Reducing, renegotiating and settling debts is a last resort option. All honorable people want to pay what they owe in full. Paying any less feels like, and in a sense is, stealing.
But sometimes stuff just doesn't work out, and you have no way of paying the full amount. You may have started missing payments, or you know you are about to. What is the process for reducing debt, and by how much can you expect to do it?
It's based on the principle that something is better than nothing. Creditors want to get something back, rather than you go bankrupt and they get nothing. If they are convinced that you cannot pay the full amount, they will be open to negotiation and reducing your debt.
Generally, once you are three months behind in payments, credit card companies and creditors get nervous. They will contact you, and pressure you to pay your outstanding debts. This is the time to tell them the bitter truth, that you are going to not be able to pay the full amount. You would like to negotiate, and they will probably agree.
Before your three months of nonpayment have passed, you should be doing your financial homework. Look at your debt, look at your income, look at your expenses, and try to come up with a reasonable proposal for how much you can pay. Included in that proposal a payment schedule. What monthly amount, or over what period of time can you pay? Be honest, and the companies will be open to adjusting your case.
At some point, creditors may sell your debt to a collection agency. This usually happens after five months have passed without a payment. At that point, you now owe money to someone else entirely. The collection agency has purchased your debt for a fraction of its original cost, with the expectation that they will be able to get you to pay more than they did.
Example. Let's say you owe $22,000 to a credit card company. It's been five months, and they sell your debt to a collection agency for $3000. The collection agency will want to get as much as they can from you, and legally you owe them the full amount. Nonetheless, they will be happy with anything over $3000.
Had you reduced your debt before it was sold, you would probably have been able to settle for less.
By now you know the answer: it depends. It depends on how much you planned for and your ability. A general target to aim for would be 40 to 50%.
Yes, but it requires good negotiation skills. Hiring a lawyer might get you a better deal, but my cost you more money. On the other hand, your lack of experience in negotiating might deprive you of many options you are not aware of. Further, the time involved is time you could be using to be earning more money and getting back on your feet.
Representation for debt reduction is intended to save you money, not cost you money.
The following companies will talk to you for free to show how you can redice your debt with them:
Call them at at 1-866-603-6980 (9AM to 8PM Eastern time) for a free telephoned Debt Evaluation. Or click here to apply on their site. To be eligible for CuraDebt, you must have $10,000 or more in debt and be able to pay $200/month. CuraDebt does not operate in the following US states: CT, DE, GA, HI, ID, KS, KY, LA, ME, MT, ND, NH, NJ, NV, OH, OR, PA, PR, RI, SC, TN, UT, VT, WV and WY.