Debt sucks. And it really sucks if you can’t make your your payments each month. If your monthly payments are getting harder and harder to make, then here’s some real simple debt advice for you. Stop making the payments.
Your first priority is taking care of your immediate needs. You need shelter, food, utilities and transportation. Those 4 items always get paid first. Once those items have been taken care of, then you can take what’s left and put together a plan to deal with your creditors and any debt collection agencies that may be after you.
Option 1: Work Out a Payment Plan
If you have some money left over after taking care of the necessities each month. Your best bet is to work out a payment plan. The creditor wants to get their money back. Once they realize that you can’t meet the original payment plan (which you showed them by not making the payments) they will be more willing to work out a new payment plan with a lower payment. They would rather it take longer to get their money back than not get their money back at all.
Getting them to accept this situation is sometimes difficult. Especially if they are a company that tends to be pretty aggressive in their collection efforts. You have to explain that this is the maximum amount that you afford at this time and don’t budge on that.
If you can get them to accept a revised payment plan then have them send the new terms to you in writing. Don’t ever agree to anything without getting it in writing. Really. Never ever send a creditor or a debt collector money without having the terms of the new payment plan in writing.
Once you have a new payment plan in place then stick to it. Don’t work out something that you really can’t afford. If you have to go back to them a second time, they’ll be much less willing to work with you if you didn’t keep up your end of the deal the first time around.
Option 2: Settle The Debt
Your second option in this situation is to try to settle the debt. Most creditors or debt collectors are less willing to accept this unless it has been at least several months since you made a payment. The longer it has been the easier it will be to settle.
Again, don’t forget that the creditor wants to get their money back. From their perspective, the longer it has been since you’ve made a payment the less chance there is they will get their money back. They would rather get some money back than nothing at all.
If it has been a year or more since you’ve made a payment you may be able to settle for 50 cents on the dollar (or maybe even less.) Similar to setting up a payment plan, you need to call the creditor or debt collector and offer to settle the debt for a certain dollar amount. It’s a negotiation process. You may offer to send them 40% of the balance as payment in full and they may come back and say they’ll accept 65%. You can then continue to negotiate until you come to an agreement.
Again, once you’ve reached an agreement make sure you get it in writing for you send them a penny. Once you have it in writing, then send them a cashiers check or money order and keep a copy of that check and a copy of the letter from the creditor in a file for the rest of your life.
It can be intimidating when a collector is chasing you. But if you know what your options are and keep your cool, you can successfully negotiate with creditors and debt collection agencies.