Negotiating Debt Settlement with Original Creditors

by davescunningplan

The original creditor is the company where you opened the account. If your account is 90-120 days overdue, you are probably dealing with them. If your account is over 120 days in default, you may likely be dealing with a collection agency. The laws and rules are different for them.

First and foremost, if you know that you are not going to be able to pay your bills, call your creditor. Most will work out hardship terms with you for a certain period of time. This may include a reduction of interest, waiving late fees, etc and not reporting it as past due. I cannot stress enough that it is best to call as soon as possible.

If you are like me, and chose to bury your head in the sand, you will be facing an uphill battle in getting a settlement and saving some little bit of your credit score but it can be done without hiring and paying a debt settlement company.

Steps to Negotiating a Debt Settlement

1. Gather all the documentation, amounts due, credit report, penalties and interest for all of the debts.

2. Know the total amount you will be able to pay to settle each debt.

3. Call the creditor and ask to speak with someone who has the authority to make settlement arrangements and change the reporting to the credit bureaus.

4. Take a deep breath and unemotionally explain your situation to the creditor. Explain why you have not been able to make your payments and what your plan is to settle the debt. When you make your offer, remember that if they sell the debt to a collection agency, they will be making pennies on the dollar. Make an offer to settle the debt and ask that they report it as paid as agreed, closed by consumer. Be prepared that the best you may be able to do is to have it reported as settled as many of the credit card companies have flat refused to report it as paid as agreed. In reality, it is unlikely that you will have success at getting it marked paid as agreed. The options below are listed in order of preference to you:

• Paid (with no negatives such as charge off, repossession, late notations)
• Settled (better than Paid – Charge Off, or Paid- Repossession)
• Paid – Charge Off, Paid – Collection, Paid – __ days late

5. If they will not agree, thank them for their time and hang up. Try again a few days later. I have found that the phone reps are either rude and unwilling to help or very helpful and nice. If they are rude, wait and talk to someone else. If they refuse to negotiate at all, ask to speak with a supervisor. Explain what you are offering and ask for the agreement in writing. Make notes about who you spoke with and what they agreed or did not agree to do.

6. If you have not luck negotiating on the phone, send them a letter detailing the reasons why you are in default, a listing of the total debts you owe, a copy of your credit report showing that you are in default on more than just their account, your monthly budget showing that there is not enough income to make payments and your offer to settle the debt.

7. Get the agreement in writing before you pay a penny. If you don’t get it in writing you are trusting that they will do what they say. Most won’t and you have no legal recourse unless you have it in writing..

8. Do not send postdated checks. There have been far too many instances of creditors cashing those post dated checks as soon as they receive them. The bank will pay them and you have no legal recourse.

9. Once you have the settlement amount, wait to get the settlement agreement in writing from the creditor. This letter will protect you from any future claims from this creditor. There have been instances where agreements have been reached, payment made and then the company comes back for the balance due. If you don’t have it in writing, you might as well expect to pay it.

10. Once you have the settlement letter in hand, pay the agreed upon amount by money order or Cashier’s Check promptly as agreed.

11. Check credit report in 60-90 days to verify that it has been updated as agreed. You need to be sure that this information has been changed. If not, send a copy of the agreement letter to them and request in writing that it be changed per the agreement.

If you are dealing with a collection agency or debt collector, the rules and the laws change. You have much more legal protection from a collection agency than you have from the original creditor. I will be writing an article dealing specifically with negotiating with a collection agency in the next few days.

What has your experience been with negotiating with creditors? Were you successful? What companies have you been successful in negotiating? I’d love to hear from you.

For more information on debt settlement, you can visit the following links

The Money Blog Negotiating Tips to Get Negative Remarks Removed Off Your Credit Report

Military Money: You Can Negotiate With Creditors

Remortgage Market Debt Negotiation to Avoid Insolvency, Bankruptcy, and IVA’s

The book that has helped me in negotiating my debt settlements is called Good Credit is Sexy and it can be purchased here. Order the Book!

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Tags: debt settlement