Becoming overwhelmed by debt is very stressful. Being harassed nonstop by debt collectors, constantly receiving late notices, and late fees adding to the debt create an unbearable situation for many, especially in today’s economy. Knowing how to negotiate with the creditors can be very helpful in relieving the stress as well as reaching the goal of becoming debt free.
Knowing Your Rights as a Debtor
A very important step in debt settlement negotiation is to know one’s rights. Just because you have fallen behind in your payments does not mean you have lost all of your human rights as well. While debt collectors would like you to believe that you have no rights and no options, this is not true. There are several tactics that one can use when negotiating with creditors to reach a settlement that is acceptable to both parties.
A few unknown facts about your rights as a debtor include the number of times in one day that a debt collection agency can contact you. They cannot call you constantly all day long. They are allowed one phone call per day. If you do not want them to telephone you, send them a letter stating that you will only negotiate with them in writing and stating that they are not to contact you by any other medium.
Debt collectors will try strong arm tactics such as threatening to take your home or your car or many other things. For an unsecured debt, they generally will be unsuccessful in these attempts and for most it is only a threat. Debt collectors have the ability to create a judgment against you personally, garnish your wages and/or your bank account and things such as this, but generally they will not be granted your home or your mode of transportation.
The Negotiation
When negotiating with a creditor, make it clear that you want to resolve the issue. Try not to sound as if you want it to just disappear because this is obviously not going to happen. Explain to the creditor that while you understand the importance of paying the bill, you currently need to negotiate different terms due to your financial situation. Try not to give them too much information, as the more personal information they obtain, the more avenues of contact they can gain.
Do not allow them to pressure you into a payment arrangement immediately. Giving out financial information or employment information over the phone can cause a totally different set of issues at a later date. Also, if they are given your financial information, they may try to freeze your bank account even though you have made other arrangements with them.
Always get it in writing. Once an agreement is reached, tell the creditor that you require the agreement in writing prior to making any payments. Once you have the agreement in writing, be sure to meet all of the payments. If you default on a payment agreement, you are not likely to get another chance at peacefully resolving the debt.
Special Agreements
While the ultimate goal of debt settlement negotiation is to help one become debt free, there are other things at stake. One’s credit score and bad marks on the credit report will cause one issues for a minimum of five years. Once a payment arrangement has been met, now it is time to work on fixing one’s credit score. Debt collectors have the ability to remove negative marks on your credit report. During your negotiation, let the creditor know that you want this negative mark removed from your credit report. If they won’t agree to remove it, at least negotiate having the account marked as paid in full rather than paid in settlement. Paid in full on a credit report looks far better than paid in debt settlement.
Do-it-Yourself Debt Settlement Negotiation
Contrary to popular belief, you do not need to use a debt management organization or a credit counselor to negotiate with your creditors. Anyone can negotiate a settlement. Knowing your rights, knowing how to handle the conflicting statements, and keeping accurate records can help one in negotiating a reasonable settlement. First, when negotiating know what your debt ratio is. You must know what you can afford to pay before agreeing to make payment arrangements. Second, remain calm during negotiation.
If you become emotional and argumentative, the debt collector will continue to pressure you until you agree just to get rid of them. Never give out personal information over the phone. Doing so will result in further problems at a later date. Tell the debt collector that everything needs to be put in writing prior to any payments being made. Do not let them pressure you into making a payment over the phone or anything of that nature. Once you have it in writing, the debt collector is forced to stick to the agreement as well.
