If you are facing debt collection, you have probably thought about how to settle debt. Speaking with creditors or debt collectors about unpaid debt can be embarrassing, intimidating and frustrating all at the same time. For many, negotiating a debt settlement is fraught with uncertainty. Saying or doing the wrong thing is usually worse than doing nothing at all. To avoid the unseen pitfalls of debt collection, and save money in the process, read the following tips on debt settlement:
1. Don’t Make Payment Without A Written Agreement. The primary job of a debt collector is to collect money. Collecting money does not require a written agreement or a full settlement. With no agreement, payments to the debt collector won’t stop collection and will not prevent a lawsuit from being filed. In fact, your willingness and ability to make payment without an agreement is likely to encourage more aggressive collection attempts. Also, did you consider the consequences of making a payment? Is the debt still enforceable under the applicable limitations period? If not, you may be reviving the debt by making a payment. Did you pay by card or check? If so, the collector now has your banking information if they get a judgment.
2. Having Debt Does Not Make You An Immoral Loser. Too many people are embarrassed by their plight, and try and convince debt collectors that they are not bad people and that they intend to pay their debt. Others become indignant and brag that they make plenty of money, to avoid being judged poorly. But, by professing a sense of moral obligation, and/or financial ability to pay the debt, you have implied a willingness to pay back the entire debt claimed by the debt collector. You might feel a little better, but you will be in no place to begin a settlement negotiation. It’s business, don’t make it personal.
3. Everyone Takes A Risk In Business. When you got your loan, credit card or equity line, the bank accepted the risk that you might not re-pay all or a portion of the money. They managed that risk by adjusting the principal and interest charged to you; and then passed most of the risk to investors through a process called “securitization.” But, what about you? You also accepted the risk that your circumstances could change and prevent you from being able to pay back the loan. Your reputation, credit score, collateral, and peace of mind were all risked in exchange for money. Settling a debt is a way for both sides to compromise, cut their losses, and move on.
4. Take Each Debt One At A Time. Deciding to settle unpaid debt can be an emotional decision as well as a logical decision. People feel trapped by debt and just want it all gone. This mindset causes many people to file an unnecessary bankruptcy, only to find it far more devastating. Slow down. Start with the debts that have the highest priority. A lawsuit, garnishment, or lien filing can quickly make one debt more important than the rest. If there are no lawsuits, take them as they come. Break the debt down into “bite size chunks.”
5. Don’t Turn Unsecured Debt Into Secured Debt. In a rush to be free from debt collectors, many debtors jump from the frying pan straight into the fire. “Unsecured debt” means that you did not have to provide collateral to insure repayment of the loan. “Secured debt” means they can take your property, and its usually your home, if you don’t pay. If your financial circumstances have taken a turn for the worse, don’t risk your home or other valuable property to pay off credit cards.
6. Budget for Settlement. Calculate the total amount of your unpaid debt and then cut that figure in half. Now, divide that number by 36 months. Can you afford to save this amount every month and not touch it? Still too high? Increase the number of months until you get to a comfortable payment. Why pay a debt consolidation company to hold on to your money? My usual recommendation is to open an account at a different bank, with no debit card or checkbook, depriving you of the ability to access the money quickly. For those with sufficient knowledge and experience, it can be a good idea to open an online trading account to boost savings, in addition to placing the funds outside your reach for frivolous or impulsive purchases.
7. Control The Negotiation. So, you have budgeted and saved funds that can be used to settle debt and are ready to make an offer. In writing, send an offer, or a choice of offers, to the debt collector. Inform the debt collector that if no response is received within a set period of time, that the offer will expire. Try to stay away from phone negotiations. Ask for an email address, so that all communications are in writing.
8. Make The Debt Collector Your Ally. In the world of consumer debt collection, you normally negotiate with collection agents and attorneys. They did not lend you any money. They are just messengers. They get paid a percentage of what they can collect. You need to provide them with information that will justify a reduction of the debt, or an extension of the repayment period. Help them to help you. At the end of the day, they are just trying to make a living like everybody else.
9. Remove Personal Information. Many debt collectors want proof of your financial hardship. Remember that this information can be used to locate assets and provide information that can later be used against you if the debt collector obtains a money judgment. Make sure to cross through social security numbers, bank names and account numbers, employer names and addresses, etc., when providing financial information. If you think it will help, it is o.k. to let the creditor or debt collector know how much you make, and how much, or how little, you have. But, don’t let them know where you make your money or keep your money if they don’t already know.
10. Know When To Hire A Lawyer. For a credit account or loan under $3,500, it may not be worth the money to hire a lawyer. For larger debts, especially where lawsuits have been filed, or will be filed, hiring the right lawyer is the single most important factor in settling your debt. Carlisle Law Firm specializes in defending consumer debtors and negotiating favorable debt settlements. For debt settlements, we only collect a fee if we are able to negotiate a mutually agreeable settlement. Even better, our fees are based on how much money we save by reducing your debt. Our clients never end up paying more than they owe. We only get paid for the result.
Carlisle Law Firm does not file bankruptcies and we are not a debt consolidation company. We provide an alternative method of debt relief. We represent people who are not candidates for bankruptcy, and don’t want to pay thousands of dollars to a debt consolidation company, only to end up with lawsuits and judgments those companies are powerless to defend . If you have larger or more problematic debts that you want settled, and you want to save as much money as possible, we will review your information and documents at no charge. Once we make an assessment of your situation, we will let you know how we can be of help. Start your path to becoming debt free today. Documents and information can be submitted by email as shown below: