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Let’s make a deal: Trying debt negotiation before bankruptcy

One of the most frustrating parts of being in debt is the harassment you might be subjected to from debt-collection agencies. There are laws governing how and when creditors can contact you as well as how they can and cannot seek to collect debts. That being said, many collection agencies call incessantly and may even engage in unethical or illegal collection practices.

If you are considering bankruptcy but aren’t sure if it makes sense in your situation, you might want to try negotiating with debt collectors first. Today, we’ll share some tips to keep in mind when seeking to negotiate.

The good news is that by returning debt collectors’ phone calls (rather than avoiding the phone), you may find that certain creditors and collection agencies are willing to strike a deal. Even if your bills are way past due, they may be willing to set up a reasonable payment plan and/or allow you to settle the debt for less than the full balance.

It may be helpful to give the person you’re speaking to the short version of how you came into financial hardship. Perhaps you lost a job. Perhaps you suffered a medical or family emergency. Perhaps you struggled with drug or alcohol addiction and you have since gotten help.

You don’t need to be overly specific or tell a “sob story.” But by sharing a little about your struggles, the debt collector may be persuaded to strike a deal or be authorized to do so (if working for a larger company).

Before you call (or at least before you agree to any repayment plan) you should have some idea of what you can afford to pay. If you have a steady job, you may decide you can afford to pay 2 percent of your total credit card debt per month. Make sure you don’t offer or agree to anything you cannot afford long-term.

As a final note, make sure that whatever agreement you reach on the phone gets sent to you in writing. Debt collection agencies typically purchase debts from the original creditors for just pennies on the dollar. This means they can afford to accept less than the full amount. But some of these companies are also notorious for losing paperwork, failing to credit previous payments and failing to update their own records regarding deals/plans worked out with debtors.

If negotiation proves unsuccessful or the problem becomes overwhelming, please reach out to an experienced bankruptcy attorney who can help you understand your rights and options.

Source: Credit.com, “3 Things You Need When Negotiating With a Debt Collector,” Michael Bovee, June 3, 2014

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