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Debt Negotiation Principles - Handling Debt Collectors

May 1, 2008
Being in debt can be a stressful time. Trying to find money to service the debt and pay all the necessary bills whilst being harassed by debt collectors can put unwanted stress on your personal and business relationships. Many people end up arguing with their spouse and many divorces are caused by money problems. So how do you avoid ending up in this situation. There are a few alternatives when it comes to solving your debt problems.

The most obvious option is to file for bankruptcy, however this should only be seen as a last resort. The bankruptcy laws have changed in the last few years making it harder to file for a liquidation bankruptcy that effectively clears all your debts. Indeed, before you even consider bankruptcy you may think about negotiating with your creditors to come to a solution that they will accept and keep your financial affairs out of the courts. This article will cover some debt negotiation principles that you may find useful should you go for this option.

Many people would be extremely nervous about approaching a creditor or debt collection service about outstanding debts that you have with them. The best way to get over this nervousness is to get informed about the debt collection process. In particular, your rights when it comes to debt collection services contacting you. There are strict laws that dictate how collection agencies can treat people they are contacting about debt. Any kind of harassment, such a verbal abuse, is against the law. They can't contact you at unsociable hours such as early morning or late at night. A place to start this research is the Federal Trade Commission. They have a website that gives details of the laws that govern debt collection practices. If you think a debt collector has violated these rules then you can contact the commission.

Debt collectors are generally paid on a commission basis so they will be hard nosed about pursuing the debt. By knowing your rights you can put them in their place if they overstep the mark.

The next thing to consider is your personal financial details. You need to know how much debt you owe. How this debt breaks down in terms of original debt and interest payments. You also need to work out how much you earn each month and how much money you have available to pay off the debt after essential expenses have been deducted. Basically, you need to get a firm understanding of what is a workable settlement or payment plan in the negotiation process. If you are not well versed in these facts and figures you won't be able to negotiate effectively.

Start off the negotiation by offering to pay less than the amount that you can afford to pay. This will give you some negotiating room during the meeting.

Keep all documentation and details of conversations that occur during the negotiation process. This may mean taping telephone conversations. This is legal if you mention that you intend to do this at the beginning of the conversation.

Don't be forced into a solution that you don't think is fair or that you can't handle financially. If this happens, you will not have solved the problem and the creditor will be reticent to negotiate with you again. If you come to some agreement, ask the creditor to remove any information that they have added to your credit report so that your credit score is not adversely affected.
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