When Debt Settlement is Right

You are drowning in credit card and revolving debt loan payments. Your income is not enough to make all the payments and meet your essential needs as well. You have missed payments to several creditors, and they are calling. You don’t know what to tell them and you are stressed and scared. You do not see any way out because, short of winning the lottery, you have no way to get current on your debt. Your credit rating has been so damaged that no lending institution will consider a consolidation loan. Is your financial happiness gone? Of course it is! Debt settlement brings it back.

The Options for Debt Settlement

Debt settlement involves negotiations with creditors and/or collection firms in order to secure a much more favorable debt obligation. This process cannot be begun unless the debtor is at least 60 days in arrears, for a creditor will not be motivated to settle unless he has a fear that he will not be paid at all. Debt settlement can be completed by the debtor himself or by a professional who is employed to complete the process.

The following tips will help you if you decide to proceed on your own:

1. Do not give a creditor any kind of hope that you will be able to get current on this debt. Tell him that you have no way to make these payments.
2. Tell the creditor not to call you at work.
3. Tell the creditor that you could possibly make payments if he would be willing to remove late fees, lower the interest rate and lower the overall debt amount. Begin your negotiations at 50% of the original debt. He may say “no” at first, but be persistent. The longer he goes without any payment, the more willing he may be to negotiate.
4. If a collection firm is involved, you will need to follow some different strategies. Ask for a debt validation in writing. This will provide the name of the original creditor, the amount of the original debt, and other information that may be critical. If the creditor has transferred the debt, the collector is working on a percentage of whatever he is able to collect. If the debt has been sold to the collector, he has bought it for pennies on the dollar, and your negotiating position is stronger. Tell the collector to stop calling you at work. Send a registered letter telling the collector not to call you at home. Keep copies of all correspondence. Once an agreement has been reached, be certain to get it in writing.

If all of this sounds time consuming, you are right. It takes lots of time and some real skill in negotiation. For this reason, many debtors employ the services of a settlement professional that has the contacts, the skills and the time to get the job done. Be certain to check references and fees before you sign a contract.

Once you have reached settlement with your creditors, breathe a sigh of relief and make your new payments on time. You have just saved thousands of dollars in high interest and are on your way to financial freedom.

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