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Can You Negotiate Your Own Debt Settlement?

Scissors cutting $100 billFamilies who find themselves deeply in debt want just one thing–debt relief. And for good reason. Being deeply in debt can have a very bad effect on your entire life. You can find yourself tossing and turning all night wondering how you’re ever going to get out of debt. It can hurt your productivity at work or even end up tearing apart your family.

The “doomsday” solution

If worse comes to worse, you could file for bankruptcy. However, this is kind of the “nuclear option” in that the bankruptcy will stay in your credit report and affect your credit score for as long as ten years. You would have a really hard time getting any new credit during those ten years, meaning that it could be very difficult for you to buy a house or a car or even rent an apartment.

Debt settlement

A better alternative to bankruptcy is a strategy called debt settlement. Here’s how it works. First, you make sure you are a good candidate for settlement – you need to have the ability to save money into a settlement fund – many people use the money they would normally pay to their creditors to fund this account. In six months’ time you should have a decent chunk of change available to start making settlement offers. It takes a strong constitution to get through those months because you’ll undoubtedly be harassed by your lenders or even by collection agencies.

Next, you’ll contact your creditors somewhere around month five or six and offer to settle your debts. Your goal is to get your creditors to agree to reduce your debts to a fraction of what you owe. The way you do this is by telling them that you have a certain amount of cash available and will pay the company immediately if it agrees to settle your debt for that amount. Of course, this means you have to have the cash available to do pay off the settlement.

Why creditors will agree

The reason why most creditors will agree to settling your debts for less than full balance is because it is better than having you file for bankruptcy, in which case they get zero cents on the dollar. It’s actually even better for most creditors than selling your debt to a collection agency.

Starting the process

One of the most important parts of debt settlement is to make sure that you have everything in writing. You should start the process by requesting all of your credit reports from the three credit reporting bureaus, Experian®, TransUnion® and Equifax®. You can get all three of them with one request on the site www.annualcreditreport.com. Next, make a list of all those companies where you have unsecured debts such as credit card debt. You will need to call each one, including any collection agencies, and make your settlement offer. Your first offer may not be accepted. In fact, the settlement process may drag on for several months. Some of your creditors and collection agencies may continue to harass you during this period of time or even threaten to sue you. However, most credit card companies will not actually file suit because taking you to court requires too much time and money.

Get it all in writing

You will probably get different settlements with different creditors. In other words, some might agree to settle for a very low amount of what you owe while others might not budge beyond a certain percentage. When a creditor does agree to settle your debt, be sure to get all the relevant information in writing. This should include how much you’ve agreed to pay, how you will make your lump sum payment (with a cashier’s check, by electronic bank transfer, etc.), and by what date you will make the payment. It is also very important to get a document from each creditor that your debt is marked “paid in full” or other similar words.

Professional debt settlement

If debt settlement appeals to you but you’re not sure you have the iron constitution necessary to handle it yourself, let us here at National Debt Relief handle it for you. Our debt counselors have years of experience negotiating debt settlements that could save you thousands of dollars. Fill out our free debt analysis form and learn why we might be the best option.

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