FAQ on Debt Negotiation


Will debt negotiation solve my debt problems?

– It depends on whether you have a lump sum to negotiate with, since creditors are most interested in simply resolving the debt rather than offering to let you pay les per month at no interest.

If I do have a lump sum, how do I proceed?

– First, look at your number of creditors.  If there are three, for example, figure out a proportion of what is available for each and offer it to them.

What if I get an agreement with a creditor?

– Get it in writing!  Do not send money until you have the specifics in writing. Otherwise, a creditor will often thank you for sending a ‘payment’ and if you argue it was a pay off amount they’ll say that employee didn’t have authority or no longer works there. Also, you want to be able to prove in the future that this debt was paid in case the debt is sold by error to a collection agency.  Also, be aware that any agreement will likely mean the creditor will send a notice to the IRS as to how much they are forgiving. That amount is considered income, so it’s something to be aware of at tax time because it will appear you have more income than usual and that might affect your taxes.

What if a Creditor won’t talk with me?

– If they won’t talk to you that may be because you’re current on your payments, so they prefer to bet that you’ll continue to pay them or it may be because they only listen to attorneys who might file a bankruptcy.  Either way, it might be a good time to schedule a consult with an attorney to look at your options; many offer a free consult but check in advance.

If I don’t have a lump sum to negotiate, what do I do?

– Most likely, you need to look at bankruptcy if you cannot keep up on your debt payments.  Do not liquidate your retirement accounts or borrow from them until you have had a consult with an attorney since the worst thing would be to lose retirement that would have been saved in Chapter 7 and not succeed in getting rid of your debt.

Should I try working with a consumer credit counselling group?

– It depends on who they work for. Most of them are primarily funded by credit card companies and banks so they’re not really working on your behalf even if they do charge you quite a bit.  Also, they tend to require their money up front so even if you have given them some of the money they asked for to negotiate your debts, most do not make any deals until they have the full amount.

What if I don’t agree on the amount of the debt?

– Before agreeing to anything, make sure there is agreement as to the correct amount of the debt. You may need to supply proof of payments but that is better than agreeing to a settlement for an amount than is incorrect. If the creditor is not willing to discuss the amount due, do not ignore the debt (a common error) since the creditor will simply pursue collections and sue you.


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