Debt Settlement – Can I do it myself?

You've missed some payments on your loan or credit card and your lender is getting nasty. They may even have sold your debt on to a debt collector and now you have to deal with horrible telephone calls from them. You wish you could get rid of them but even if you remortgaged or borrowed some money from a relative you still wouldn't be able to raise enough money to pay off your debt. And then you hear about debt settlement. Your creditors agree to a debt settlement proposal where you pay a one-off reduced lump sum to get rid of your debt. You get up to 80% of your debt written off and walk away debt-free. It seems heaven-sent and the answer to all your problems.

In reality it doesn't always work out this easily and neatly. There can be an immense amount of stress and heartache when dealing with creditors who are determined to get you to pay 100% of the debt by any means possible. If you've never negotiated a debt settlement before, you could end up playing right into their hands. If you're on the edge of financial disaster, this could be the move that tips you over. How? Because of the tactics unscrupulous creditors will use on you. Creditors don't really like debt settlements because it deprives them of their profit. Here are a few of the pitfalls that can befall you if you are inexperienced at negotiating a debt settlement.

Accepting your cheque and then asking for more

When you spoke to your creditor on the phone, they said they were happy with the debt settlement you were proposing and asked you to send a letter about the offer with a cheque. You send the cheque off with a letter and wait for their confirmation that your debt is paid off. Instead, you get a letter thanking you for the payment and requesting a date when the rest will be paid.

Deadlines that you're not meant to meet

You have 14 days to accept a debt settlement offer from your lender. Trouble is, the letter is dated 12 days ago and the postmark shows your creditor didn't put it in the post until the day before. You have only two days to get it back to them and because you've been at work all day you've already missed the post for the day. You get your acceptance posted off the next day, you're your creditor 'claims' it didn't arrive in time so they assumed it was unacceptable to you. They demand 100% of their money back. You have to start all over again.

Misinterpreting terms and conditions

While writing letters to your creditors you try and make them sound formal and professional, but you haven't realized some of your comments could be open to misinterpretation and provide a loophole for your creditor to use to back out of agreements. For example, you promise to pay your creditor a sum of money on a particular date. You initiate a BACS transfer on that date, which will take three days to clear. Your creditor then claims you broke the terms of your agreement as the funds were not cleared on the date you specified. They thank you for your payment and demand the remaining balance of your debt.

Tying you up in knots on the phone

You offer a debt settlement to your creditor and they ask you to ring them to sort out the details. Suddenly you are faced with a rude aggressive member of staff who claims you lied on your original credit application form and threatens to take you to court for fraud. Frightened and believing you filled in the form incorrectly by accident, you agree to what they want. Only when you get off the phone and look through for your copy of your credit agreement do you realise you've been conned – it isn't filled in incorrectly at all. They lied to get you to agree to their demands.

Hassling your friends and family

Your 73 year old Great Aunt Nelly wants to help you get ahead in life and offers to give you a lump sum to offer as a debt settlement to your creditors. Enthusiastically you tell your creditor about it and they sweetly ask for Great Aunt Nelly's contact details to arrange the debt settlement payment with her. Suddenly Nelly is getting nasty phone calls for the full 100% of the debt and she can't take the stress. She rings you crying and frightened because the last call was so bad she had an angina attack. She decides she's going to scrape her life savings together to pay off the whole debt and stop the terrible phone calls.

Creditors have one thing – and only one thing – on their mind and it's not debt settlement; it's to get the full amount of the debt from you by any means they can. If they have to employ nasty tactics to do so they will. Unless you have a strong constitution, understand the tactics they could come at you at and have good negotiating skills that will help you to avoid falling prey to them.

Writeoffloan.com provide help and advice on how to settle your debts effectively with a full and final debt settlement. See our debt settlement faq section here for more information.

Tags: personal, money, debt, finance, Personal Loans