Debt Negotiation Begins with a Convincing Letter to your Collector |
By Wendy Clay on November 15, 2011
.jpg.aspx) When you’re in debt and the situation is only getting worse it can be overwhelming to imagine ever escaping your debt, but negotiating your debt may provide an escape from your circumstances if you have debt from credit cards, lines of credit, hospital bills, unsecured bank loans, or home mortgages.
The first step in debt negotiation is determining who owns your debt—your original creditor or a collection agency—as the answer to this will determine which steps you should take next. You can determine the owner of your debt simply by calling your original creditor. If your original creditor still has control of your debt this is wonderful as it will allow you to negotiate and begin payments again before it goes to collection. You can either begin negotiations during that initial phone call or decide to call again later after you have thought about what kind of deal you are willing to accept. Once you begin negotiating with your creditor, keep in mind that most settlements fall within the range of 35%-50% of the total debt and that you should avoid repayment plans that are spread out over more than six months as the interest you will accrue after that period will begin to negate the benefits of your settlement.
If your debt has been sold to a collection agency, the details of the negotiation change slightly. First, with collection agencies it is best to avoid over the phone negotiations when at all possible, but if you have no other option, be sure to get the physical address of the collection agency, as well as the agency’s name, direct line number, and fax number. Also take note of the day on which the conversation takes places, who you speak with, and the name of their supervisor as well before beginning negotiations. When settling with a collection agency, you want to settle for no more than 25% of your debt, because this is debt that has probably been purchased from your creditor for pennies on the dollar. Receiving 25% of your original debt will still give the collection agency a considerable profit.
Regardless of whether you are dealing with your original creditor or a collection agency, before you end your negotiations bring up the topic of your credit rating. With your original creditor you may only be able to have your debt listed as paid as agreed or settled, but collection agencies may be willing to have the entire debt removed from your credit history. Also, throughout the negotiation keep a record of all the terms of your agreement, and when dealing with a collection agency you send a copy of your records by registered mail for approval before making any payments.
The debt negotiation process can be a lot of work, but if you are persistent your hard work will pay off in the end as you find yourself on the road to a debt free life.
Sources:
Debt Negotiation in Southern California. Weintraub & Selth, 2011. Web. 17 Oct. 2011
<http://www.yourbankruptcylawyer.com/Bankruptcy-Alternatives/Debt-Negotiation.htm>.
Negotiating with Original Creditors. Credit Infocenter, 14 Mar. 2011. Web. 18 Oct. 2011
<http://www.creditinfocenter.com/debt/originalcreditor_debtsettlement.shtml>.
Settling Your Debts. Credit Infocenter, 23 June 2011. Web. 19 Oct. 2011
<http://www.creditinfocenter.com/debt/settle_debts.shtml>. |
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