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A Debt Settlement Company Owner Reveals Negotiation Strategies and Tips

A Debt Settlement Company Owner Reveals Negotiation Strategies and Tips

Settling debt can be a daunting process. As a debt settlement company owner for over 10 years, I’ve learned a lot about effective negotiation strategies and tips that can help consumers reach settlements with creditors. I’m here to share my insights so you can approach debt settlement prepared and empowered.

Know Your Rights

The first step is understanding your rights under the Fair Debt Collection Practices Act (FDCPA) [1]. This law prohibits debt collectors from using abusive tactics or false statements when collecting debts. Collectors can’t call you before 8am or after 9pm, contact you at work if you’ve asked them not to, or threaten you with violence. Knowing your rights arms you to call out any violations.

Research Debt Settlement Companies

Unfortunately, many predatory companies exist. Do your homework before choosing one. Check the Better Business Bureau and online reviews. Make sure they explain their fees and services in detail. Avoid any company that charges upfront fees – reputable companies collect fees from your settled savings. Be wary of bold claims that seem too good to be true. And know that non-profit credit counseling services offer debt management plans, not settlement.

Gather Documentation

To settle debts, you’ll need to provide documentation of your financial hardship. Collect recent pay stubs, bank statements, bills, and anything else showing income and expenses. Creditors will want proof of your inability to repay before accepting reduced settlements.

List All Debts

Make a list of all debts with the creditor name, account number, amount owed, interest rate, and last payment date. This helps you prioritize which to tackle first. Listing secured debts like auto loans and mortgages separately from unsecured debts like credit cards is also useful. Different negotiation strategies apply.

Understand How Settlements Work

Settling involves agreeing to pay a lump sum that is less than the total amount owed. Creditors often accept discounted settlements to avoid further delinquency. Just know that settled debts may be reported as “paid in full for less than the full balance”, impacting your credit score. Get any agreement for a reduced payoff in writing before sending payment.

Consider DIY Settlement

Hiring a debt company isn’t your only option. You can contact creditors directly and negotiate yourself. But having an experienced professional makes the process smoother. Evaluate if you can handle calls and documentation yourself or if you need assistance.

Pick Accounts Wisely

When selecting accounts to target first, consider prioritizing by interest rate, age of debt, and account status. Settling newer accounts in good standing is ideal. Creditors are more likely to negotiate if you’ve paid regularly and want to avoid charge-offs. Older charged-off debts tend to require smaller settlements too.

Know Optimal Settlement Amounts

Expect to settle for 50-60% of the total owed on recent accounts in good standing. Charged-off debts can be settled for 25-50% depending on age and whether the creditor has sold it to collections. Offer 30% first, then increase offers slowly to reach an acceptable settlement.

Make Your First Offer Low

Don’t start negotiations with your best offer. Many creditors begin discussions requiring 70-80% of the balance as a minimum first offer. Know that and make an initial low offer instead. Creditors expect this as part of the process. Then incrementally increase offers until you reach a settlement.

Prepare For Pushback

Expect creditors to counter your first offer asking for a higher amount. Don’t get discouraged. Stand firm if you know the offer aligns with typical settlement rates based on your research. Silence on your end prompts more concessions from them.

Follow Up Regularly

Settlement takes persistence. Don’t settle on the first offer. Keep calling and restating your case politely until you reach the best deal. Send updated financial documentation emphasizing continued hardship. Frequent follow up shows you’re serious about settling.

Get it in Writing

Always get the details of a settlement agreement in writing before sending payment. Signed letters specifying the reduced payoff amount and account status after payment are essential. And only make payments once the agreement is signed to ensure the deal is secured.

Consider Lump Sum Savings

The ideal way to settle is with a lump sum payment in cash or money order. Many creditors will knock off additional percentages if you can pay the entire reduced amount at once. Ask if they offer “cash discounts”. Saving up to make lump sum settlements can really pay off.

Settling debt yourself takes time and dedication. But you can negotiate directly with creditors successfully with the right strategies. Just know your rights, research reputable companies, document your finances, make reasonable offers, and follow up persistently to reach favorable settlements. Let me know if you have any other debt settlement questions!

[1] https://www.consumerfinance.gov/compliance/compliance-resources/other-applicable-requirements/fair-debt-collection-practices-act/

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