You may need to call several times until you end up speaking to someone sympathetic to your situation.Ħ.
Ask for a manager or for the creditor’s “financial relief” department. With your offer in hand, call the creditor. In either case, your first lump-sum offer should be well below the 40% to 50% range to provide some room for negotiation.ĥ. Typically, a creditor will agree to accept 40% to 50% of the debt you owe, although it could be as much as 80%, depending on whether you’re dealing with a debt collector or the original creditor. Once you’ve done your research and put aside some cash, it’s time to determine what your settlement offer will be. This is because most will want a lump-sum payment, although some may be okay with dividing the dollar amount into monthly payments.Ĥ. Telling the creditors that you’ve got money saved up to settle the debt may give you an advantage in negotiating with them. Keep in mind that not all creditors will agree to a debt settlement.ģ. If you can’t locate the information online, call your creditors and ask how they deal with debt settlement. Go online to find out how the creditors (or the debt collectors, if the creditors are no longer handling the debt) handle debt settlement. How much do you owe? Who are the creditors? Is it possible to pay off the debts without hammering out a settlement agreement? Or would it be impossible to erase the debts without getting a break on the amount you owe?Ģ. Before doing anything else, assess your debts. Here are seven steps you can take when you head down the DIY road of debt settlement.ġ.
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In other words, you won’t have a debt settlement professional or anyone else to negotiate on your behalf. If at least $600 in debt is forgiven, you’ll likely pay income taxes on the forgiven amount.Īnother downside to either DIY or professional debt settlement is that your credit score will take a dive, and the settlement will remain on your credit report for seven years.Īnd don’t forget that, if you decide to DIY, you’ll be on your own. Regardless of whether you take on the task yourself or reach out to a debt settlement company, you may face a tax burden if you do reach a settlement. If you choose to negotiate a DIY debt settlement, you don’t relinquish your personal control over the timing of the process. So, if you’re settling a $10,000 debt for $5,000, you could be hit with a fee as high as $1,250 or even more. A DIY settlement avoids the fees you might pay to a professional debt settlement company.Ī debt settlement company may charge fees totaling 15% to 25% of the settled amount. The primary benefits of pursuing a do-it-yourself debt settlement revolve around cost. So, instead of possibly not getting a penny from you, each creditor receives a lump-sum payment of $2,500. In order to get at least some of their money, the card issuers then decide to accept a lump-sum payment representing 50% of what you owe. Let’s say, for instance, that you’re overdue on $5,000 you owe to one credit card issuer and $5,000 you owe to another credit card issuer. Unlike the less dramatic forms of achieving debt relief, like debt consolidation or a debt management plan, with debt settlement, you repay only a portion of the principal you owe. On Century's Website The Basics of Debt Settlementĭebt settlement involves negotiating with creditors to significantly reduce the amount of money you owe.
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