Struggling with Debt – Debt Settlement and Negotiation

Struggling with Debt Are you unable to repay your debts or finding it difficult to meet current repayments on a continual basis? If so, do not ignore the situation. It is necessary to take immediate action NOW before it escalates.

What can be done when you can’t repay your loans?

Writing a debt settlement letter to your creditors is an effective way to try to improve your financial predicament.

What is debt negotiation and settlement?

Debt settlement and debt negotiation are more preferable alternative solutions for critical debt than filing for bankruptcy. They are the processes of beginning negotiations with creditors in order to agree upon a manageable payment schedule and amount. This can involve a reduced rate of interest or a one-off lump sum payment accepted in lieu of the full balance owed.

Is it necessary to hire a debt settlement firm?

With fees ranging from 10% – 75% of the total amount to be settled, it can be expensive to hire a firm. can highlight for free the actions consumers can take themselves to settle debt.

Why would a creditor agree to receive less money in a settlement?

Bankruptcy ranks unsecured creditors as the bottom of the repayment pool, meaning they usually receive nothing after a filing is made. If your only option is bankruptcy, many creditors would be amenable to debt settlement and negotiation as a way to ensure they receive at least something.

How to Negotiate Debt Yourself in a Debt Settlement Letter

  1. Focus on the benefits to the creditor: The aim of sending a debt settlement letter is to convince the creditor that it is in their benefit to come to an agreement with you. Treat it as a business proposal and make the letter professional and use objective language rather than emotional or sympathy-grabbing words.
  2. Clearly convey the severity of your financial situation: It is important that you explain in the letter that bankruptcy is a likely outcome if a settlement cannot be agreed upon.
  3. Include all of the account details: List all of the account that you have with the creditor and refer clearly to account numbers, balances owed and dates of previous correspondence.
  4. Make a realistic repayment amount: Although the creditor wants as much cash as possible, you need to be clear about how much you can practically afford to pay so that you have breathing room to manage your other financial obligations. Remember that your priority is to make a change in your circumstances in order to slowly make your way out of debt. Closely examine your finances to find the right amount do not allow creditors to pressure you into repaying more than you can manage.
  5. Include a payment schedule: The creditor will want to know when you will be able to repay the amount you propose. State clearly when you will repay the sum – will this be installments or in a lump sum? How many months or years do you think it will take you to repay it?
  6. Request to be sent a “paid in full” receipt: State in the letter that you require a “paid in full” letter to confirm that any collections or lawsuits have been terminated and that any detrimental reporting has been cleared from your credit file. A major aim of debt settlement is to salvage your credit score. Ensuring that all negative marks have been expunged from your credit score will help get you back on the road back to solvency and creditworthiness.
  7. Don’t be disheartened if your initial proposal is rejected: Some creditors will give you a counter proposal. Definitely try to negotiate better terms and never agree to a figure that is larger than you can repay.
  8. Request a Letter of Agreement: Once an agreement has been reached, ask the creditor to detail the terms of the settlement in a Letter of Agreement which you will keep on file. Do not repay any monies until this letter is received; this is your legal proof of the settlement agreement.

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One Response to Struggling with Debt – Debt Settlement and Negotiation

  1. David Bar says:

    Very nice article.

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