Often when a consumer is up to their ears in debt and toying with the idea of filing for bankruptcy, but either can't file or doesn't want to, there are other options. Were you aware that the consumer can negotiate with their creditors and end up paying a significantly smaller amount than what is owed?



The Factors Involved In Negotiating Your Debt

Depending on many factors, a consumer can negotiate their debt down. Some of the factors include the age of the debt, the date a payment on the debt was last paid and the amount of interest and fees that have been added to the debt owed. Sound interesting? Read on it gets better.

Before going any further it is important to mention that this path is not easy, creditors are often not nice to deal with at the best of times. When you are the object of their attention, you can be inundated with rude and threatening phone calls, nasty letters and many other tasteless tactics used by some companies to get money out of you. If you can learn to be un-swayed by these tactics and remain calm and level headed through out the whole process, you are well on your way to sorting out your debts and paying much less at the same time. The reason that creditors resort to these sorts of tactics is that it is about all they can do to get the debts paid to them. Medical bills, store cards and credit cards are called unsecured loans. This means that they have no collateral tied to them.

The Problem

When a consumer stops paying their bills, the creditor has a few options. They can try bullying you into paying the debt or they can take you to court and hope that they receive a favorable ruling in order for them to come to your house and remove possessions to cover their bills. The latter is not commonly practiced as the risks of getting an unfavorable verdict from the judge are considerable. Besides that, it is probably hardly worth the trouble since these types of debts are usually considerably smaller than secured loans, such as houses and cars.

Where To Start Your Negotiations

So how much can you offer a debtor and have it accepted?

There is no set figure or sum and no guarantee that a company will accept your terms. However, if they have a choice between being paid something or nothing, they are going to choose some of the money any day. A good guide to begin your negotiation is 25% or less for debts that have recently been charged off. Often you can offer much less if the debt is older and the company has added a host of other fees and charges to the debt.

Ok so you are ready to negotiate? Hold on a minute, there are a few more things that you need to arm yourself with before going off to credit battle. Remember the best defense that you can have is to know exactly how your opponent works and what you can and can't do.

Tips To Negotiating Like A Pro

Below are a few helpful tips:

* Never negotiate over the phone, in fact, if a creditor contacts you by phone- hang up. All of your correspondence should be conducted by mail.

* Record everything; keep letters, numbers and dates. Never expect that an agency will remember what was agreed on or keep their word without proof.

* Keep copies of every letter that you send to the credit agency and make sure to use registered mail, or mail that has to be signed for. That way you have proof that the other party has received your correspondence.

* Never seem to be too eager to settle the debt too soon, never accept the first or second settlement offer and above all, never let the agency think that it has the upper hand.

Another useful approach is the good old threat of bankruptcy. While its not as easy as it once was to file bankruptcy.

Tip: Here is an article on the new bankruptcy requirements you must meet in order to file, read it so if you pull this trick, you sound knowledgeable.

If the creditor believes that you are about to file for bankruptcy, they will often be more than willing to settle for anything they can before you file and

they loose all hope of ever getting anything out of you. But proceed with caution if you acquire any more debt after telling a creditor this. Then you may not be able to get rid of this debt should you file for bankruptcy.

If the process seems a little difficult for you to handle or you feel that you would be eaten for breakfast by a hungry credit agency, you maybe right. You can either:

A. If you have a trusted family member that is good at negotiating you may ask them for help. Keep in mind, some companies will not speak with them unless you fax them a power of attorney letter stating your friend or family member has the authority to speak for you.

B. There are options available for dealing with these agencies. A debt negotiation company can provide you with advice and they can negotiate settlements with the agency for you. The Debt negotiation company will help you set up a savings fund to start collecting money to pay your debts. They can also help shed some light on how to begin living a debt free life.