How to Settle Your Debt for Free

Consumers oftentimes find themselves in a situation where they have more debt than they can afford. The good news is that many consumers are responsible and would rather find a way to honor their debts if they can. The bad news is that many have been led to believe that the only way to settle a debt is to pay someone to do it. The truth is, you can settle most debts yourself for free by making one simple phone call.

Instructions

1

Order a copy of your credit report. The Fair and Accurate Credit Transactions Act (FACTA) entitles you to one free report every year from each of the three major credit bureaus: Experian, Transunion and Equifax. On the report, look for accounts that have been charged off or referred to a collection agency.

2

Send a Debt Validation Letter (DV) to each account held by a collection agency. Under the Fair Debt Collection Practices Act (FDCPA), debt collectors are required to provide proof that the debt actually belongs to you and they must cease collection of the debt until they do so. They are not allowed to report the debt to the credit bureaus until they have completed validation. A DV request must be made within 30 days from the date the collection letter was initially sent to you.

3

Calculate how much you owe each creditor. Make sure you use the correct balance, including late fees, interest and any other miscellaneous charges that are still outstanding. Write this amount down on a sheet of paper next to the creditor's name for easy reference.

4

Determine the highest dollar amount that you are able to pay towards each of these debts. This will be the amount that you offer to the creditor as settlement in full.

5

Call each creditor and request to speak to someone in a position of authority. Most customer service reps don't have permission to accept offers, but their supervisors do. Inform the supervisor of your intent to settle. Direct calls to the original creditor if they still own the debt; if not, call the collection agency.

6

Offer a partial payment initially and not the full amount. If you can pay two hundred dollars on a three hundred dollar debt, start the discussion at one hundred. You want to leave room to negotiate. The company may accept your initial offer, or they may provide a counteroffer; this is why it's important to begin with a lower dollar amount.

7

Request written confirmation of the agreement from the creditor. Do not give out your checking account information over the phone. Once you receive the letter, send a cashier's check or U.S. Postal Money Order to them via certified mail. Include a copy of the letter along with your payment. Repeat this process for each of your debts.