How to Use Negotiation as a Debt Relief Method
If you owe $5,000, $10,000 or more in unsecured personal debt, such as credit cards, you may find it impossible to keep up with your monthly payments. As a result, you could be tempted to declare personal bankruptcy.
Unfortunately, back in 2005, the US Congress made it a lot harder for consumers to file for personal bankruptcy, as not all debt is automatically discharged in a bankruptcy ruling. That said, you do have some leverage when it comes to paying your bills: negotiation as a form of debt relief.
With this process, you may be able to have your debt partially reduced and/or your interest rate reduced in order to make it easier for you to pay off your financial obligation. It’s just going to take a little effort on your part… a few phone calls.
Is debt negotiation right for you? Will it give you the relief you need? Please keep reading as we’ll examine this increasingly popular way to reduce debt levels.
Should You Avoid Debt Relief Companies that Negotiate on Your Behalf?
As you are probably already aware of, there are companies whose sole business is to act as debt negotiators on your behalf. And quite frankly, this is a bad idea for one big reason: you’ll be charged fees for the privilege of having them do something that you can probably do yourself.
There are some decent firms that can really help and charge you fare prices. Curadebt is one of those companies. And National Debt Relief is another. They are very recognizable debt relief firms within the industry.
Aside from Curadebt and National debt relief, there aren’t many other firms out there that can provide this type of service earnestly.
However, this is something you could do yourself. And it doesn’t take much effort to pull it off.
Yes, if you owe $5,500 to Visa, $6,400 to American Express and another $6,900 to Master Card and you have tried your hardest to pay off your debt, you can contact each lender and make the following statement:
“I owe “x amount” and I simply cannot keep up with my payments.”
Politely, you mention that you are considering personal bankruptcy but would prefer not to take that route. Instead, you mention that you fully intend to honor your debt obligation, but you would like some help from them in the form of either reducing or eliminating your interest payments or forgiving some of your debt.
Your Offer, Their Response
Why would a lender agree to such a bold request? Well, for two reasons:
1. Your debt to them is unsecured. This means there isn’t a lien on property such as your home, car or other personal assets that might be seized to cover what you owe.
2. If you file for personal bankruptcy they get absolutely nothing. And that’s a scenario they will try to avoid at all costs. Yes, bankruptcy damages your credit and remains on your credit record for up to 10 years, but likely your credit score has already been hit hard.
So, if you offer a convincing explanation you could end up with new debt agreements and be on your way to satisfying your obligations with some help from your debtors.
By the way, debt negotiators can do the same thing. The difference here is that they’ll charge you for the work you can and should do yourself. So don’t be intimidated by the idea of having to talk to and negotiate with your creditors.
Thousands of Americans do it every year with a good degree of success.
Restoring Your Credit After Debt Negotiation
In fact, if you do the work yourself you stand a better chance of preserving your credit standing. How can you do that? By requesting your creditor not place negative information in your credit file.
Likely, your request will be honored as all they want is to make certain that you satisfy your debt or at least a portion of it. That’s better than a total loss, what takes place under bankruptcy. Creditors would prefer to give you some method of debt relief instead of them getting nothing in return.
So, as you can see, you do have some leverage you can use to try and get your creditors to work with you. Negotiating with creditors is something most people ignore themselves, but it can potentially save them a lot of money and interest charges.
Many will outsource this process to one of the negotiation companies and this will cost them a good amount of money over the long haul.
Remember, it just takes a few phone calls and some patience. That doesn’t cost you a dime. It’s better than giving 30% of your potential savings to a third-party company when you really don’t have to.