Every day, millions of Americans struggle with what seems to be insurmountable debt. If you have fallen behind on making payments, you may be dealing with frequent calls from creditors and debt collectors. However, in an effort to alleviate your debts, you may be able to engage in debt settlement negotiations with creditors to work out a more manageable arrangement. Debt settlements may result in the creditor accepting a lower lump sum payment, or, lower monthly payments, and allow you to regain control of your finances.
Before you begin debt settlement negotiations with a creditor, there are several issues to take into consideration that may help you arrive at the most favorable result for your debt. You may want to speak with a veteran Ohio debt lawyer who knows the law regarding debt relief and can ensure that creditors follow the law and respect your rights.
Tip #1: If possible, deal directly with the original creditors and not a debt collector.
It may be beneficial for you to try to reach a settlement agreement with a creditor before the unpaid debt is sent to a debt collector. In doing so, you may be in a better position to negotiate a better settlement because it may be more advantageous for the creditor rather than having to go through the time and money it takes to hire a third-party debt collector.
This means that you should not allow yourself more than a couple of months of late payments before reaching out to the creditor. Most of them will assign a debt to collections if it is more than 3 or 4 months late. Once a debt has been assigned to a debt collector, the original creditor will refuse to speak with you regarding account details. Additionally, once a debt is in collections, negative marks will incur on your credit record.
Tip # 2: Offering a lump sum payment may result in the best settlement of a debt as compared to a payment plan.
Often, creditors are more likely to agree to settle a debt for a lower amount if a lump sum payment can be made immediately. If you are able to save a sum of money before you begin negotiating your debt and then make an offer to pay that sum immediately, you are more likely to get a creditor to accept a payment that is 30% to 50% of the original debt. Creditors would rather take an immediate offer of cash rather than have to wait for smaller payments over a period of time. Additionally, you will likely pay more over time if you agree to a payment plan.
In order to do this, you should analyze your income and expenses closely and determine what you can realistically afford to pay. If you are considering negotiations, then your overall goal is to eliminate enough debt so that you can pay off what is remaining in a reasonable time period. If debt negotiations won’t allow you to get to this place, then you are not in a better position than before and you should reconsider before moving forward.
If you can’t afford a lump sum payment, you may still be able to negotiate a significant reduction in the principal debt amount, as well as lower interest rates and reduced late fees, in a payment plan. A creditor may also be willing to agree to a temporary reduction of your payments.
Tip # 3: Consider bankruptcy as an option.
Bankruptcy is a legal process meant to help consumers to either eliminate their debts or repay them under the protection of a federal court. It can help many consumers who face crippling debt get a fresh start. Creditors are more likely to agree to a favorable debt settlement if you are considering bankruptcy as an option, particularly unsecured creditors like credit card companies. In most bankruptcy filings, the full debt to an unsecured creditor is discharged, and the creditor will end up getting nothing. Unsecured creditors are aware of this and are more likely to settle the debt for a much lower amount, rather that end up with nothing once a debtor files for bankruptcy protection.
Contact an Ohio Debt Attorney to Consider your Options
Debt settlement negotiations can be an intimidating and stressful process. If you are considering entering into such negotiations, you should speak with experienced debt attorneys such as the attorneys at Luftman, Heck & Associates for assistance. Our compassionate advocates will take the time to listen to the circumstances of your case and help you figure out what your next step should be.