Debt settlement negotiations are often a great solution for people who are struggling with debt. Negotiating a settlement with a creditor can lead to reduced payment amounts and even a smaller principle. Knowing how to go about negotiating a settlement will help you to get the best deal. Knowing what NOT to do is often even more important.
Five Most Common Mistakes in Debt Settlement Negotiations
- Underestimation of Creditors – Creditors like to play dirty, but you have to hold your ground. Secured creditors have the obvious advantage of being able to leverage or repossess your property. Unsecured creditors may be able to sue, garnish wages and levy bank accounts.
- Not Aiming High (Low) Enough – Most unsecured creditors will eventually settle for pennies on the dollar. When you start negotiating the settlement amount, aim low. Don’t just aim low, aim subterranean. Unsecured creditors know that Chapter 7 bankruptcy will likely completely wipe out your debt, so they would rather take a little than nothing at all.
- Not Paying with Cash – In debt settlement negotiations, cash speaks louder than any words. If you can offer cash, your creditor is infinitely more likely to settle for a lower amount faster. Many make the mistake of getting a home equity loan or dipping into their retirement funds to pay off the debt, but that can get you into more trouble down the line.
- Debt Consolidation – Debt consolidation scams promise to pay off your debts in exchange for high monthly fees and payments. Also, many of these consolidation companies never pay the debt anyway, meaning you’re still going to be getting harassed and slapped with creditor lawsuits.
- Not Knowing When Bankruptcy Is Better – There are many situations where a debtor may be better off filing for Chapter 7 bankruptcy. Chapter 7 bankruptcy is often the best solution, because you could potentially see most or all of your debts completely wiped out.
The Lewisville bankruptcy attorneys at Shuster Law Firm PLLC are here to help you achieve your goal of becoming debt free in whatever way best suits your unique situation.