Do you feel as if you were sitting in a covered wagon and your creditors were firing flaming arrows at you? Being seriously in debt can feel like this or even worse. You may be getting nasty phone calls from your credit card companies or even from debt collectors. Trust me when I say that once you fall into the clutches of a debt collector, your life is going to be miserable. Most debt collectors get paid on commission – that is they get a percentage of what they can collect. This means their only objective is to transfer money from your pocket to theirs by whatever means necessary.
If you’re six months behind
If you’ve been unable to make even the minimum payments on your credit cards for the past six months, you may be able to negotiate your debts. This is a strategy called debt settlement. The way it works is that you contact each of your creditors and offer to negotiate or settle your debts. At least initially you should offer to settle each debt for maybe 40% of what you owe. You will need to be a good salesperson in that you will need to sell your creditors on the idea that they will either settle with you or you will file for bankruptcy, in which case they would get nothing.
You basically have to be a man or woman of steel to make this work because you will likely continue to get calls and harassing collection letters during the negotiation process. A creditor may even garnish your wages. And one disadvantage of debt settlement that is often overlooked is that you may have to pay income tax on what you saved through settlement. This is because your creditor could send a 100–C form to the IRS at the end of the year and you would be required to report that amount as income.
It’s a gamble
There’s nothing that says that your creditors must accept your debt settlement offers. You have to be a very good negotiator as some or maybe all of your creditors could refuse to negotiate with you. In this event, you will end up and were shaken when you started because of all those months when you are not making payments.
It will affect your credit rating
One of the biggest downsides of debt negotiation or debt settlement is that it will have a negative effect on your credit rating. This is because of all of those months that you were not making payments on your unsecured debts. It’s just not possible to skip those payments without it negatively impacting your credit score
Let the pros do it
If you don’t feel that you have nerves of steel or are not a skilled negotiator, you can let the pros do it. We have handled debt settlement for thousands of families and have helped them become debt free in 24 to 48 months.
The way we work is that we contact your creditors and do the debt negotiations for you. Because our debt counselors have excellent relationships with the credit card companies and because they are very skilled negotiators, they can usually get balances reduced by thousands of dollars. While we are negotiating with your creditors, you send us a payment each month, which we deposit in an FDIC-insured trust account.
When your creditors agree
Once your creditors agree to our settlement offers, this money is then used to pay off your debts. In turn, you will have an affordable payment plan that will help you become debt free.
Debt negotiation can be an excellent way to become debt free but it’s usually better when you take a hands-off approach and let us do it for you.
I am an associate at National Debt Relief, which is a Debt Consolidation Company that has helped thousands of Americans facing credit card debt problems. We help with debt settlement, debt management, and other debt related financial crisis' facing consum