How To Negotiate Debts

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How To Negotiate Debts
Now for the what might be the most popular article of this series. I personally was shocked and amazed by what I learned during my research on consumer debt. Read on and learn more about your rights.

Most Americans are worried about bill collectors calling on the telephone and harassing them. In fact, some Americans have even agreed to send money to complete starngers because they felt the stranger had some mystical power over them. Maybe they were threatened. Average people succumb to collection activity that coerces them into paying, perhaps out of fear.

How many of us simply cannot wait until the mailman shows up? Yeah right. It seems that we have a sixth sense about knowing what is in the mail. Without the use of a scanner, we seem to know which envelope contains a check, a letter from a friend, a card from Aunt Sue and a nasty letter fom a bill collector or attorney. These are letters that we fear most. For some reason we place them on the coffee table to be opened later. Maybe we wait until our spouse goes to sleep. After all, we don't want them to know the bad news.

Sometimes we place them in a drawer for safekeeping. That's right. We sure don't want to lose them. Who knows, someday we might get enough courage to open them.

Here is how the collection scenario plays out. It is easier to collect money within the first 60 days because it is fresh in your mind. that is when the collection folks will put on the pressure. Believe me when I tell you that they know more about your situation than you might think. They know whether or not you have a job, whether your wife is working and whether or not you use your credit cards and whether you make mortgage and car payments. They also know how much your payments are. So when I tell you they know the odds of collecting from you, that is true.

What do you do? Well, I'll tell you the very first thing to do. DO NOT TALK TO THE BILL COLLECTOR ON THE TELEPHONE! Inform them that you are going to notify their agency to communicate with you in writing only. This is your right under the Fair Debt Collection Practices Act. If you think that you have extra special skills on the telephone and have that desire to out-talk a collector, you might want to think again. They are trained in the art of convincing people to give them money. They also have the added incentive in that they are all on a commission basis.

They could care less if the baby is sick, or your spouse missed a few days of work. They only want what you have and that is money. Your best plan of attack in resolving these issues is to get them in writing. By doing this you can virtually turn bad debt into good credit.

In my next article I'll address just how this turn-around is accomplished.

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Negotiating Debts

In my last article I started discussing how to negotiate debts. In this article I'll cover the remainder of what you can and cannot do when addressing old debt.

Old debt doesn't go away unless you pay it off. It's that simple. The original creditor might have charged it off. It might be very close to the Statute of Limitations. When you have this knowledge, and some money to pay your old debt, you are in a position to negotiate terms. Remember in the last article when I stated to not talk to collectors on the telephone? That person most probably does NOT have any authority regarding your account. You have every right under the law to seek PROOF OF THE DEBT.

You might want to offer a "settlement offer". That means that in consideration for the creditior/collector accepting agreed upon funds, they have to agree to accept your offer as "paid in full". There have been a great number of letters written regarding paying off "charged off accounts". Present FICO scoring methodology works in this fashion. If an account is reported as "paid charged off account", this action LOWERS your credit score. Today many creditors/collectors are being more and more aware of this failure in the system and have agreed to report the account as "Paid As Agreed" or have "DELETED" the paying history entirely.

There are many pros and cons regarding this type of reporting. However, we cannot agree with the FICO manner in which credit scores are lowered when one tries to pay off old accounts. I have read both sides of the argument and one fact stands out. When you have the money, you have the power. Feel free to excercise your leverage in negotiating your payment terms.

Look at this from the perspective of the creditor/collection agency. Imagine you"re a businessman and you have 100 accounts owing you $1000 each and haven't heard anything for 4 years and suddenly all these past due accounts offered you $500 as payment in full for your updating the credit files. Would you take the money? That's a no-brainer. The most important part of this strategy is that no one has to resort to litigation, which is costly. The original creditor is happy and you might even get a new calendar at Christmas.

If you negotiate under this scenario and you do not have enough money to pay the debt all at once, then by all means negotiate monthly payments. DO NOT agree to make a payment by a certain date. Simply agree to pay so much per month. That way if you are a day or two late, you are not in violation of any agreement.

Now lets say you agreed to pay the account off over a period of 12 months. Well at the end of a six-month period you can show your lender that you are indeed serious about addressing your back debt. You have virtually turned bad credit into good credit. You have gotten the original creditor to discount your bill by 50% and he has agreed to finance you. You didn't borrow a dime to pay him back. Is that smart? You bet it is!

That pretty much sums up how to negotiate your debt when you have money as leverage. Later I'll go over doing the same if you have no money. In my next article I'll cover how the Statute of Limitations works.




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How To Negotiate Debts
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