Debt Settlement tips and valuable advice
Debt Settlement means you are working with your creditors and or collections agencies to settle your debt for less than you owe. Also called debt negotiation, this process is only used for unsecured debt. Unsecured debt can be credit card debt, personal loans, and some medical bills. Mortgages and auto payments are secured debt. You cannot settle a secured debt; the lender will just take the house or car as settlement.
Trying to settle your debt with the original creditors like the credit card company or the bank you got a personal loan from, is different than trying to settle your debt with collections agencies.
Tip Number 1
It makes sense to talk to your original creditor on the phone. If you are 60 plus days past due and are past due on other bills, credit card companies and some banks will have programs in place. This may vary from offering a bonus of taking at least $50 off your balance if you just make a payment, to cutting your balance if you pay it off all at once.
For collection agencies, it is important that you deal with them by mail so that you have a paper trail of any agreements. If they call and want to talk about any offer you’ve made to settle the debt, remind them that the settlement offer you sent them requires a response in writing and hang up the phone. If you are corresponding with them, you don’t have to talk to them on the phone. It is important to get any settlement terms in writing before you sign a check or send them any money. Never expect the collection agency to honor verbal terms. You could pay the amount and have them try to collect more.
Employee turnover at many collection agencies can be high. Making a verbal agreement with one agent means that you have to believe they will be there two months later and that they will remember and honor the agreement. Send all correspondence by registered mail, keep good records and definitely keep a copy of every letter you write to them.
For more information, http://www.creditinfocenter.com has detailed information on setting your debts yourself and working with creditors and collection agencies.
Tip Number 2
Besides negotiating a monetary settlement with the creditor, negotiate what is reported to your credit rating. Start with trying to get them to agree to remove the listing on the credit report. Do this as part of the monetary settlement. Agree to pay X% of the debt by the X of next month if you remove the listing from the credit report.
If they won’t agree to a full deletion, work on the wording. The collection agency will want to list the settlement as something like ‘Paid Charge-off,’ ‘Paid Collection,’ or ‘Paid was 30-, 60-, or 90-days late.’ You want them to delete the debt, but if you can’t get them to budge on this, ask them to report only the word ‘paid’ with no qualifiers.
Tip Number 3
“Never let them see you sweat.” If you are eager or mention that you plan to buy a new home or anything else, they won’t settle. Be polite, be firm, hang up the phone if you are getting upset or don’t want to discuss it anymore. Remember, with the collection agencies you can work with them in writing and it is better to do so.
You don’t have to accept the first settlement offer the company makes. Take time, think about it and counter with a different offer.
Debt Settlement is a process. It isn’t the easiest thing to do and sometimes the results depend on personalities and or persistence. Depending on how many debts you need to settle, you may want to pursue credit counseling services or check out debt settlement companies. Just make sure to do your research into the company and the charges.
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