Negotiating with your creditors:
In an earlier post there is some discussion about techniques used to deal with creditors. I would like to speak further to that. There is generally one reason you would need to negotiate with creditors – you missed a payment or you will miss a payment. The reasons are generally Medical emergency, permanent or temporary job loss, separation or divorce and unfortunately substance abuse.
Most people go through a period of coming to grips with their current situation over time. Once you have realized the gravity of the situation it is time to put some thought into how to make a deal to manage the situation in the long term. In order to be successful you have to play your cards right to make the best deal possible. A couple of things to consider – How much to pay back (cents on dollar) How long to pay the balance, determine the resulting blemish on your bureau and ensure you do not get taken advantage of.
Cents on the dollar:
What is good for your friend/neighbor may not be a good deal for you. There are many factors that directly effect the results. What are you worth in a bankruptcy? Have you given full disclosure or do the creditors know what you own and where your assets are? How long has it been since any activity on your account – the longer the better. Of course having said that, how much of the debt is interest? There are many crazy success stories about 10 cents per dollar deals floating around however 55 cents on the dollar would be pretty reasonable.
How long to pay back:
Just as important as the amount that has been negotiated, what are the terms that you can live with. If they want (and they will) the money up front within 72 Hours than you had better be prepared. This is one of those rare times when it makes sense to borrow from friends and family as you can conceivably repay this lower negotiated amount in a very short period of time. Occasionally the creditors will accept a payment plan. If you choose a more formal route than a payment plan will be negotiated into the deal.
It is unavoidable that you are or already have destroyed your credit. Whenever you negotiate any settlement, either 20 cents or 95 cents on the dollar you will get a resulting R7 that will remain for 3 years past your last payment. If you do not make a deal than it may stay as an R9 and remain for 6 years. When negotiating always ensure that the report will show R7 at the worst case. Sometimes the entire thing can be removed or put back to R1.
Don’t get taken advantage of:
I know that you will find it hard to imagine but the collector that you are dealing with may not be the poster child for integrity and honesty. Get everything in writing! If you do not than you cannot prove that that $3000 you sent them is a final payout for the full amount that you owe.
What does that mean? Well in 30 days you will get a call from another collection agency that says thanks for the 3k deposit, when can we expect the remaining balance… Imagine how angry, frustrated and broke you would be. It happens all the time and what are you going to do about it? Call the customer service hot line? Hire a lawyer? Get everything in writing!
Should I hire a professional?
There are companies that specialize in putting deals together. Some are good, some are great and some are no better than the collection companies themselves. Understand your situation, the process, take ownership of it. If you have even a general understanding of the rules than you will be able to either do it yourself or hire someone with confidence to do it for you. Either way it has to be done and your life will change forever!