Negotiating with Creditors

Negotiating terms of repayment with your creditors can give you some breathing room with your payments, prevent or postpone legal action, or it may even reduce the total balance that you owe.

• Debt collectors sometimes agree to a payment plan, which can help you spread out repayment over a number of months. Usually these payments tend to be much larger than you would otherwise have to pay for a similar balance on consumer credit accounts.
• Debt collectors that are receiving payments normally delay legal action that would force repayment. It costs money to go to court, and they may be better off to simply collect the balance over an extended period of time than to pursue a judgment.
• Debt collectors may reduce the balance if you can negotiate a payoff. Debt collectors normally pay less than 25% of the balance to purchase your debt from a creditor. They can still earn tremendous profits if they agree to reduce the total payoff to 50-70% of the balance.

Negotiating with creditors is something you may be able to do on your own. You can generally save the most if you can negotiate a great settlement directly with a debt collector without having to pay a fee to an intermediary.

If you prefer to have a debt settlement company negotiate with your creditors on your behalf, then understand that there are heavy fees that can be owed for debt settlement services. Also, some debt settlement companies have negative ratings with the Better Business Bureau and may have legal action pending from the Attorneys General of individual states.

Some debt settlement companies exaggerate claims on what they can do for you. Some infer that you will be represented by an attorney when that may not be the case. If you feel you need legal advice during the process, then you may wish to consult an attorney that negotiates settlements on debt.