Tips on Debt Settlement PDF Print E-mail
Written by Jessica Acosta   
Tuesday, 21 April 2009 12:42
If you are currently in over your head, you may want to consider debt settlement. It can help reduce your debt to a manageable level and save you from bankruptcy. But it can be a daunting task if you dont take the time to learn what you need to know to successfully negotiate with your creditors. The following information will ensure that you are properly prepared to tackle this mission.
by JessicaAcosta


If you are currently in over your head, you may want to consider debt settlement. It can help reduce your debt to a manageable level and save you from bankruptcy. But it can be a daunting task if you dont take the time to learn what you need to know to successfully negotiate with your creditors. The following information will ensure that you are properly prepared to tackle this mission.

Please be advised that debt settlement should be a last resort; you should only use it when your only other alternative is bankruptcy. Credit card debt settlement can frequently reduce your debt by 30-70%, but it is not a get out of jail free card; you will likely have to pay income tax on any forgiven debt, and your credit score will also be adversely affected (although a settled debt is much better than a bankruptcy).

If your account is currently being handled by a collection agency, do not try to negotiate your debt with them. You should only negotiate with the original creditor.

You will need to notify your original creditor that you do not have the financial resources to pay your debt, and that if they won't settle with you, you might have no choice but to file for bankruptcy. The mention of the word 'bankruptcy' should get their attention, because they know that if you file for bankruptcy they won't get any of their money back from you.

If you are currently making payments on your account, you will have to stop if you wish to settle the debt. Creditors won't consider settlement unless your account is seriously past due.

Once the negotiation process begins, proceed carefully. You should send all correspondence via certified mail with a return receipt, and be sure to keep copies of everything. If you speak to anyone over the phone, document the date, time, and name of the person to whom you speak.

Don't become discouraged if an agreement can't be as reached as fast as you would like. Debt settlement negotiations can sometimes take months.

Once a mutually acceptable settlement amount is agreed upon, insist that you receive a copy of the agreement in writing before you make a payment. Be sure to ask the creditor to state in writing that they will never sell your forgiven debt to another party. This is important, because if they do that, you will then have a junk debt buyer harassing you for the remainder of the balance on that account.

If you would prefer not to negotiate with your creditors yourself, you could hire a debt settlement service. Just be sure to investigate potential debt settlement companies thoroughly before hiring them; seek one that has a satisfactory record with the Better Business Bureau.

DISCLAIMER: This article is provided as information only and is not to be taken as financial advice.

Jessica Acosta is committed to providing you with truthful, objective information regarding debt settlement, credit repair, and similar issues. If you found this article helpful and want to read more from Jessica, please visit her website, Credit Repair and Debt Solutions.