Do It Yourself Debt Settlement: How To Negotiate With Your Creditors

In my last post I talked about how to set up a debt elimination plan but sometimes doing this just isn’t going to help if you have more debt than income in a month.  If this is your situation then maybe you ought to consider this free do it yourself debt settlement solution.

However, before I begin I must stress one important point.  You should only consider this option if setting your own debt plan up doesn’t work.  What I mean is if you can’t scrounge up enough money every month to pay off all of your normal bills then you may want to give this option a shot.

This article is also going to be broken up into a 2 part series, this week we are going to talk about how to negotiate with your creditors, next week I’m going to show you how to negotiate with collection agencies.  Contacting either one requires different tactics to make them work.

Alright, so here we go.

First Things First

First we need calculate how much debt we have and only certain debts will work.  Unsecured debts will be your best bet to negotiate a deal with since they are not back by any asset.  Secured debts like your mortgage will have no chance at all to be negotiated since it is back by an asset, your home.  This is why I would consider this more of a do it yourself credit card debt settlement plan, since they are not a secured debt.

Now that we know how much unsecured debt we have you may also want to look into getting your credit report.  This will show you if any of your accounts have been turned over to your creditors.  If you’re not sure check your credit reports first.

How To Negotiate With Your Creditors

• Write Up A Budget. Having a budget in place will allow you to show creditors that you are more serious about solving your debt issues.  When you call them you will be able to fax it to them or mail it to show them your exact situation.

• Align Your Debts From Lowest To Highest. When you go to negotiate your debts with your creditors you should start with debt that has the lowest payoff amount.  This will allow you to pick momentum much faster since you will be able to free up cash flow right away.

• Create A Plan. Next, you need to create a plan so you can negotiate with your creditors.  There are three ways you can do this, the first way I suggest is a onetime pay off.  If you have cash in hand right now you may be able to negotiate up to 50% to 60% off.  If this isn’t an option you may be able to do a short term payoff.  This is where you negotiate a deal that you will be able to pay them back in 3 to 6 months, however you may likely have to pay back in full if you can’t come up with the cash up front.  Then there is a long term payoff plan which you can pay back your creditors in 1 to 5 years however like the last option you may have to pay it back in full but at least they may extend the payoff periods for you.

• Call Your Creditors. At this point you should have a budget and a plan written down and in place so when you go to call your first creditor you are ready to go.  When you go to make an offer remember to be polite with them.  Getting angry and upset will only may things worse.   Also remember to give them the benefits of your plan and let them know you are willing to fax them or send them a copy of your budget and plan.  Also explain your situation with them and let them know you have made the same offers with other creditors.  Don’t give your creditors your bank account info or anything they shouldn’t need. Finally, know that it is up to them to accept the offer.

• Get An Agreement In Writing. If your plan does get accepted make sure they send you the agreement in writing before you make any payments what so ever.  If you don’t do this it makes it real easy for creditors to go back on their word and you will have no proof of it at all.  I also suggest you get the full name of the representative you talk to and their phone number since you may be calling them back.  You may also want to look into recording your call with them as well, not all states allow this but it’s defiantly will help if they go back on their word.  Finally, any form of communication they send you should be kept even after the debt is paid.

• How To Request Your Payoff? Once your debt is paid off you need to consider how this will reflect on your credit report.  If they’re reported the wrong way they can have a damaging effect to your credit history.  If done right they can improve your credit.  If your debt is paid off you do not want to have them report it as, “Paid as Agreed,” or “Settled,” since this will have a negative effect, you want them to be reported as,” Paid in Full,” or, ” Pay for Delete.”  This will give you better marks on your credit score.  Finally, make sure you get this writing otherwise you may not get it at all.

• Rinse And Repeat. Once the first debt is paid in full rinse and repeat, call the creditor with the next highest amount of debt and start all over.  I should also mention some creditors will not want to budge and inch if this is the case call them back tomorrow.   The chances of you likely reaching the same person you talked to yesterday are slim to none.  Credit card companies hire hundreds if not thousands of account representatives all over the world and what doesn’t work today might work tomorrow.  You just have to be persistent with the process.

Questions???

Finally, as you’re working through this do it yourself debt settlement guide for negotiating with your creditors feel free to ask questions in the comment area.  It can be tough when you’re just starting out; I know how this feels but if we work together you can make it happen.

This article was featured on The Carnival Of Personal Finance by Being Frugal.

Tagged as: do it yourself credit card debt settlement, do it yourself debt settlement, do it yourself debt settlement guide, free do it yourself debt settlement, negotiate with creditors