Debt settlement is the preferred option of debtors but sometimes, they approach it with the wrong assumptions. These give them a distorted impression of what this process is really all about.
While it is true that this debt relief method will aim to negotiate for a lower outstanding balance on your debt, waiving off late payment penalties and other charges, and a lower interest rate, it will not be served to you on a silver platter.
Do not get us wrong. This is still one of the best and legitimate options to get rid of debt and it really works for some people. However, we need to paint the right picture for you so you will be relieved of any false assumptions about your expectations of this program.
The Truth About Debt Settlement
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Here are important reminders that you should keep in mind when you enroll in a debt settlement program.
Creditors will not always say yes. This is heartbreaking for some people but this is the truth. The chances of your creditor saying NO the first time we approach them is possible. But this is why you hired us in the first place. We will not give up. A successful debt negotiation will ride on the sincerity of your financial capabilities, our expertise and our working relationship with the creditor.
Debt Settlement is not a Right. It is true that the government encourages creditors to agree to debt settlement but only when their financial capabilities dictate that they cannot afford other modes of payment. The law requires that they be open to debt settlement but they are not obliged to agree or accept your terms. It is not a right that debtors have. Although, you do have the right to apply for debt settlement but that is as far as it goes. All the laws put out by the government is only there to protect you from harassment and abusive practices. It will not relieve you of your debt and you should still look for favor in the eyes of your creditor.
Debt Settlement is not the Favored option of Creditors. There are a lot of debt relief options and sometimes, creditors will prefer them. This decision will be based on your financial capabilities – which will be in discussion and intense scrutiny while the debt settlement negotiation is going on. If they think that you are capable of paying off your debts entirely, they may agree to lower the interest rate but still maintain the outstanding balance. They can also offer to extend your payment period to lower the monthly amount that you have to pay.
Things To Do When Settling Debts
While all of the above statements are true, you have to remember that you have what your creditors want – money. Here are some tips to succeed in debt settlement – even after the creditor said NO the first time.
1. Put everything down in writing. You are not the only debtor that your creditor is dealing with so best to have a record of past correspondences. Keep a copy of your letters and the response of your creditors. Track the conversations between the debt negotiator and the creditor and make sure they send you progress updates.
2. If you conversed over the phone, get the name and designation of the person/s you spoke with. Record the time and date of the call and what you discussed. Write down everything in a letter and send that to the creditor. Have them do the same so you know there is no misunderstanding.
3. Be patient. Sometimes, the longer the debt has remained unsettled, the more willing the creditor is to settle. But then again, if they know that you are financially capable and you are just holding back on your payments to force them into settling, you might end up with a lawsuit. Be sure you are really financially incapable of paying off your original debts.
4. Make sure the you and the creditors agree to the same terms and that a proposal is in written form. Otherwise, do not write that check just yet. It is important to ensure that you understood the new terms of the agreement correctly to avoid problems in the future.