Categories: Get Out of Debt

Handling a Debt Negotiation

When you’re deep in debt, it may seem like there’s no way out. Fortunately, there are options. Just because you owe a certain amount doesn’t mean that that is what you’ll have to pay. Through processes like debt negotiation, you actually may be able to work out a better payment plan and pay less than you were originally required. Here are some of the things you’ll want to bear in mind.

WITH DEBT NEGOTIATION, IT’S BETTER TO DEAL WITH THE CREDITORS RATHER THAN COLLECTORS

One of the first steps to make this matter simpler is to talk with the creditor. Collection agencies often have to get approval anyway, so cut out the middle man. Explain to the creditor

  • What you can afford
  • What your situation is
  • What your other debts are

Remember that lawsuits are expensive for them too, so settlement is better than nothing. But do make sure to tell the truth.

Know What Your Debt Is

You must make sure you know what kind of debt you have. Secured creditors have the ability to take the property that they have an interest in through the debt. Unsecured creditors, the typical credit card company, for instance, is not able to come through and take back the property. Unsecured debt can generally be discharged through bankruptcy.

Understand What’s Legal

The Fair Debt Collection Practices Act provides key protections for consumers. No matter how intimidating the debt collector may seem, certain activities are illegal. In particularly, remember that the Fair Debt Collection Practices prohibits

  • Contacting you after you have asked them not to contact you
  • Contacting you before 8:00 am or 9:00 pm (unless you say it’s all right)
  • Contact friends and family members to get you to pay (unless they are cosigners on the loan)
  • Fail to contact you in writing of your right to dispute
  • Threaten you with illegal action including bodily harm or financial ruin
  • Threaten you with more loss than you will actually receive
  • Claim to be a secured creditor when they aren’t

Consider Getting a Professional

Handling a debt negotiation can be a stressful process. It can be helpful to have another person, particularly a professional, on hand to help you ensure you’re getting a good settlement and the best terms possible for someone in your situation. Creditors and collectors aren’t supposed to make threats or illegal claims, but some of them do. If you are easily flustered or have a hard time asking the appropriate questions, you will certainly want someone there to help you.

Be cautious about who you contact though. CBS News reports that some debt negotiation businesses have no qualifications in the business and will not even provide you with a settlement, even though they will charge you. Always research the business’s track record. Working with an attorney can be beneficial as there are other ramifications that you might not be aware of. If the debt you settle or forgiven for is more than $600, you’ll still have to pay income taxes on it and report it.

Debt negotiation can help you get back into the green. But it can be stressful. Deal with the creditor rather than the collection agency. Be sure you know what your debt is because that alters what they can do. Understand what’s legal in collection practices.


If all of this is too complicated, then consider working with a professional like the Van Horn Law Group can help you get out of the mess.

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Published by
Chad Van Horn

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