How to Arrange a Debt Settlement
If you have a debt that you can’t afford to repay in full, a good option may be to negotiate a settlement. This is when you and your creditor consent to settle an account balance for less than what you owe. Whatever reduced sum you both agree on is the deal. Once the creditor accepts your offer, you are no longer responsible for paying the forgiven balance.
It is most typical to make a settlement with a collection agency. Because these businesses buy accounts from original creditors or other collection agencies for a percentage of the balance, they may accept less than the original debt. You may also arrange a settlement with an original creditor, whether it is your credit card company, a dentist, or anyone else you may owe. To increase the likelihood that the creditor accepts your offer, give a reasonable explanation for not being able to pay the full balance.
Process of Settling
How low will a creditor go? That is entirely up to them, but the age of the debt is a major factor. Typically, the older the debt, the less the creditor may accept. If you can’t be taken to court because the statute of limitations for lawsuits has run, it is possible to pay very little of the balance. The statute of limitations is the number of years a creditor has to sue you for a debt. This time frame varies, so check your state’s law regarding lawsuits and unsecured debts. The National Association of Attorneys General publishes a list of Attorneys General for each state: (202) 326-6000/www.naag.org/attorneys_general.php. They will be able to provide you with statute of limitation information for your area.
Once you have determined your offer and have the money to send, call the creditor and begin to negotiate. Explain that you would like to settle the account and present your offer. The creditor may accept or reject your proposal, or they may make a different offer. At that point you would bargain until you reach an agreement. If they accept a reduction, you may also ask that they report the settled account as paid in full.
Some people find speaking with creditors intimidating, and if you do, you may choose to negotiate entirely by mail instead. However, even if you start the process over the phone, make the final arrangement in a letter. Send it certified mail, return receipt requested. Keep copies of all written correspondence for your records.
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