How To Negotiate Debt Settlements: What You Need To Know

Consider negotiating a debt settlement with your creditors; you'll be able to get

rid of a debt and remove a blemish from your credit report at the same time. You can come to terms on a debt settlement with either an original creditor or a debt collector. Debt settlement is a particularly good idea if you have been subjected to credit card harassment or if you are being charged huge fees and interest on what was originally a small debt.

Almost any unsecured debt is negotiable, including credit cards, personal loans and medical debts. Guaranteed loans like student loans are generally not open to settlement. If you want to negotiate a settlement, you will need to know the original amount of the debt and the name and contact information for the current holder of the debt. It is important to determine who currently owns the debt - it could be the original creditor or a debt collection agency.

Negotiating debt settlements with original creditors:

The original creditor is the business that you made a purchase from or acquired a loan from. An original creditor can be your credit card company, a store, finance company or even your doctor. If the original creditor still shows the debt as active, then you will need to negotiate with them. If they have sold it to a debt collector, you need to work out the settlement with the collector. Decide what amount of money you can offer for the debt, and offer the sum directly to the creditor, with the provision that the account would be considered paid in full and reported accordingly. You also need the creditor to agree that the amount is the total sum, and that they will cease collection activities, including selling your account to a collector. Get this information in writing before handing over any cash. The more delinquent your account is, the more likely an original creditor is to accept a settlement.

Negotiating debt settlements with debt collectors:

If your debt has already been placed with a debt collection agency, then you should negotiate a settlement with them. Debt collectors are notorious for breaking agreements, so you should not release any funds to them until you have confirmation of your settlement agreement in writing.

Once your debt has been placed with a debt collector, you should be able to settle for a small fraction of the original amount. The collector has likely paid only a few dollars to purchase your debt, and will therefore accept a smaller settlement - though he is likely hoping you'll pay a lot more.

It is very important to get any settlement agreement you make with a debt collection agency in writing before you hand over any cash. Debt collectors are notorious for backing out of verbal agreements. If the collector won't give you the agreement in writing, don't settle. Once you have the agreement in hand, pay the collector with a bank check or a certified check. This gives you an additional layer of protection, since the collector won't have access to your actual account.

by: Sergei Lemberg

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