Home

Some Common Mistakes to Avoid While Negotiating for Debt Settlement

Isabella Rossellini, Financial Advisor, Business Expert,

Isabella Rossellini, Financial Advisor, Business Expert,

Negotiating with your creditors could be the most effective way of reducing your debt load and getting the much-needed relief from constant creditor threats and calls. When you realize that there could be no other way of coping with your debt apart from negotiating and settling your debt, you must avoid some of the most common mistakes. You must know what steps to take to enhance the possibilities of successful negotiations. Here are some of the most common pitfalls associated with debt settlement negotiations.

Having No Idea Whether Secured or Unsecured Debt

It would be quite a mistake if you cannot differentiate between a secured and unsecured debt. You must understand that there are two types of debts. Depending on the kind of debt there would be secured creditors and unsecured creditors.

Secured creditors are creditors who are interested in your assets including car, land, boat, and the like. When you fail to repay the debt, secured creditor would be free to claim your asset or property.

Unsecured creditors would be allowing debtors to buy credit or goods without any kind of security. If the debtor fails to pay up, this creditor does not have the right to claim any of the debtor’s assets or take back all the merchandise.

Often some unscrupulous unsecured creditors attempt to convince the debtor that actually they are supposed to be the secured creditors. Sometimes, they would even threaten to claim back all the merchandise.

You must examine all your existing debts and then determine if you are in a financial position to pay back 50 percent of the entire debt amount

If you read debt settlement reviews online then you would not be easily fooled by these thugs provided you have a clear idea whether your debt is unsecured or secured.

Ignoring the Creditor’s Strengths

Secured creditors are in a strong position as they have the right to repossess valuable assets or property. However, unsecured creditors are in an advantageous position as well from certain perspectives. They have the right to make numerous calls and send letters demanding payment until the negotiation process is over. They could feel free to sue the debtors in case of breach of contract. If you are a debtor, it is essential to be strong and carry on negotiating with the creditor. The unsecured creditors have the full freedom to garnish your wages provided they have won the lawsuit. They could even levy your precise bank account. You must stop making any direct deposits and keep lowest possible bank balance for protecting your money.

Not being Aware of the Weaknesses of Creditors

Your creditors would be having certain weaknesses that could be used cleverly to your advantage. You must find out if your creditors need to abide by the collection laws. If your creditors need to conform to the FDCPA (Fair Debt Collection Practices Act), they have to curb aggressive and unfair debt collection tactics.

Another weakness of creditors is that they need to spend an exorbitant amount in terms of fees for suing the debtor. Litigation is, therefore, almost always the last resort as it would involve wastage of money and time.

Not Taking Down Important Notes while Negotiating

Creditors are used to confusing you and often misleading you with conflicting information. Therefore, if you are a debtor, you should take down detailed negotiation related notes about when did you talk to the creditors, what was the discussion about in detail and precisely what amount was actually negotiated. Keep your notes ready. Refer to them whenever there is some sort of confusion in future. This way, you would never get fooled by unscrupulous creditors or collectors.

Conclusion

You must always see the big picture before opting for debt settlement. You must examine all your existing debts and then determine if you are in a financial position to pay back 50 percent of the entire debt amount. You must understand the fundamental concepts of debt settlement before negotiating with the creditors so that you could settle your debts effectively and get rid of financial burdens.