You may have heard lately about an option to filing bankruptcy. This option is debt negotiation. Debt negotiation allows you to settle your debts with your creditors without having to file bankruptcy. A bankruptcy can stay with you for 7-10 years while a debt negotiation has no long lasting impact once the program is complete.
What is debt negotiation? Simply put, debt negotiation is when you stop paying your creditors (except for your mortgage if you have one - don't lose your house), and then settle the debt you owe them with payoff amounts that are less than what you originally owed. If you have gotten in over your head with your debt but you are still paying your bills, your creditors will want to continue to be paid their monthly payments. They will not negotiate with you as long as your credit history with them is acceptable. However, if you stop paying them, they are more likely to take something from you versus nothing.
Debt negotiation will allow you to settle your debts with your creditors for pennies on the dollar and it is worth considering. I would like to remind you that this is not an invitation to go have a spending spree and then enroll in a debt negotiation program. Doing this is fraud and could have its own unique set of legal problems.
Before you start a debt negotiation program, there are some consequences that come with this solution to getting out of debt. The most obvious is that if you had been paying your bills on time and had good credit scores your credit scores will go down significantly when you stop paying them. However with debt negotiation, you can get out of debt in 2-3 years, save yourself from filing a bankruptcy and lastly save yourself thousands of dollars.
The second consequence that you need to consider is that while you are in the program, you will likely be harassed by your creditors. You need to keep the end result in sight. Once you start the program, don't pick up the phone unless you know who is on the other line. Mute your ringer. The collection agencies can drive you crazy. Their goal is to get money out of you by scaring you. They'll threaten to go into your bank accounts, contact your employer, show up at your house and introduce themselves to your neighbors. There are many things that the collection company can't do that they say. Why they say is that a lot of people listen to them and give in to their demands. Developing a thick skin is critical for this process.
There is good news regarding creditor phone calls, a good debt negotiation company can offer some relief to all of the calls. The collection agencies still are required to play under the rules of the fair debt collections practices act of 1977 and do have guidelines for contacting you that they must abide by. Your debt negotiation company can send out letters to your creditors to tell them to cease and desist which could provide some relief until your debt negotiation program is completed.
Why would my creditors agree to take reduced settlements? If you file a bankruptcy the creditor can end up with nothing. Billions of dollars in debt will forever go uncollected. If you are at the point of filing a bankruptcy, debt negotiation may be the creditors' only way to recoup any money from you. If you file a bankruptcy the creditor may end up with nothing.
Why would I want to enroll in a debt negotiation program? You would want to if you ever want to get out of debt and haven't been able to make any headway. You may want to enroll to pave the way to a mortgage at a decent interest rate, or a better car, or have a decent credit rating. Your credit will be bad while you are in the program, but as the debts are paid off and all of those collection accounts wiped off your credit report, your credit score will go up.
I just mentioned if you use a debt negotiation company. You can do the debt negotiation program yourself, but like I said it will take a very thick skin. If you use professional help, they can burden a lot of the stress for you as they stand in between you and your creditors.
Debt negotiation is not an easy process as it will test your patience. But it is well worth it in the long run for getting out of debt and on your way to what you want.
