Debt reduction plans are commonly known as debt settlements and debt negotiations. A debt reduction plan works with both the debtor and the creditor in lowering a debt that is owed. At times a third party will assist in making these plans and can assist in lowering the debt owed by up to sixty percent.
How Debt Reduction Plans Work
Debt reduction plans vary based on the individual's situation. Some individuals will opt for claiming bankruptcy prior to trying to alleviate the debt themselves. This can be done by hiring an outside agency for assistance or by contacting the individual creditors and agreeing on a plan that is right for you.
Creditors
Creditors will generally work with debt reduction plans; this is because they want to be paid just as much as you want to be debt-free. It is important to remember to receive all agreements with your creditors in writing. Never agree to a plan that does not work for you; only agree to pay what you can afford. Take notes while developing your plan with the creditor, be sure to write down who you spoke with the date and time and what your agreement was.
When to Contact Creditors
The best time to contact creditors is at the end of the month because this is when creditors are more willing to compromise due to finalizing their accounting books. When dealing with creditors be sure to request the reduction plan in writing; always be sure to document each conversation.
Outside Agencies
Outside debt reduction agencies assist by analyzing the individual's situation. They ask several questions and determine what is best for you. Many agencies will request that you stop paying the creditors and placing the money owed into a separate account. After doing this the agency will contact the creditors for you and negotiate your debts. It is important to keep in mind that debt reduction agencies will assist you with your debts for a fee.
Federal Trade Commission
The FTC (Federal Trade Commission) advises you to stay away from debt reduction plans that result in untrue claims. FTC also advises documenting all claims and debt reduction plans with third party companies as well as creditors. Creditors frequently record calls to protect themselves from untrue claims. The FTC can be contacted by calling 1-877-FTC-HELP.
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