Some businesses offers a debt settlement as an option, if they assumed that they can never recuperate what you are indebted to pay, or whether the ongoing collections becomes inefficient; or if they think that a debtor can make progress, by settling the debt with the collection agency.
If you decide to take a debt settlement as a solution to your payment, get all the written terms established, and read it carefully before sending money. You need to be on your guard if you have been offered a settlement. You are negotiating with people who knows everything about settlement, and whatever mistakes you make, will be to their advantage – and what you owe will still be collected. Learn more about the Do’s & Don’ts for collection agencies here: http://howtodeletedebt.com/techniques After sending the money you will have no power with the debt collector and anything that is not written in the agreement, in all likelihood, will not be honored.
If you are caught under a mound of debt, you may want to work with creditors (or debt collectors) to make things more simpler and manageable; this is usually called a debt negotiation or debt settlement. For example, you may be want to settle a debt by getting a creditor to take a lower amount of pay, than the amount that was originally owed. Or maybe you can negotiate to get lower payments, permanently or temporarily.
Negotiating with the creditors is a good way to decrease your debt load. To find out how to get some relief from the irritating calls from creditors, go to HowToDeleteDebt.com/Techniques/Methods Make sure you avoid the common pitfalls. Knowing what NOT to do, can dramatically increase the chance of a successful negotiation.
Here are some common mistakes that people usually make in dealing with their creditors during their debt settlement agreements:
1) Not knowing if your debt is secured or unsecured. Two types of debt are secured and unsecured:
- Unsecured Creditors – These types allows the debtor to acquire goods on credit (without the debtor providing any collateral or security). If the debtors cannot pay the debt, the creditor can’t go to the debtor’s house and take back the products.
- Secured creditors – These kinds of creditor’s do have interest in some assets. If you do not pay your debt, this creditor is allowed to take back the properties.
2) Not knowing the strength of the creditors – secured creditors have a strong position, because they can reclaim valued properties, while unsecured creditors have other points of strength:
- They can call or send you a letter. Even during the time of the negotiation procedure, the creditor may continue to call & demand payment; so the borrower must stay resilient until all discussions are settled.
- They can sue. The creditors can charge the debtors for a breach of contract. Some will begin proceedings even when the consultations are pending.
- Garnish wages. if a creditor wins a complaint against you. They will garnish your wages. To learn how to reverse this, go to http://howtodeletedebt.com/shortcuts/debt-help
- Levy bank accounts – if the creditors wins any lawsuit against you, they can get all the money in your bank accounts. Make your balances in your bank account as low as possible, and discontinue making direct deposits to protect your funds.
3) Not knowing the weak point of your creditor:
- It is costly for the creditors to sue. Litigation is the creditor’s last option, because of the money and time needed for it. A lawsuit does not give assurance that a creditor can recover money.
- Unsecured creditors can only repossess a property, in very rare situations.
- Unsecured creditors have much to lose. If the debtor can’t pay for the debts, instead of filing for a bankruptcy protection, creditors will get nothing in return.
4) Use of the wrong money:
- Money is king, as far as debt negotiations are concerned. If a debtor can transfer capital immediately, the creditors can quickly settle for a lower amount; however, this should be your last resort.
5) Use equally valued asset(s) you already have, to pay an unsecured debt.
- For example, one can use their retirement funds to pay a debt. The debtor may pay the withdrawal tax of the funds or pay back the funds, if it is taken as loan.
6) Take notes at the time of negotiations
- Most of the creditors gives very conflicting information. The debtor needs to take down the very details regarding the amount of the debt, the people whom they negotiated with, as well as, other important details.
7) Debt consolidation company.
- These kinds of businesses offer a substantial monthly fee, there are no assurance that the debts will be settled.
8) Don’t overlook the “big picture”.
- Debtors should look and examine all their debts, and the real possibility of being able to pay the debt. A lot of the debtors end up filing for bankruptcy protection, even when they already paid thousands in settled debts!
A debtor who fully understands these concepts, before making a call to a creditor for a debt negotiation, stand to have a better financial outcome, should they engage in negotiations to relieve debt problems.