Preparing Mentally for Debt Negotiation
Once debt rises to a certain level, it starts to feel uncontrollable. At this point, many people feel the only recourse they have is to declare bankruptcy. In fact, this might be the worst option to take.
Bankruptcy puts a permanent blight on your credit rating, and can have long-term ramifications that can be impossible to overcome. Before resorting to bankruptcy, be sure you’ve explored every other possible option. Among these options is debt negotiation.
Direct negotiation with debt collectors or creditors can be nerve-wracking and intimidating, but it might be your best bet for clearing your debt and regaining control of your life. Make sure to be prepared before contacting your creditors, and your chances of a successful negotiation are much higher.
Video: Where to Turn When Bill Collectors Get Aggressive
Some things that will help you prepare mentally before entering into any negotiation:
Stay calm. Maintaining calm and focused will help you stay on the subject and make it harder for collectors to intimidate you or maneuver you into reacting out of fear.
Be prepared to stand your ground—don’t let them push you. Know ahead of time exactly how much you can afford to pay, and offer less than that. Then stick to your guns. If you let yourself be pushed or bullied into paying more than you can manage, you’ll end up back where you started.
Don’t seem desperate. Even if you are desperate to get your finances under control, don’t let them see you sweat. Remember, this is a negotiation, so stay cool and don’t beg.
The ball is in your court. Creditors and collection agencies will likely threaten to garnish your salary or freeze your bank accounts. This is largely an attempt to intimidate. In truth, creditors don’t want to take these steps. They can’t do this without taking legal action against you, which is expensive and time-consuming. In the long run, they’ll be better off negotiating with you, and they know this. You remember it, too, and you’ll be less likely to be swayed by threats.
Know your rights. Federal consumer laws limit the actions creditors can take against you. Take some time to research your rights, so you’ll know when and if they’re being infringed upon.
Some General Negotiation Tips
Don’t give out more information than necessary. Don’t give in to the temptation to tell your creditors why you can’t pay, or explain yourself beyond what the creditors have any right to know. It won’t help you, and in fact might have a negative effect on your negotiation.
Get everything in writing. Once you do come to an agreement, be sure to get all the details formalized in writing to prevent misunderstandings down the line.
Take detailed notes. Along the same lines, take plenty of notes during your discussions so you can compare them to any formalized papers you’re sent.
Don’t forget to negotiate your credit rating. While you’re working out how to settle your debt, don’t forget to ask your creditors to remove any negative marks from your credit rating now that your debt has been settled. This can make a big difference for you down the road.
Don’t pay anything without a bill. After you’ve made your agreement, don’t send any money until you’ve received a bill. You’ll want to maintain a legitimate paper trail for all stages of the process.
What to Have Ready Before Beginning Negotiations
Video: How to Negotiate with Your Credit Card Company
Validation that the bill is legitimate. Before negotiating any debt, be sure it’s legitimate. People make mistakes, and it’s possible a debt has been paid off, or might not even be yours in the first place.
Information about the statute of limitations on the particular debt. After a certain amount of time, debts become literally uncollectible. If the statute of limitations on your debt has passed, your creditors can’t pursue you for the money. And if the statute of limitations is close, you can use this as a point of negotiation.
A prioritized list of bills. Make a list of everything you owe and what bills are the highest priority. Just because collectors are pursuing you to pay a particular debt doesn’t mean it’s the highest priority.
Financial data to help you know how much you can realistically afford to pay. Know how much you can afford to pay toward your outstanding debt, and don’t promise more.
Something for taking notes. Don’t start any negotiations until you’re prepared to take detailed notes. You’ll want to be sure you have a record of everything that’s said during your discussions.