will all be discussed in an interview with your credit counselor, who will refer to your credit report to verify that all of the information you provide is accurate.

A reputable credit counselor will make recommendations related to controlling your expenses and enhancing income while also offering free educational materials that can further get you on the right track financially. After evaluating your situation, the counselor can offer you a debt management plan that includes a reduction of interest rates and monthly payments on your unsecured debts – subject to the acceptance of your creditors. If you agree to enroll, the duration of the payment schedule will generally be between 36 and 60 months. Most counseling agencies charge a one-time enrollment fee and regular monthly fees of approximately $50 per month for services related to a DMP.

Things That Must Be Done for Effective Debt Settlement

Either you or a debt settlement company must assess your financial situation and determine how much you can save each month toward your eventual settlement. A good debt settlement company will approximate how much you will ultimately need following a specific review of your creditors and a determination as to which of them may be potentially legally aggressive. You also must generate a hierarchy of creditors – who to settle with first, and at what percentage – followed by the next creditor and percentage, and so forth, through your entire sequence of creditors.

You also must manage all communications with your creditors. Accordingly, you must formulate a strategy of how to best submit debt settlement offers that paint your situation in the most advantageous possible light and that provides creditors with proper incentive to settle with you. Remember, creditors are not legally responsible for accepting any settlement offers. To the contrary, creditors often have legal ground to sue for non-payment, a fact that only enhances the need to expedite the debt settlement process judiciously.

The Choice is Yours

As you can see, debt settlement is not a simple, straightforward, cut and dried process. Rather, it can be quite nuanced, as communications with creditors must be carefully crafted, with proper prioritization given to those creditors and collection agencies that have the potential to cause the most problems for you – both legally and financially. All of this must be accomplished while trying to save as much money and time as possible, along with mitigating the ongoing damage to your credit score and profile.

Throughout debt settlement negotiation, it is critical to know what information to disclose, the manner of structuring offers, and the timing of such offers. This ongoing process of communication and negotiation is often best handled by a reputable debt settlement firm staffed with experienced professionals who are comfortable navigating these treacherous waters. If you’re burdened by high levels of unsecured debt, contact us here at United Debt Settlement. Our experienced debt counselors will assist you in the process toward successful debt settlement and financial wellness.