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How to settle a debt and negotiate a settlement
Collectors have a limited amount of time to attempt collection of payments.
The first thing
you should do is determine if the statute of limitations for collecting
a debt in your state have passed. If the debt is older than the statute
of limitations, tell the bill collectors they are wasting their time by
harassing you for an un-collectable debt, as the original creditor or the
assigned collection agency cannot take you to court to get a judgment.
Most unsecured debts can be settled. An unsecured debt is a debt where
there is no collateral. Unsecured debts include medical bills, credit cards,
department store cards, personal loans, collection accounts, deficiency
balances remaining after foreclosure or repossession, and bounced checks.
There are a few creditors who will never compromise, but most will take
a less-than-full payment as settlement-in-full. You have the natural advantage
in debt settlement, because you have something the creditor wants. You
must hold out for your terms until the creditor gives you what you want.
Once you've written that settlement check, your advantage disappears.
Get your terms in writing before you even open your
checkbook. Everything must be in writing and, even then, you will probably
have to push to make the creditor live up to his end of the bargain.
Penalties and extra interest should be your first target
in reducing the debt Most companies would be agreeable to get you to pay
the original debt even without the extra penalties they add on and will
usually be willing to waive these fees.
Time is on your side. The longer the debt remains uncollected,
the better your chances will be of getting a good settlement. Eventually,
the creditor will have to consider the bad debt a loss in order to receive
a corporate tax write-off. This does not necessarily mean that they won't
pursue you for the debt. The corporation may then collect on the debt themselves,
sell or assign the debt to a collection agency, press for a judgment and
garnishment, or temporarily ignore the debt. The course of action chosen
by the creditor will vary widely between corporations and debts.
If you're contacted by more than one collection agency
for the same debt, it means that the original creditor has hired a secondary
or even tertiary collection agency. This indicates that the original creditor
and even the first collection agency has given up on you. A collection
agency that agrees to take your debt at this time will insist the original
creditor pay a fee (usually 50%-60% of what is owed). Many secondary and
tertiary agencies will take 33-55 cents on the dollar. If the agency hasn't
been able to reach you by phone but knows that you are receiving its letters,
it
may be willing to take even less.
Never look too eager to settle. If you tell a creditor
that you really need to get this debt settled to get into your dream home,
you can forget any kind of affordable settlement. The creditor will most
likely insist on the full balance.
Remind the creditor that the statute of limitations
is approaching on the debt and know when the statue is up on each debt
and be prepared to give the creditor the time line.
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