Mark Carolin

Debt negotiation is a common process. During this process, people hired by a debtor try and negotiate the loan amount with credit companies. Generally after this negotiation, the loan amount negotiated is not just lower, the debtor is also freed from all the loans after consolidation of all loans after this one.

 

Debt negotiation helps all those who have been experiencing financial difficulties. It is not for all those experiencing difficulties, it is also for those who are found to be totally unable to pay off such loans. This study is made by the counselors hired by the person. The credit company may or may not agree to this negotiation, if it feels that the person can very well pay off the loan.

 

The benefit of negotiation happens that the person who is in debt can pay off at least minimum of loan amount. This saves the credit company from hiring legal teams, filing foreclosure and also trying to get money by selling person’s assets. However, in case where the fixed asset is not mortgaged, it is common that the company may end up losing up all the money that is owned by the creditor.

 

Debt negotiation is one of the common processes during debt settlement and debt arbitration. This negotiation needs to be done, in case the debt is to be repaid at least in part to the company. Negotiation will always help a debtor against bankruptcies.

 

During debt negotiation there are a variety of things taken under consideration. These are the earning capacity, number of persons earning, total income of the family as against total debt and liabilities. This also ascertains whether or not the family or individual will be able to repay the loan. If it is found that the loan cannot be repaid rather only the amount if negotiated can be repaid, in such cases companies allow debt negotiation. If it is found that the family or individual can repay loan the credit company will try to get complete amount from the person.

 

Most of the times, debt negotiation is done by a credit counselor. This could be a person working privately for a company or could be an independent entity. In both cases, it is the main aim of this person to get your debt reduced considerably. You may have to pay this person, however it does not need to be immediate. At times the payment is determined depending upon how much debt has been actually reduced. Commission payment is always the calculated as percentage of amount reduced in debt. Payment terms are determined by both parties mutually.

 

Upon reduction in debt, terms of payment, rate of interest and duration of the loan is also determined. Generally after debt negotiation, fresh papers are prepared. It depends on the credit company to determine whether or not credit rating of this person would be affected.

 

Debt negotiation is often the most fruitful way of getting money back from the debtor, it saves time and also it saves the debtor his dignity. It can also help the debtor in stabilizing his financial status.

 

Learn more about debt negotiation services here!

 

http://www.curadebt.com/about.asp

 

http://www.curadebt.com/

 

 

Creditors will accept debt negotiation for several reasons.  The first reason is getting something is better than getting nothing.  Debt negotiation is better than forcing a debtor into bankruptcy.  The creditor will receive nothing if the bankruptcy is allowed.  By negotiating the debt, the creditor will receive a percentage of what is owed.  They also will not have to expend more effort and money on trying to collect the debt.

A second reason for creditors accepting debt negotiations is the creditor has already figured it in as a cost of doing business.  As an example, the credit card companies know that a certain percentage of money owed to them will be written off.  The offset for these write-offs is charging a higher interest rate to many customers.  Credit card companies earn billions of dollars a year in profit.  They have accounted for negotiated debt reduction in their business plan.

A third reason, using the credit card companies as an example, the higher interest rates to cover write-offs, allows for more profit from those paying debtors.

Other businesses negotiate debts for basically the first reason.  Getting a debt settled is a means to get some money out of the debtor.  Clearing the books of bad or under performing debts keeps the business clean and is less costly in the long run. 

Creditors will accept debt negotiation or reduction when confronted with the reality of take this offer or get nothing.  The alternative is the debtor files for bankruptcy; it is allowed and the creditor receives nothing.  This is a huge incentive to negotiate.

 

Debt Negotiation happens in two basic ways: by a professional, or by yourself.

Here are a few strategies the professionals use when handling a debt negotiation on your behalf.

In this discussion, we are only looking at “unsecured debts”, which includes credit cards or medical debts most commonly. It simply means any debt which has no collateral, such as a car loan, home loan, boat loan, etc.

Before you start any debt negotiation, you should expect that you’ll take a “hit” on your credit score. Any creditor who lent you money is not going to just let you get out of paying any less than the full balance and let you retain perfect credit.

That said, all credit automatically repairs itself when all future payments are made on time. In many cases someone can suffer credit damage from a debt negotiation and within two years, provided all future payments are made on time, have an excellent “A+” 730+ fico score.

In addition, many people confuse credit “Score” and credit “ability”. If you have a perfect 850 fico score, but do not qualify for more financing because you are carrying too much debt already relative to your income, then you have zero credit ability. Frankly, the creditors have worked hard to make you believe these are the same, so that you keep paying. If you are looking for debt negotatiation, you are probably carrying too much debt. If you’re willing to stop using your credit cards for a while and don’t plan to buy a home or car in the near future, then it may save you many thousands of dollars.

The most common strategy the professionals use is to stop making payments, and instead save the money up so that a single lump-sum payment can be offered.

In addition to this, a debt negotiation professional will also prepare a specially formatted letter containing a legitimate reason why you could afford the debt before, but cannot afford it any longer, and if things continue, it will end in bankruptcy or charge-off. This usually contains a factual story, referred to by professionals as a “hardship”. This can include medical events, loss of job or income, dramatic increase in expenses due to some sudden unforseen reason i.e. divorce or adjustable mortgage changes, or a natural disaster.

There are a few reasons why a debt negotiation professional can reach a better, lower debt negotiation settlement offer than you doing it yourself.

First, debt negotiation companies deal with thousands of clients at a time, so they’re able to reach higher up the chain of command. A consumer will usually reach a lower-level technician, who is not authorized much leeway for debt negotiation. An attorney or non-attorney professional can speak with a vice president because they are offering sometimes hundreds of thousands of dollars spread over many accounts based on certain status and net discount amount.

Second, debt negotiation companies know how to say and how to package what needs to be said, at the right time, to the right people.

Third a debt negotiation expert knows the system and averages for each company. A creditor has the legal right to sue you in court for non payment, which could result in a legal judgement, which can mean garnishment of wages directly from your employer, additional court fees, and more credit damage. A professional debt negotiation company can minimize the risk of being sued while still reaching a settlement around 42 cents on the dollar.

Last, because a debt negotiation company has either attorneys on staff, or non-attorney trained negotiators on staff (depending on your state’s laws, and your file), they know the creditor’s tricks. The credit card industry makes literally billions of dollars per year in profit, and they don’t make this by being nice. However nice the customer service representative may seem on the phone, they have one agenda: to get as much money from you as possible. Most typically, for anyone in a bit of debt trouble, the creditor will suggest “Credit Counseling”.

The dirty secret about credit counseling is that “Credit Counseling” was invented by the credit card companies. They want you to feel like they’re helping, but when you enroll in these programs, you’ll repay 100% of your debt plus interest, suffer credit damage, and they’ll often collect a monthly fee on top of it ($49 a month x 48 months, for example is $2,352 in fees, not including interest). They usually won’t tell you this, but they also get a 15% “fair share fee” from the credit card company, so the IRS has revoked the “non-profit” status of many of these companies.

Like plumbing, taxes, or fixing your computer, you can handle debt negotiation yourself, or you can hire a professional. Those willing to educate themselves to learn how to do it right can definitely save some money. That said, for the reasons stated above, often times the settlement amount offered on a debt negotiation you conduct yourself may not be as discounted as what a professional may get, and therefore the service in almost all cases pays for itself. For example, if you get offered $.80 on the dollar, but a professional gets $.42, then it’s actually cheaper even with the cost of service to have a debt negotiation service handle your case.

One dangerous byproduct of staying in debt is not having enough time to invest for retirement. Most people don’t know exactly how much money they’ll need to retire. Do you? The sooner you use debt negotiation to clear your debts, the sooner you can build your investments to ensure you can retire the way you want – instead of living your golden years as a burden on family, with lower standard of living, or working past retirement.

Publicity is one of the most influential factors on people’s decisions. If your product is well promoted, it does not mean it has the best quality. The product itself can be standard and will be used by people anyway.

Debt negotiation is one of the most advertised services in the web. LOWER PAYMENT BY 45% – ENJOY A DEBT FREE LIFE IN LESS THAN 6 MONTHS – and so on and so forth. Ads are everywhere on the net, and they focus in attracting possible clients, not in the details. After someone hits on an ad, the rest lies on the hands of the online marketers or in some computerized automated service.

People need to learn more about the process itself, and if debt negotiation is the proper way to go. Self-teaching about the pros and cons of debt negotiation is a good first step. One of the first things to know is that the term “debt negotiation” is also known as debt arbitration or debt settlement.

To begin with, a lender has little motivation to arbitrate anything less than the full amount of the debt unless the person is two to three months behind in payment. But remember that debt negotiation, a legal method as it is, fits the description of a last-resort measure. The truth of the matter is that debt negotiation is one step away from filing for bankruptcy. You have to consider that your lender gave you the money or property in good faith, so he or she has every right to expect that the loan be repaid in no less than full amount.

Even though you may want to repay the loan or debt in full, this is not always possible because you do not have the means – not now and not in the foreseeable future. This is where debt negotiation comes into play. It may be your only logical course of action and way out.

Katherine Cole applied for debt negotiation a few months ago seeking professional counseling due to the excessive debts. Elizabeth Laurent, professional counselor, took her case and worked with her in order to set up a payment plan to ensure the payment of the debts. Creditors will see that she is making and effort and will be more accessible to make deals.

Katherine Cole:

Is debt negotiation bad?

Elizabeth Laurent:

If you are delinquent, debt negotiation can be the best decision to make. Reach out for professional counseling on debt negotiation and let a team of negotiators give you advice on what to do and how to face you debt situation. They will certainly deal with your creditors and lighten your current situation.

Katherine Cole:

Will debt negotiation affect my credit?

Elizabeth Laurent:

Yes. Debt negotiation will show in credit reports; and as long as you stay in the debt negotiation program, you will not be able to apply for new loans or credit lines. You will have to stay away from any kind of credit services. On the other hand, once you finish paying off your debts and successfully leaving from the program your, credit score will start picking up as long as you keep yourself away from debt.

Katherine Cole:

What will debt negotiation do for my current situation?

Elizabeth Laurent:

After you apply for the debt negotiation process, you hand the control over to professional counselors called negotiators, who will first stop the collection process and will make it clear that any kind of communication between you, as the debtor, and creditors will go through the debt negotiation company.

Later on, a negotiator will set up a repayment plan that you can handle. The main goal is to avoid your incurring more debt, and you are able to make your current payments. Creditors feel more confident when the debtor has applied for a debt negotiation program because this means the person is making an effort and is interested in paying off the debt. The negotiator will make a deal with each creditor in order to lower the monthly payment and most importantly, lower the interest charge.

Although debt negotiation is a great way to avoid bankruptcy and free yourself from delinquent debt, people have to consider that there are many debt relief solutions. It all depends on what type of debt you have and how bad it is. Take a look at curadebt.com and seek professional help.

We have different articles on interesting topics and current and former clients’ experiences with our programs. Take a look at the different situations on Debt Negotiation and debt related topics that people can fall into and how to keep yourself a debt free person.

Check these links to learn more:

http://debtsettlementcalifornia2.blogspot.com/

http://www.debt-negotiation-settlement.com

Let’s face it, creditors loath trying to collect delinquent debt. It’s not so much the fact that the money is late. It’s because most creditors are not treated fairly by the majority of businesses in financial hardship. Debtors (most of whom “go it alone” in dealing with collectors) tend to ignore collection efforts, or they respond with false promises and misinformation. The false promises made to creditors erode credibility, and the only option creditors have in protecting their rights is litigation. It’s no wonder our court system is so clogged with cases.

Whether you “go it alone” or hire a professional debt management company, if you have overdue debt that needs resolution you will benefit greatly by making a strong effort to improve your credibility standing with creditors and/or collectors. Improving credibility will result in real concessions to you from creditors, creating more favorable repayment terms and further reductions in the amount creditors will accept to settle your debt.

Why is credibility so important?

Because debt negotiation is a relationship-driven activity. The quality of the “debtor-creditor” relationship between the debtor and the creditor drives the timeliness of communications, the exchange of payment and settlement offers, the exchange and review of financial information, the creditor’s perception of the debtor’s cash flow problems, the creditor/collector’s willingness to “go to the mat” with superiors to get reasonable offers considered, etc. Improved credibility can enable you to increase the quality of the debtor-creditor relationship by turning your creditors into allies, effectively getting creditors “on your side”.

Failing to improve a bad credibility perception will leave a debtor in a low priority position with creditors, and statistics show that in these situations debt negotiations will take longer, will be less meaningful, will produce less settlements, and will cost both parties more to administer. In addition, the settlements that do occur will be less favorable to you. This is because an insufficient relationship exists (post-debt) to drive an honest and reasonable settlement. In the debt management industry, this phenomenon is known as a “lack of momentum”.

How can bad credibility be repaired?

First, be honest and prompt with the creditor. Tell them that you have cash flow issues, and answer any reasonable questions from the creditor or collector honestly. Give them a firm date and time for you to update them, keeping them “in the loop” of your business activity, even if you have no current funds to pay. The boost in trust and respect in your relationship that you get from creditors by keeping these small promises is quite valuable, and many people overlook this.

Second, be ready to exchange detailed financial information with the creditor. If you want, offer to provide it up front, instead of being asked. The financials “back you up”, they give the creditor extra confidence in your position, and they give the credit negotiator “ammunition” to go to superiors for approvals. This further builds relationship momentum and allows adjusters to correctly code your file.

Third, have some meaningful information for a creditor each time you communicate so that a creditor will know that the settlement process is moving forward at all times, and that there is new information to discuss and consider. This helps prevent your file status from being recoded in the future for legal action, and your relationship with the creditor or collector remains as positive as possible.

Fourth, the interpersonal relationship between debtor and creditor is also important, so assign a new contact person from your business to communicate with the creditor to help eliminate the bad credibility of past actions or past contact people. This allows for a fresh start between the parties, with fresh, accurate information. This, in turn, equates to fresh creditor hope of a reasonable return on their collection attempts. Less lawsuits are filed, less wasteful communications occur, and the entire credit collection and credit reporting system becomes more efficient.

Fifth, make reasonable offers to the creditor based on supportable projections of future revenue and expenses, and be ready to talk about your receivables. However, don’t ever bind yourself individually on any business settlement, and don’t be bullied by a collector into a settlement you know cannot be funded. A debtor-creditor relationship is a give and take process, not a slugfest.

Sixth, produce and/or update your business website (including testimonials, if possible), so the creditor can be confident that it has a working relationship with a modern, ongoing business that has the capacity to make a reasonable settlement offer. Some creditors check debtor websites to verify addresses, phone numbers, and business status. Correctly matching information gives creditors more confidence.

Seventh, your relationship with your own business is also important, so keep your business legal structure current. Make sure your filings (corporate documents, taxes, permit fees) with the state in which the business is domiciled are current, paid and compliant with law. If the business’s filings with the government are lax, and if the business in turn loses it’s legal status, a creditor or collector who aquires this information may try to use it to their advantage.

In the end, successful credibility repair will help show creditors how your economic situation demands compromise and how reasonable your offers are, using standard business indicators that are easily understood. Your efforts to boost the debtor-creditor relationship status send a clear signal to creditors that you are acting responsibly and consider their interests important. Creditors will become more flexible and cooperative, and without their cooperation no solution can be had.