Drowning in Debt - Try Debt Settlement Before Filing for Bankruptcy
For consumers with massive debt, debt settlement may provide a way to avoid filing for bankruptcy. Settling for less than actually owed has been used by borrowers and lenders as long as loans have been made.
Accepting a lower amount than the actual balance is a way for the lender to recoup some money; filing bankruptcy might cancel the entire amount.
For the consumer, this topic is less harmful to his credit rating than being bankrupt as it appears on the credit report for a shorter period of time. It's also easier to maintain self respect if you know you've paid as much as possible on your obligation.
This option can only work with unsecured debt. If your loan is secured with your home (mortgage) or car, the lender will simply take back the property if you fail to pay.
This is an area where a borrow can have some leverage and is most often used in the event of a financial crisis such as loss of job and income, serious health issues, or other major lifestyle change.
If you seriously cannot pay those bills, the lender's options are limited on unsecured loans. He can write it off as "bad debt" and sell the loan paper to a secondary collection agency for a few cents on the dollar or he can sue you for the money. In either case, you can't pay what you don't have.
To settle the amount owed for a lesser number requires calm negotiating skills. This is not the time for angst or anger as it is a business decision for the company you are dealing with. It is also not an area where you can "trust" or "assume" anything and it is necessary to conduct these negotiations in writing rather than by phone.
Do not hesitate to let the loan officer know you're attempting to settle to avoid filing for bankruptcy. If the lender is willing to pursue a settlement, it will take some time. Their first offer will not be the best for you and it may take serious negotiating to arrive at a dollar figure you can pay - and they agree to accept.
Even after you arrive at an agreeable debt settlement payoff, you should have that agreement in writing and signed (and in your hand) before writing a check to clear that obligation.
To YOUR successful debt settlement,
Trace Morgan
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