Doing Debt Settlement By Yourself

Before considering debt settlement as a solution for their unsecured debt, consumers are strongly cautioned to first consider the negative consequences that may follow from doing so. Specifically, they should consider the serious credit damage they will suffer as a result of not making any payments to their creditors on the accounts involved.

They should also consider the tax liability that they will be creating for themselves if the debt negotiations are indeed successful. The tax liability that is created will treat the forgiven portion of the settled debt as income, and therefore consumers should plan for the potential liability in advance to make sure that they don’t get free from their creditors and fall into the hands of the IRS instead.

The credit damage that takes place from not paying their creditors is a necessary part of the process of successful debt settlement, as their creditors must believe that settlement represents their best chance of recovering any money at all from the borrower. Just as long as consumers are aware that debt settlement will include these and other shortcomings, and they can reason that they are more than offset by the potential advantages to be gained, then debt settlement can be considered as a solution for their debt problem.

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Some consumers with unsecured debt problems have decided that they can save the most money with debt settlement by handling the negotiations themselves. While in theory this may be true, one needs to be aware of the potential risks as well as the rewards of choosing not to involve professional debt counselors in their debt problem.

Before attempting to negotiate with your creditors by yourself, you need to have a good understanding of what the process is likely to entail, how to prepare yourself properly, and also the possible consequences of mishandling the negotiations. After doing so, you will be in a better position to make the decision of the appropriate means for achieving your goal of becoming debt-free.

Debt Settlement Takes Patience

The first thing you need to consider is that debt settlement can be a long, drawn-out process which requires a mix of patience, persistence and knowledge. Some creditors may not be interested in negotiation at all, and instead will simply use your call as an inbound debt collection opportunity. You will need to be firm but cordial about your intentions to settle the unsecured debt, while at the same time making sure that you don’t sound too eager. This may prove to be challenging, as some creditors will use scare tactics or just flat-out refuse to negotiate. A lot of individuals are unaware of their consumer rights, so many creditors use this to their advantage and attempt to intimidate consumers. Be sure to always know your consumer rights, which you can learn about by reviewing the Fair Debt Collection Practices.

If you feel like you can’t move forward, don’t lose your cool. End the phone call politely and try calling them again at a later date. It’s not uncommon for creditors to remain firm during the early contacts. Resolve to be patient and just accept the fact that the process may become tedious and time-consuming, and be prepared for the possibility that particular creditors ultimately may never agree to negotiate with you at all. But do make sure that when you do speak with a representative, take good, detailed notes to refer to later on.

Consider All Debt Settlement Offers First

Another important consideration involves how to handle situations in which the creditor makes a debt settlement offer. Normally it isn’t a good idea to accept their first offer. Instead, tell them that you need time to consider their offer or to discuss it with your spouse, and arrange to speak with them again in the next day or two. When you speak with them again, counter with a lower debt settlement amount and explain that you are in a severe financial hardship (and never another explanation). If they seem unwilling to give you a better offer, let them know that theirs is just one of several accounts that you need to settle, and that you are negotiating with them in good faith in order to avoid having to declare bankruptcy. If they do make what you think is a good offer, always ask them to send it to you in writing. Then read what they send you very carefully to verify that it’s accurate before sending them any money.

Prepare for the Potential Consequences

Lastly, you need to consider the possible consequences of handling your own negotiation process poorly. Not only will you likely not receive a good debt settlement offer, but you may also jeopardize the situation for anyone (including a professional debt counselor) to come along later and try to clean up your mess. Accept the fact that a creditor is more likely to negotiate with (much less speak with) a debt professional who may represent dozens of accounts or more to them, than they are with you when you represent only a single account. Therefore, a debt counselor with experience and knowledge and established contacts at each creditor will be more likely to obtain a better debt settlement offer. He will also be able to recognize a truly good offer when one is finally put on the table.

While this discussion is not intended to be comprehensive in all the aspects of handling debt settlement by yourself (even a book on the subject would likely omit some details), it should serve as a cursory overview for those who may be looking to save themselves the costs of enrolling in a debt settlement program. Consumers are again urged to consider all their debt relief options before accepting the shortcomings of debt settlement too readily. For instance, credit counseling and a debt management plan (DMP) offer potent debt relief benefits without doing credit score damage or creating a tax liability.