How to Settle Debts Without a Debt Settlement Company

If you are dealing with unmanageable debt, you may consider using a debt settlement company to work on your behalf. Unfortunately, many debt settlement companies charge substantial fees, and there is no guarantee that they can resolve your debt problem. You may be able to settle your debts on your own as well as any debt settlement company could, and you can save the fees along the way.

Instructions

1

Determine how much money you have available to pay your debts. Before you begin any negotiation, have a clear picture of your finances. Analyze your cash flow and calculate the most that you could afford to pay your creditors if you get into a debt settlement plan. If you agree to a debt settlement and cannot afford to make the payments, your plan will fail.

2

Call your creditors and negotiate. Ask for a lower interest rate on your debt, a reduction in your outstanding balance or any deal they can cut you if you make a lump-sum payment. Ironically, your creditors may be reluctant to agree to a settlement program with you if you have been paying on time. Usually, creditors will cut a deal only if it appears you cannot make your payments. Consequently, you will probably be able to negotiate your best deals after you have fallen behind on your payments.

3

Declare bankruptcy. If you cannot manage to negotiate a deal with your creditors, you can resort to filing bankruptcy. While a bankruptcy can wreak havoc on your finances, it is the ultimate debt settlement action. When faced with a bankruptcy discharge, your creditors lose all power to collect on your debt. While creditors will get at least some payment from you if you file Chapter 13 "reorganization" bankruptcy, in a Chapter 7 "liquidation" bankruptcy creditors traditionally receive nothing. Even if your creditors did not want to settle your debt, the bankruptcy discharge forces their hand and effectively renders your debt invalid. You may have to deal with the after-effects of your bankruptcy for 10 years, but as a last resort, your bankruptcy discharge will basically settle all of your debts down to zero.