There are plenty of ways to get into debt and fortunately, there are also several ways to get out of it. Bankruptcy is not the only way to handle debt that has gotten out of control. In fact, it is designed to be a last resort so if there is a way for debtors to avoid bankruptcy, they should. Debt negotiation is one alternative that has helped some people saddled with bills they cannot afford to repay. Get a free evaluation to see what option is right for you today!
Debt Negotiation vs. Bankruptcy
In a debt negotiation program, a debtor enters discussions with creditors or collectors acting on their behalf. The goal of debt negotiation is to reduce the amount of outstanding debt so it can be repaid faster. The debtor and each creditor agree on a reduced debt balance that once repaid, is considered payment in full.
If you are in debt, you can negotiate your debts directly with creditors and collectors or get assistance from a third party. Though many reputable companies offer debt negotiation services, consumers should be aware that an increasing number of credit repair firms are not reputable and some are scams. Many states have enacted laws to regulate companies engaged in debt negotiation and the services they provide.
Some firms say they can reduce unsecured debt to between ten and 50 percent of the original amount owed. They claim this will not affect the ability to obtain credit in the future and that negative information on the credit report will be removed after the program is completed. These firms often advise debtors to cease making payments directly to creditors and instead pay the debt negotiation firm, which will use the funds to repay creditors.
Consumers should be wary even if a debt negotiation company claims to be a nonprofit organization. There is no guarantee that this company is legitimate, nor is a creditor obligated to accept partial repayment of debt. If the debtor stops making payments, interest and late fees may accrue on the debt. A debt negotiation company may impose its own fees for services, increasing the repayment amount.
When shopping for a company to negotiate your debts, avoid those that guarantee to remove unsecured debts. Firms promising that debts can be repaid for pennies on the dollar should be viewed with skepticism as should those that impose significant service fees or other charges. Verify a debt negotiation company with the Better Business Bureau, state attorney general, and local consumer protection agency before revealing personal information or entering an agreement.
Did you know that you have the ability to negotiate your debts when they get of control? This is a popular way to avoid bankruptcy while easing the financial burden of debt. When they are approached the right way, creditors and debt collectors may be willing to accept reduced payments over time or a lower repayment in full. Learn the secrets to successful debt negotiation and how to get help when it is needed.
The key to successful debt negotiation is the strategy used. Some strategies are appropriate for all situations while others are more effective with certain types of creditors. If debt has become cumbersome, consider employing one of these strategies to take control of it and avoid bankruptcy, wage garnishments, levies, foreclosure, and other serious consequences. Learn the difference between debt negotiation and bankruptcy – speak with a bankruptcy expert for free right away!
Debt Negotiation vs. Bankruptcy? Call Us Now!
When negotiating with most collectors and creditors, begin by indicating that bankruptcy may be on the horizon. Credit card companies and other unsecured creditors do not want to go down this road because they are not likely to receive payment during Chapter 7 or Chapter 13 bankruptcy. They would rather get pennies on the dollar than settle for nothing.
Enter the debt negotiation process with a low offer, approximately 15 percent of what is owed. Be patient and engage in the back-and-forth process, keeping in mind that most unsecured creditors will be willing to accept between 30 and 50 percent of what they are due. They are more likely to settle at the low end of this range if money is available for immediate transfer so save up during the negotiation process.
Continue this approach with each creditor, eventually eliminating all debts. When dealing with a mortgage company, the process may be more difficult. Many mortgage lenders, particularly large ones with a national presence, are not eager to modify loans. Debtors with mortgages held by small, local banks are usually more successful. The national Making Home Affordable Program (HAMP) is another alternative.
Negotiating secured loans such as those for motorcycles, cars, and boats, is also easier when the loan holder is a small, local bank. The recommended approach mirrors that used for unsecured debts. Even back taxes can be successfully negotiated if they are several years past due. When debt negotiation assistance is needed, consult a bankruptcy attorney to negotiate your debts on your behalf. This type of attorney knows current collection laws and has experience dealing with all kinds of creditors.