How To Negotiate With Creditors For Debt Restructuring
Dealing with debt can be really stressful. If you’ve fallen behind on payments or are struggling to keep up with minimums, negotiating with creditors could help provide some relief. The key is learning how to approach these conversations strategically to get the best possible terms.
Do Your Research First
Before reaching out to creditors, take some time to understand the debt restructuring options available. This will allow you to go into talks informed and prepared. Some things to research:
-- Types of Debt Relief – Debt consolidation, hardship programs, balance reductions, etc. Know what’s out there so you can request specific solutions. Reddit threads provide great overviews.
- Account Status – Review your full credit report and confirm the standing of each account. This includes missed payments, interest rates, fees, etc. AnnualCreditReport.com provides free reports.
- Company Policies – Check creditor websites and Quora posts to understand existing hardship programs, eligibility criteria, and processes.
Document key details for each credit account into a spreadsheet. This will help identify priorities and negotiate specifics during calls.
Lead With Empathy
When first reaching out, take an empathetic tone acknowledging the difficulties COVID has caused. Many creditors have hardship teams dedicated to assisting borrowers impacted by job loss, illness, etc.
Some sample opening lines:
- “I wanted to discuss my account as I’ve recently lost significant income due to COVID layoffs.”
- “I’m struggling with expenses due to COVID and wanted to see if any hardship programs could help provide temporary relief.”
- “With COVID negatively impacting finances, I’m having trouble keeping accounts current and wanted to discuss options.”
Position the call as seeking assistance versus demanding forgiveness. This builds goodwill and makes creditors more likely to offer support.
-Explain Your Situation
After opening the call empathetically, clearly explain your current financial situation. Provide specifics on job loss, medical bills, etc. that contribute to financial hardship.
Some details to cover:
- Income disruption due to COVID-19
- Monthly budget shortfalls
- Account payment priorities
The more context you can provide, the better creditors can assess need and eligibility for hardship programs. Submitting documentation upfront also helps support the request.
Listen To All Available Options
Before requesting a specific solution, listen and take notes on all debt restructuring options presented. Available programs vary significantly between creditors.
Some potential options include:
-- Reduced interest rates
- Suspended payments
- Waived late fees
- Balance reductions
Let the creditor walk through different assistance programs, eligibility criteria, durations, etc. Understanding all alternatives allows you to evaluate and select the optimal debt relief solution.
Request Specific Terms
Once the creditor has outlined available debt restructuring options, request your preferred solution. Clearly explain desired specifics like:
- Number of months suspended payments
- Interest rate reduction percentage
- Fees waived
- Balance reduction amount
Citing financial hardship due to COVID often provides justification for better-than-standard terms. The worst they can do is say no or present an alternative agreement.
-Get All Terms In Writing
Before agreeing to new debt repayment terms, request a written agreement outlining all details. This includes:
- Duration of special arrangement
- Modified interest rates
- Exact months with suspended payments
- Minimum payments after arrangement ends
- Contingencies for further hardship
Review this documentation carefully before signing. Get clarification on any vague language. You want no surprises down the road.
Continue Communicating As Needed
If additional financial challenges occur during the special debt arrangement, contact creditors quickly to discuss impacts. Demonstrating proactive communication makes creditors more likely to extend assistance programs if hardship continues longer than expected.
Explore Additional Debt Relief Options
Avvo, LawInfo, and FindLaw provide overviews on bankruptcy alternatives like debt management plans and debt settlement. If negotiating directly with creditors proves unsuccessful, meet with financial experts to evaluate supplemental debt relief solutions.
The most important thing is taking that first step to discuss your financial situation openly and honestly with creditors. This puts you in the best position to obtain temporary arrangements providing critical breathing room. With a little effort and empathy on both sides, significant progress can be made.
Additional Debt Restructuring Resources
Reddit Threads
- /r/PersonalFinance thread on negotiating with credit card companies
- /r/RedditForGrownups thread on negotiating medical debt
YouTube Videos
- How to Negotiate and Settle Your Debts with Creditors and Debt Collectors
- 4 Steps I Used to Negotiate Debt and Save $6,000