Debt Negotiation & Settlement Instructions

In times of economic hardship, one of the problems is debt management. Layoffs, increased interest rates, and salary cuts are some of the reasons consumers are falling behind. The National Foundation for Credit Counseling reports in April 2010 that 28 percent (of American bill-payers), or nearly 64 million adults, admit to not paying all of their bills on time. Now, more than ever, creditors are willingly to negotiate settlements on past due accounts. Below are suggestions to follow when negotiating payment settlements.

Instructions

Review Debt Obligations

1

Go to freecreditreport.com to request free copies of your credit report. As a consumer, you are entitled to one free credit report each year from each of three credit bureaus: Equifax, Transunion and Experian.

2

Review each credit account on your credit report for accuracy and to ensure that all of your creditors are listed on the report.

3

Review your creditor's monthly statements. Verify interest rates, balances and monthly payments.

Determine Payment Amount

4

Review your budget. If you do not have a budget, now would be a good time to start one. For help creating a budget, download the budget template from moneysavingchallenge.com.

5

Decide on the amount that you can commit to pay, either in a lump sum or on a monthly basis, on past due and delinquent accounts. Even if you can pay only a small amount, you have to start eliminating your debt.

6

Prioritize your repayment plan based on the account with the highest interest rate.

Contact Your Creditors

7

Explain your financial situation and the reason you have fallen behind. Communication is crucial when negotiating debt. Creditors may be more sympathetic once they learn that you are not intentionally trying to negate your financial obligation.

8

Explain that you want to pay your obligations and provide the amount you are committed to pay. A creditor has the option to accept your terms. If the creditor is unwilling to accept your arrangement, and the debt is an unsecured debt (i.e. credit cards, medical bills), seek credit counseling from a non-profit organization such as Credit.org, formerly CCCS. The credit counselors can negotiate a settlement on your behalf, often at a lower interest rate. If the debt is secure (i.e. car loan, home loan), consider selling the property to pay off the balance or seeking the counsel of a bankruptcy attorney.

9

Ask each creditor to document your account with the terms of the agreement.

10

Ask for all debt negotiations in writing. If a creditor refuses to send written proof of the agreement, send that creditor a certified letter explaining the terms that were discussed.

Make Timely Payments

11

Pay as agreed. Send the amount that was negotiated and do not be late. If for some unforeseen reason you cannot make the agreed upon payment, contact your creditors immediately. Explain the circumstance and offer to negotiate an alternative. Often times, creditors will require that you set up an automatic draft from your bank account, to ensure they receive their payments. If you do not have a bank account, offer to send the payments via Western Union or Quick Collect.

12

Request a letter that an account has been paid in full once the last payment has been posted.

13

Send the paid-in-full letter to each credit bureau to have your account updated.