While it is advised that you enlist the help of a professional, debt settlement is something that you can accomplish on your own. If you wish to go about the whole process by yourself, you need to understand every step involved.

The goal of debt settlement is to negotiate with your creditors to arrive at an agreed amount that is lower than your debt balance. The idea is to pay for this settlement amount and once completed, the rest of the debt is forgiven. The average reduction in this debt relief option is usually between 30% to 50%. That means if you have an outstanding balance of $10,000 and the creditor agrees to a 50% settlement amount, you only have to pay for $5,000 and the rest will be forgiven. The usual process takes around to 24-48 months.

The reason why debt settlement experts are good at what they do is because of their knowledge of the process, their negotiation experience and the fact that they are not ruled by their emotions. You need to do the same. Negotiating with your creditors to allow debt reduction is not a walk in the park. It can be frustrating, intimidating, and very stressful. Of the three factors mentioned, you will only be lacking in experience. But what you lack in experience can be compensated by what you know of the settlement procedure.

So what is involved in the settlement process?

Assuming that you have analyzed your finances and you know how much your disposable income amounts to, the first step is to stop paying your creditors. Yes it will have a negative impact on your credit score but this is a must. One of the main reasons why your creditors will agree to settle is with proof of your financial crisis and an obvious effect of that is being unable to pay for your credits.

The next step is saving for the settlement fund that you will use later on. You will not really use your money on something else. Instead of sending it to the creditor, you will put it in a separate account month on month.

Once you stop paying your creditors, they will start calling you. Be polite, courteous and on your best behaviour even if they are not. Try to be patient and consistent in your financial crisis story. And always state the possibility of filing for bankruptcy.

When the time is right - usually between 4-6 months after you missed a payment, you can begin dropping hints of a settlement. Say something like, “I have heard about people going into debt settlement. Is that something that we can possibly go through?”

In your offer, begin with the lowest amount - $0.25 to a dollar. The creditor/collector will negotiate for a higher amount and you can go back and forth. If you cannot accept their proposal, just state that you will think about it and see if you can come up with the funds. When they call again, say that the last amount is something that you cannot reach and state a new proposal. Just be patient and never agree on an amount that you cannot afford.

You should also expect that a few of your proposals will be met with a NO. This is normal. Just keep going with your negotiations. Always say that if this settlement fails, you may have to resort to bankruptcy.

As you are going through your negotiations, be patient and know that time is on your side. The longer it takes for you to pay, the more desperate the creditor will be and willing to settle. Of course, you should not rule out that they may indeed be sued in court. If you are in a real financial crisis, this should not scare you at all. You may end up being discharged of your debts without making a single payment to your creditors.

Remember to put everything in writing. All the correspondences, verbal agreements and negotiations must be translated in black and white. If the creditor agrees to settle with you, do not send any payment until the agreement is in writing and signed by someone who is authorized to represent the creditor you originally owe the debt to.

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