Debt Negotiation and Settlement

Debt Negotiation

Debt negotiation is the process of contacting your creditors and making arrangements to pay less than the amount you owe. When a creditor accepts less than what you owe them, it's called a settlement. You are more likely to negotiate a reduced amount if you are behind on payments and don't have the resources to pay in full. Creditors are also more likely to accept settlement offers if you're in some sort of financial distress.

With Smart Credit, you can use an Action called Debt Negotiator to contact your creditors without the need for debt counseling. Debt Negotiator is the first on-line self-help to get out of debt. There is no middle man or middle man fees. Your negotiations go directly to your creditor(s) and you'll be notified when the creditor responds. If there are any errors listed in your credit history, you can also contact the creditor and ask to have those items removed.

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A settlement is a common way to get out of debt and it's a strategy that should be on your list well before you consider filing for bankruptcy protection. Creditors know that they will get little or nothing if you file for bankruptcy and are more willing to negotiate settlements as an alternative. Once an account is settled in full you no longer owe the creditor or collector. At that point your credit reports must be updated to show a $0 balance and the creditor cannot attempt to collect the debt any longer.

You can negotiate debts of any kind including credit cards, medical bills, and some loans. You can't normally negotiate settlements on secured loans, such as home or auto, unless you're willing to forego your house or car. It's also fairly common for the IRS or other tax enforcement agencies to accept settlements, although they are not required to do so. Conversely, it's very uncommon to settle student loan debt.

It's important to keep in mind that when you negotiate or settle for an amount less than you owe, this can negatively impact your credit. Settlements are reported to the credit reporting agencies. The settlement notation will generally remain on your credit file until the account is removed.

You can negotiate settlements on your own or you can use debt negotiation companies. The debt negotiation companies have a fairly poor reputation and charge excessive fees for their services. They also offer no protection from your creditors if they choose to sue you. Negotiating settlements on your own is generally a better option because the creditor gets more of their money back.

If you find yourself in a position where you simply cannot pay your credit card bills any longer you should call your creditors, immediately. You can negotiate directly with creditors and collection agencies. You should keep a record of every correspondence and phone call you make or receive.

If you reach a verbal settlement agreement with a creditor or collection agency, read everything thoroughly and ask for a copy of their offer in writing on company letterhead. And, if you need assistance doing this on your own, SmartCredit® offers a debt negotiator self-help tool that allows you to communicate settlement offers directly with your creditors, without having to pay fees to debt settlement companies. Doing this on your own will save you money, time and it will likely yield a better result for all parties involved.