Too many people these days face an overwhelming mountain of debt and are at a loss of what to do. Often they think bankruptcy is their only way out. However, you have another debt settlement choice. Negotiate with your lenders in order to get the best outcome.
The nature of the negotiation process allows all parties involved to offer and counter offer until all are satisfied with the outcome. Once there are mutually agreeable terms finalized, the creditor will provide a debt settlement letter, which outlines the terms of the offer.
However, before you get to this stage, here are eight things you should know to help you negotiate the best debt settlement deal:
- A creditor can take legal action against you, and if they win the lawsuit, the lender may garnish your wages or have your property seized.
- While laws vary from state to state, creditors have a specific time limit during which they can actually file a suit to collect a debt.
- The statute of limitations on past due debts generally is no more than seven years.
- Consumers have the right to negotiate directly with creditors, for lower interest rates and settlement or pay off amounts. However, it is best to get assistance from a knowledgeable party such as a consumer credit counselor or debt settlement company.
- Always get your debt settlement agreement in writing. Otherwise, the creditor can raise the interest rate or can continue to collect on the outstanding balance owed.
- Depending on your financial situation, you may qualify for a debt settlement loan so you can pay off your creditors.
- Lenders generally are more willing to negotiate a reduced payoff amount if they know they will receive payment immediately.
- Depending on the amount, the IRS considers the savings you obtain from debt relief services as income and, therefore, it is taxable.