Getting Ready for Debt Negotiations

1.Decrease your expenses – The money to pay for your debts has to come from somewhere. Gather all your bills and figure out what you can cut, then have a look at your living situation and habits to see what else can be harvested for a bit of extra cash. The more you can cut, the quicker you can repay your debts.

2. Make a budget – You need to know how much you can afford to spare, and making a budget has the fortunate side effect of getting all your relevant bills into one place. For this budget, just worry about the bills and expenses which keep you going, and the debts which haven’t yet been sent to collections. Also, make room in your budget for a $1,000 emergency fund, if you don’t already have one.

3. Get your ducks in a row – If you plan to negotiate with a creditor on a debt which hasn’t been sent to collections, keep making your payments on time and get that emergency fund ready before negotiating. Otherwise, just throw everything you can into that emergency fund.

The Right Mindset, the Right Solution

4. Know your rights – A collection agency is less likely to pull a fast one if you know your rights. The Federal Trade Commission has a brochure available online on the limitations of collections agencies. The National Consumer Law Center also has a free brochure available – call (617) 542-9595 and ask for a copy of “What You Should Know About Debt Collection.” Some laws also vary from state to state, so to find out about yours call your local Attorney General.
5. How creditors tick – Creditors which haven’t sent your debt to a collections agency are often willing to settle on a debt for as little as 70% of the amount owed. However, you have a better chance of getting a settlement that low if you have been making your payments on time in the last few months. The only black mark from these accounts are late payments. You can ask to have these removed to “better reflect your current ability to pay,” but it isn’t likely for that to happen.
6. How collection agencies work – Collection agencies often buy debts for pennies on the dollar, so you may be able to negotiate your debt down to 40 or 50% of its original value. You have a better chance of successful negotiations if you call prepared with the facts instead of looking for a sympathy train or losing your cool. Accounts which have gone to collections stay on your credit for 7 years – unless you ask them to remove it once the account is paid. Your goal is to have the account removed, or at least listed as paid in full.
7. What they want to know – In any case, they’re not interested in why you owe money or what you can’t do. Familiarize yourself with everything you can do before picking up the phone, and try not to let anything else come out of your mouth.
8. Be firm in your goal – Using your budget, figure out how much you can spare and offer less. Ask that negative marks be removed from your credit report, or at the very least that your account become listed as “paid in full” instead of “paid in settlement.” You can even put a disclaimer on your checks stating “Cashing this check constitutes payment in full.”

Resolving Your Debts

9. Keep meticulous records – Send all written correspondence via certified mail and file a copy of each letter. Make a note of who called, the name of the representative, the date, and time whenever a creditor or collection agency gets in touch. Also, you absolutely must get any agreements in writing before you make any payments.

10. Record the calls too – Even if you don’t intend to use the recording for any reason, being recorded could keep the other side in line. Some states allow recording without consent or knowledge, but even if that isn’t the case in your state, if they keep talking after you’ve told them about the recording, it is considered implied consent.
11. Definitely don’t – Do not make any payments until you have the plan in writing. You can send an outline of the plan via certified mail and ask for confirmation, if you would like to make it easier on them. Also, do not give them your bank account, credit card information, or post-date a check to them.
12. One last appeal – If at first you’re not successful, just try again another time. Perhaps the best time is at the end of the month since commissions are typically based on their monthly performance. Worse come to worst, you can always speak with a supervisor.

Getting Ready for Debt Negotiations

The Right Mindset, the Right Solution

Resolving Your Debts

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