Do-It-Yourself Debt Settlement
In general, only unsecured debt (not secured by real assets like homes or autos) can be settled for less than owed. Many people report success in negotiating a debt settlement for themselves. It's possible for a consumer to imitate the practices and methods of professional debt settlement companies successfully.
An individual can obtain a settlement agreement with an original creditor just like a professional debt settlement company can, and should not be afraid to try. Initiation of negotiations can begin merely by calling the customer service department of the credit card company. Timing is everything; in general, the credit card company will only deal with a consumer when the consumer is behind on payments. A successful settlement occurs when the credit card company agrees to take a percentage of total account balance. A payment plan is not an option; the credit card company will demand that the consumer make a lump sum payment of the settlement amount.
Negotiating with a collection agency or junk debt buyer is somewhat similar to negotiating with a credit card company. However, many collection agencies (or junk debt buyers) will agree to take less of the owed amount than the original creditor, because the junk debt buyer has purchased the debt for a fraction of the original balance. As a part of the settlement, the consumer can request that collection is removed from the credit report, which is generally not the case with the original creditor. Even if the removal of the collection account from the consumer credit report has been successfully achieved as a condition of settlement during negotiations, the negative marks from the original credit card company will still remain, according to Maxine Sweet, a spokeswoman for credit reporting agency Experian.
Do-It-Yourself Debt Settlement is a much cheaper option than hiring a professional organization, and in many cases can be more effective, since the consumer is much more vested in the process than an impartial third party.
Creditor’s Incentives To Work With You
The creditor’s primary incentive is to recover funds that would otherwise be lost if you filed for bankruptcy. The other key incentive is that the creditor can often recover more funds than through other collection methods.
Collection agencies and collection attorneys charge commissions
as high as 40% on recovered funds. Bad debt purchasers buy portfolios of delinquent debts from creditors who give up on internal collection efforts and these bad debt purchasers pay between 1 and 12 cents on the dollar, depending on the age of the debt, with the oldest debts the cheapest. Collection calls and lawsuits can oush you into bankruptcy, in which case the creditor may not recovers any fund at all.
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