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One of the best ways to get debt paid off is through DIY debt negotiation. If you have the intestinal fortitude to try this, it means contacting each one of your lenders and offering to settle your debt on the spot but for much less than you actually owe. For this to work, you would need to be at least six months behind in your payments to each of your lenders. The reason for this is because very few companies are willing to talk debt settlement unless you are that far behind. Of course, you'll need to have the cash on hand to pay for those settlements. In fact, that's one of your bargaining points – if they settle with you you'll immediately send them the required amount of cash either by wire transfer or in the form of a cashier's check. Beyond this, here are some tips for DIY debt settlement.
- State your option. If you can successfully convince your creditors that it's either settle or you will file for bankruptcy, you should be able to negotiate some very favorable settlements.
- Check your state's statute of limitations. Every state has a certain number of years that your creditor or a collection agency has to try to collect a debt from you. If the statute of limitations has expired, the lender cannot legally try to recover by suing you. This is a case where instead of proposing a settlement you could just tell the collection agency to get lost.
- State your conditions. A priority and precondition for settling any debt should be getting your credit cleared. If you are sending in a debt settlement agreement offer or a counter offer, make sure your lender agrees to remove the negative item from your credit file. In fact, this needs to be a clearly stated contingent for settlement. And the lender must return a signed copy of your debt settlement offer – acknowledging agreement and acceptance.
- Get everything in writing with no exceptions. Your creditor may agree to your settlement offer orally but that's not enough. You need to make sure – in writing – that your creditor will abide by its word and remove negative credit entries from your credit report after a settlement. Keep everything in writing from your first debt settlement offer right up to the point where your creditor sends you a receipt acknowledging your payment.
Why most people hire a debt settlement company
While it is possible to do DIY debt settlement, most people turn to a debt settlement company to handle this for them. There are two reasons for this. First, most people do not have enough cash on hand to pay for the settlements they would negotiate and second, most people understand they are not very good negotiators. Professional debt settlement companies can almost always get better settlements then can people themselves. Plus, this becomes a form of debt consolidation because ultimately people who use a debt settlement company end up sending just one check a month to the settlement company until they complete their plan. This typically takes anywhere from 2 to 4 years.