How Debt Negotiation Works

So you need a basic understanding of how debt negotiation works.  If you are swamped with long overdue bills, this debt relief method can help you manage your troubled finances and get back in control.   In simple terms, debt negotiation is when you (or a professional negotiator) bargains with collectors to hammer out a reduced payment of your total balance due. 

For example, say you owe $1000 on an overdue bill that is now at a collection agency, and when you were making payments, they were $125 a month.  You (or a professional negotiator) can bargain with the collector and offer them a settlement of $600, and offer to pay them $50 a month for 12 months ($50 x 12 months = $600).   If they choose to accept this amount and payment plan, that is all you will have to pay.  The benefit is you will not be responsible for the remaining $400, and you have reduced your monthly payments from $125 to a more manageable $50 a month.  (This process is also sometimes called debt settlement or debt arbitration.)

Can I Do It Myself?

In most cases, it is less costly to manage debt negotiation yourself, rather than seeking credit services.  There are also do-it-yourself kits that can help you along the process.  However, the average consumer will get a better settlement by enlisting the help of qualified, reliable counselors who are trained to deal with creditors on a daily basis. The higher your debt and the more bills you have in collections, the more you should get a professional to help you.  Regardless of who negotiates, a creditor should be contacted in writing to officially request a reduced settlement.

How Long Will It Take?

Making progress with debtors can be a slow and agonizing process when you do it yourself.  It is a time consuming process.  Many people say that it is like having another full time job.  Depending on number of creditors and the balances due, debt negotiation could take up to 3 or 4 months when you do it yourself.  On the other hand, debt professionals DO work on your case as their full time job and can help negotiate debts significantly faster.

Any Words Of Caution?

If you allow a debt counselor or financial agent to negotiate on your behalf, be sure the payments you make to them are actually being applied.  Be sure any Power of Attorney form that you sign gives your counselor the right to handle your debt negotiation ONLY.  (Power of Attorney is a form you sign that gives another person the right to handle your affairs on your behalf.) 

Also if you hire a professional, always make sure you monitor their progress. If you are unhappy with the service you are receiving, contact The Federal Trade Commission.

Ken S



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