How to Negotiate the Best Debt Settlement Agreement

By Christina Austin

You’ve realized that you can’t afford to pay off your debts and have started to think about your options. You’ve considered ways to restructure your debt and, for various reasons, have landed on debt settlement. You’ve weighed whether you want to hire a company to help you get the best rate, or go out on your own and negotiate your own terms. You’ve decided to advocate for yourself and start preparing to call your debt collectors or original creditors to discuss repayment plans. If this sounds like you, we’re here to walk you through negotiating the best debt settlement.

We’ll help you understand the factors you should consider before you pick up the phone. Everyone’s conversation will be different and could greatly depend on the temperament of who you speak with, but we’ve found these strategies to be generally helpful.

When you should call 

How long your bill has been delinquent and, separately, how close it is to the end of the month are both factors you’ll want to consider before calling to negotiate a debt settlement. If you missed a payment just days ago, it’s way too early to consider debt settlement. If three months, or, even better, more than six months, have lapsed since your bill’s due date, you can build a much better case for your debt settlement candidacy. 

The day of the month can also influence a debt collector or creditor’s settlement offer. Oftentimes, who you’re negotiating with has a quota to meet each month. They may be more willing to make a deal on your terms near the end of the month, when they’re feeling the pressure to close more deals to meet their goal. 

What you should say

While you’re speaking to your creditor, you need to focus on the hardships you’ve experienced. Be very explicit in explaining why you haven’t been able to pay your bill. Have you lost your job? Have you been unable to work due to a medical reason? Do you have unexpected medical bills? Have you had to take in a family member? Whatever your situation, discuss how it has impacted your finances. The key here is to focus on the negative causes of your debt, versus any positive current or upcoming circumstances. 

Whatever you decide to share, make sure that it can be backed up through some sort of paperwork. Whether your hardships are documented in your credit report or in bank statements or bills, you’ll want a paper trail to validate your story. Do not embellish the truth to make your situation seem more dire. Being caught in a lie will erode the trust you’re trying to build. 

You may be asked why you choose to pay other bills, and not the one you’re negotiating. Have a reason for each one. For example, you prioritize paying your mortgage or rent because you don’t want to end up without a home. You pay for your car so you can get to and from work.

What you should do on the call

We’ve gone over what to say on the call, but there’s more to the conversation than just speaking. You’ll want to record the phone call so you can refer back to it in case discrepancies arise. Just be sure to ask before pressing record and to share why you’d like an audio version to refer back to. It’s also helpful to take notes for a quicker way to jog your memory of what was discussed.

It’s also important to be polite. While the discussion is not one you’re likely enthused about, you want to remain friendly and cordial. Keep in mind that you may also need to have multiple discussions. It’s not often that your situation will be resolved after one phone call, so be patient and prepared to call back multiple times, and possibly deal with different individuals. Your notes and recording will also be helpful when recalling earlier discussions to the different representatives you may deal with. 

Once you’ve reached an agreement that works for both parties, it’s very important that you get the terms in writing. Do not pay even a penny until you’ve read through the entire contract and have signed the document. Use your notes and recordings to make sure the contract aligns with what was agreed upon over the phone. If it doesn’t, alert your creditor and ensure a change is made. Using Kredit to have a conversation will help you keep any discussion in one easily accessible place. This can keep you organized and better equipped to negotiate and land on the best deal possible for your circumstances.

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