If you find yourself in heavy debt and are considering bankruptcy, you should look into debt settlement and debt negotiation. Debt negotiation is where you contact your creditors and explain your situation. You make them an offer to settle your debt for a lower amount than what you actually owe.
Why would a company be willing to take a smaller amount than what you owe them? They know that if you go into bankruptcy it is unlikely that they will see any money from you. If you owe $5000 with an additional $2000 in late fees, they may be very happy to get $3500 from you. They have lost money, but $3,500 is much better than 0.
When you do debt settlement it can still make a negative impact on your credit rating. After all anytime you don’t pay money that you owe it doesn’t look good. In some situations you may be able to negotiate pieces of the debt settlement that will keep your credit score looking good or at least not as bad as it would be if you went bankrupt.
If you are in trouble and are looking at debt negotiation, you have two options. First you can do the negotiating yourself by contacting all of your creditors. Second, you can hire a company to do it for you. If you want to do the negotiations yourself, you should contact all of your creditors and be honest with them. Let them know you are in trouble and are doing everything possible to get them their money. Then you should probably follow up with a settlement offer letter. Basically you make them an offer saying that you will pay them X amount instead of the amount that was originally owed.
Here is a sample format of a settlement offer letter.
Your Name
Home Address
Phone Number
Attention: {name of collector or collection agency}
Address
RE: Collection letter dated {date of letter here} or phone call on {date of call here} reference account #: {account or reference number}
Dear Mr./Ms. {Collector’s or Collection Agency’s Name}
I do not agree that I owe as much as you claim I owe on the above referenced account. In an effort to save both of us a great deal of time and expense I am offering to settle this account for $ _______.
If you accept my offer, please send written confirmation to my address listed above. Once I receive your written confirmation, I will mail payment to your organization within five business days. If you wish to discuss this settlement offer, I can be reached at (insert daytime phone number with area code).
However, please understand that I will not make any payment until receiving written confirmation that you accept my offer.
Sincerely,
Signature
Your Printed Name
Debt negotiation should be a last resort and you should view it as a way to get people some of the money you owe instead of losing it all in bankruptcy. You should make every effort to repay any loans that you have taken. You have given your word to repay them. Negotiating a debt settlement is a good option when there is no other way out.
There is help available if you want to negotiate your debts on your own, check out this resource for DIY Debt Negotiation
Thanks,
Eric