Consumer debt negotiation

Consumer Debt Negotiation

debt settlement

Simply put, debt negotiation is when you negotiate to pay off your debt, but for less than the amount fully owed (the creditor will settle for less).

Why would a creditor take less?
While it's probably obvious why you (the consumer) would want to pay less on your debts, it may seem unusual that a creditor would be willing to accept it. It's not.

Under the right circumstances it's not at all uncommon for a creditor to accept a settlement proposal. Why? There are two primary motivations for them doing so:

If they are concerned that a debtor may file for bankruptcy, they would rather receive a partial payment than what (if anything) they'd receive through a bankruptcy settlement.

Accepting less directly from the debtor can still end up costing less than hiring a collection agency, which can cost them as much as half of the recovered funds.

Of course, that certainly doesn't mean any particular creditor has to accept a settlement proposal, it's ultimately at their discretion how they wish to pursue the debt.

Who should consider debt negotiation?
People who are legitimately unable to catch up on their debts, struggling with monthly payments, and who are not able to utilize consolidation programs (due to lack of assets or poor credit history) are good candidates for debt settlement.

How does it affect my credit rating?
Settling your debts may have an adverse effect on your credit, but not to the degree that declaring bankruptcy would; and often not as badly as continually being delinquent on payments. Debt negotiation services are usually followed up by credit repair.

Use the menu to the right for more information on credit card debt negotiation, consolidation and bankruptcy options, as well as additional financial advice and perspectives.