Posts Tagged ‘debt negotiation’

Debt Negotiation

Few people realize that there is another solution to burdensome debt, an approach that puts YOU in the driver’s seat – that levels the playing field between you and your creditors without having go to court.

That solution is debt negotiation – otherwise known as good old-fashioned American haggling. Haven’t you ever haggled over the price of a purchase? Well, exactly the same thing can be done for your debts!

Just imagine you could wave a magic wand and turn that $25,000 of credit card debt into $12,500 or as little as $9,000. Wouldn’t that make a big difference to your financial future? And while most people are skeptical that this approach is possible, if you have a professional debt negotiator on your team, the odds are very good that he or she can cut your debt by 50% or less.

Why Is This Option Possible?
For a moment, put yourself in the shoes of the manager of a collection department for a major credit card bank:

You know that bankruptcies are at an all-time high, that many consumers file bankruptcy at the drop of a hat, and that the chances of collecting any money get worse as the debt ages.

Let’s also say you have the opportunity to close your books on a delinquent account by collecting fifty-cents for every dollar owed by the debtor, or take a chance on never collecting a single penny by trying to hold out for the full account value.

You also realize that once the debt leaves your bank (usually after six months or so), it will go to a third-party collection agency. The agency will take at least 15%-20% commission right off the top of whatever they collect, and they are unlikely to collect more than 70% of the debt. So you’ll probably never retrieve much more than half of the money anyway. When you look at it this way, collecting 50% does not seem like such a bad prospect.

Now, the way we’ve described it, it sounds quite easy. You might be thinking, “OK, I’ll get on the phone and do this myself.”

What will happen? You’ll reach the “customer assistance team”, and the representative will inform you that other banks may settle for 50%, but that their bank never settles for less than 85%, under any circumstances. But, of course, they do have that wonderful hardship program for you.

After you’ve called five or six banks and received the same treatment, you’ll probably end up with the idea that debt negotiation doesn’t work. The problem is that the banks will rarely take a debtor seriously.

The banks are quite prepared for the amateur do-it-yourself negotiator. They have the telephone scripts all set up so that by the time the conversation is over, the caller feels guilty about the money owed, and their dubious hardship plan sounds like a great deal after all.

Debt elimination and the law

Anything with the word “legal” in the title has probably got you suspicious. If it’s legal, why bother advertising it, right? Debt consolidation companies are often viewed suspiciously because of the nature of their work. People often wonder how a company can help you reduce your debt load. What are they getting out of it? Is this going to put me deeper into debt? Because of the bad press that a few deceitful debt consolidation companies have caused, the legal ones suffer. As a result, they have to try harder to convince you that their business is legitimate and a good service that can help you get out of debt quickly.

How debt elimination works

Some companies make unbelievable promises of how they can eliminate your debt entirely. This is impossible, at least legally, it’s impossible. In fact, some of these companies are attempting to use what they see as loopholes in the law to make your debt vanish. For example, some shady debt elimination companies have indicated that their policy is that credit card debt is not legal; therefore, you should not be required to pay it back. Their interpretation of the Fair Collections Act, however, will get you into deep trouble, so you should avoid debt elimination companies that make promises that seem unreal.

Debt elimination does not mean that your debt disappears entirely. Rather, legal debt elimination is a process that involves you and a professional debt management expert and can take on a couple of forms. First, in order to eliminate your debt, you have to be willing to admit that it is causing your strife and that your spending habits and/or money mismanagement may have had something to do with it. In essence, signing up for a legal debt elimination program will require you to stop spending immediately. Don’t use your credit cards, as high interest unsecured credit card debt is the worst kind to get bogged down in.

Debt negotiation as a way to eliminate debt

The second step towards eliminating debt is to consult a debt management expert who can help you manage your money and reduce your debt. In many instances of very large debt loads, people feel that the only way out of their debt is to declare bankruptcy. While bankruptcy is necessary for some people, it’s not the only solution. Debt negotiation is another way that professionals can help you eliminate debt legally. This is an uncompromising form of haggling which pits your debt negotiator against your creditors. Your overall debt can be reduced significantly in this process, particularly for debtors who own no property and are on the brink of declaring bankruptcy. Creditors will often agree to take something over nothing, the key to debt negotiation.

Legal debt elimination is process, not an overnight affair. It will require you to commit to debt reduction strategies based on the advice of a debt management professional. Don’t be wary of every debt consolidation company that advertises legal debt elimination. But don’t be victim of a scam either. Just because the word “legal” is used, doesn’t make it so. Discuss your options with a debt professional before making any decisions.

Professional Debt Negotiation – Your Edge

Having a third-party professional on your team makes all the difference in the world. It’s a simple approach that puts power back in your hands. Once the banks realize that they are talking to a professional – someone who knows the rules and regulations – they quickly change their tune.

A negotiator will obtain better results than you could ever obtain on your own, simply because all of the bank’s tactics are stymied by the fact that they can’t talk directly to you.

In effect, they can’t apply psychological pressure to you, as this is filtered out by your representative.

Besides, there’s no shame in seeking help. Look at it this way: the banks pull out all the big guns when you fall behind. They have an army of collectors ready to pressure you with carefully scripted techniques. They have collection agencies and attorneys waiting in the wings to go after you.

Doesn’t it make sense to level the playing field? Doesn’t it make sense to concentrate on improving your finances and let someone else deal with the aggravation of the incessant phone calls that start flooding in once you get behind?

When you become a client of a professional debt negotiator, he or she will impose two simple rules for you to follow:

Rule No. 1: Do not, under any circumstances, speak to your creditors.

Rule No. 2: Do not send your creditors any money.

Do you think you can handle those rules? Some clients find it difficult because they seem so unorthodox at first. They are so accustomed to sending out minimum payments every month, even though it’s financially killing them, that they can’t handle Rule No. 2.

Here’s exactly why these rules are so important:

Rule No. 1 is absolutely crucial because only one person can negotiate your debts for you. If you only allow the negotiator to handle some of the phone calls while you make other calls yourself, the odds are high that you will say something that is not in your best interest and thus undermine your negotiator.

As in police shows on TV, where they always read a suspect his or her rights while being arrested, the debt collection industry has one important rule.

That is, a debt collector is supposed to tell you the following: “This is an attempt to collect a debt. Any information you give us will be used for that purpose.”

Your professional debt negotiator knows exactly what information to disclose, when to disclose it, and when to withhold information.

The average person, on the other hand, has no idea of what to say in this particular situation. We tend to respect authority. Collectors have a lot of nerve and present themselves authoritatively. They ask you where you work, how much you make, how much you pay in rent every month, and so on.

The answers, quite frankly, are none of their business.

But most people feel compelled to answer, in a misguided attempt to establish rapport with the collector. So, the first rule is to SAY NOTHING, and let your negotiator do the talking.

Rule No. 2 is even more basic. Don’t send good money chasing after bad. If you’ve been making endless minimum payments and not getting anywhere in the process, it’s time to STOP. Why waste more money?

DISCLAIMER: It’s important that you understand us plainly here. We are not advocating that everybody suddenly quit paying their bills bills. If you have sufficient income to reduce your debt load the ordinary way (by reducing the balances with payments in excess of the minimums), an ethical debt negotiator will not take your case anyway.

In essence, the negotiation process works best only in the event of LEGITIMATE FINANCIAL HARDSHIP.

So Rule No. 2 applies to the person who is suffering a legitimate hardship, one who will experience serious difficulties, such as home eviction or car repossession, if they continue trying to keep up with their endless credit card payments.

Please remember that the debt negotiation strategy is not for everybody.

But for those who qualify, it’s a no-nonsense financial recovery program that makes good sense.

Debt Negotiation Can Work For You!

The list of questions below will help you decide whether or not you should consider debt negotiation.

1. Do you have a legitimate financial hardship condition?

This is usually resulting from loss of income, medical condition, death of a family member, divorce or separation, loss of child support payments, or some other serious event that caused a severe financial setback. It doesn’t always have to be drastic, but there should be an identifiable circumstance (or set of circumstances) that got you into trouble.

2. Are you committed to avoiding bankruptcy?

Just about every debtor who tries to negotiate with a bank threatens bankruptcy. A proper debt negotiation strategy takes the opposite position, by promising that bankruptcy will not be filed if the creditor agrees to a workable arrangement. This promise is essential to the process.

3. Do you owe more than $10,000 in unsecured debt?

If your debt level is much below that, it becomes unrealistic to apply negotiation strategies at the level we’ve been discussing.

Discounts can still be obtained and favorable arrangements made, but frankly, major reductions in debt are much more difficult to obtain. A level of $20,000 to $50,000 is more typical, although there is no fixed rule. It also depends on the exact nature of the debt.

4. Are your debts primarily from credit cards?

The negotiation strategy works well for a variety of debts, but the best-case scenario is credit card debt. The steepest discounts and greatest success can be obtained with credit card accounts.

Department store charge cards, financing contracts, and miscellaneous bills can also be negotiated, but with less predictable results. Medical bills are often negotiable, depending on the background of the case, usually with good results.

Government student loans cannot be negotiated (since these are federal loans, Uncle Sam can dip his hands into your tax refund to collect the balance). Auto loans can be refinanced, but generally not reduced. Mortgages can be rescued from foreclosure with a variety of techniques, but of course you’ll still be on the hook for full value.

5. Is your monthly budget up to the job?

All the best intentions in the world won’t help if you have nothing to offer your creditors. A good rule of thumb is that your monthly budget should be around $150-$200 for every $10,000 of debt you carry. So if you owe, say, $30,000 total, then your monthly budget should be around $450-$600.

6. Do you have additional resources to work with?

Even if you can only manage a small monthly amount toward debt reduction, are there other resources at your disposal? Examples include cash-value insurance policies, borrowing from family, or even the sale of unneeded household items. Is there other property you could sell to raise capital?

If you are in a condition of financial hardship, committed to avoiding bankruptcy, owe more than $10,000 of credit card debt, and have some resources to work with, then you should definitely give serious consideration to the debt negotiation strategy.