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If you are faced with negotiating debt with your creditors and want to do it yourself, here are helpful ideas that will help you in what can be a time-consuming and frustrating situation.
It is best to try to negotiate with your creditors at the beginning when you are advised or know that you are falling behind on your payments. They may have a hardship program that may include lowering or stopping your interest and allowing lower monthly payments or the payments being applied to the balance itself. They may stop the late fees that keep adding on to the debt. A major item to ask for is that they do not report your debt as past due to the credit agencies.
If they turn the account over to a collection agency, they will only make a small amount on the dollar, so they may well decide it is better to deal with you and end up with more of their money.
If you want to settle for a set amount that is much less than the balance due, you will have to have the total amount available to pay because they will not renegotiate monthly payments to do this type of settlement. You can offer a lesser figure than you are willing to pay because most likely they will try to increase the amount once you give it to them. You may have to bargain back and forth until reaching an agreement. Just remember that IRS considers the forgiven part of the debt as Income, and you will owe taxes on the amount that is forgiven.
When you have your paperwork together and know what you can afford to offer to that creditor, call and ask to talk to someone with the authority to make settlement arrangements.
Explain why you haven't been able to make your payments and what you propose to pay or settle the debt.
If you cannot work it out with the representative that you first talk to, or if that person is rude, ask to talk to the supervisor, and again explain your situation. Make notes about the people you talk to with their names, extension phone numbers, and what was discussed.
If that doesn't work, try sending a letter. Again detail why you are in default, your monthly income which is not enough to pay all your bills, and what you propose.
Hopefully you will eventually work it out. It does take time, so you have to try to be patient. Ask that you be sent the agreement in writing before you pay anything because you need to have a legal document to prevent any future claims for the unpaid balance.
Once you have that written agreement, you can pay with a cashier's check or money order (saving copies of everything). Be sure to send your payment by Certified Mail with a Return Receipt Requested so that you have proof that it was received and accepted.
Then you should check with your credit agency in a month or two to make sure that debt has been updated. You may have to send them a copy of your settlement agreement and proof of payment before they will change your credit report.