How to Take Care of a Debt Settlement Yourself

Managing debt on your own isn't always easy, and many opt to seek help from a credit or debt counselor. Debt counselors charge their clients a certain amount of money to help them get their debt in order, but when you're facing financial hardships, every penny counts. Cutting out the middle man and taking care of debt settlement with creditors and collection agencies can save you money.

Instructions

Settling Original Creditor Debt

1

Obtain a copy of your credit report from one of the three free services offered by the Credit Bureau. You can get a copy from Equifax, Experian and Trans Union. You are entitled to one free copy from each service once a year.

2

Examine your credit report to determine if your unpaid debt is still with the original creditor or has been turned over to collection. Dealing with original creditors and collection agencies are two very different processes.

3

Collect mailing address and telephone contact information for each creditor, along with the amount of debt owed to each one.

4

Set up a budget based on your monthly income earnings. Subtract current monthly expenditures to determine how much you have left over to pay creditors.

5

Calculate your total debt and divide it by the number of creditors you owe. This will give you an equal payment average for each creditor. To avoid paying more than you can afford, refer back to your budget.

6

Compose a letter explaining your current financial situation and offering payment. Include a paragraph informing the creditor that the same offer is being made to all of your creditors and those who accept will be the first ones paid. Some creditors may make a counter offer between 35 and 50 percent less than the full amount of your total debt, but only if you pay the amount in full. Keep your acceptance agreement letters from creditors on file.

7

Make the agreed upon payments, including a request for receipt stating the debt has been paid in full. Keep the receipt on file in case the debt status is not updated on your credit report and you need to contact the credit bureaus to update the status.

Settling Collection Agency Debt

8

Review your credit report for debts that have been turned over to collection. Write down the contact information, such as address and telephone number, of the original creditor and the collection agency handling the debt.

9

Contact the original creditor by telephone and explain your current situation. Express your willingness to settle the debt with a lump sum payment or a monthly payment plan and ask them to pull your account out of collection. In the event that they don't accept the offer, begin negotiation with the collection agency.

10

Contact the collection agency by telephone and set up monthly payment arrangements. Tell them how much you are able and willing to pay each month to settle the debt.

11

Make monthly payments on time as agreed until the debt with the collection agency is settled.

12

Request a written statement from the collection agency confirming the debt is paid once you make your final payment.