Expert: Michael Brotherton - 1/19/2009

Question
Hello:

I have been trying to pay off my debts in the past 4 years and now am down to 2 creditors to deal with. Both accounts are about $10,000 each, so I have about $20,000 in debt.

If I want to deal with the creditors directly, instead of using a debt consolidation company or even an attorney,
what advice would you give so that I get a fair deal? What are the things I need to negotiate with them, such as knocking down or lowering the interest, payment plan, etc.? I want to pay them off but at the same time I want them to deal with me fairly.

Thank you for your help.

Answer
Of course the best deal would be for an offer for a lump sum settlement if you have the resources but off the bat you should be able to get a rate reduction under certain conditions. One condition is you may have to stop using the card or close the account. Don't worry about credit scores you can get them back up. Priority should be to get out of debt. Your scores will improve over a short term.

You may be able to qualify on your own for a hardship program but you will need to go through their hardship or credit counseling dept. Don't count on customer service to help. They are inundated with requests to cut interest and to make other concessions and they are trained to resist as much as possible without running off their customers.

Be assertive and if you are looking for major concessions don't be afraid to ask and don't take no for an answer. Climb the chain of command if you have to. Be diplomatic and don't burn your bridge with them but be aggressive. Do not make threats of going elsewhere or file bk as they hear this a all the time and it doesn't affect them so they could care less.

There are limits on minimum payments which most adhere to as a matter of policy if your account is active and not a charge off or collection account. These types of accounts are more flexible.

If you want a settlement start as low as 20%. Don't be afraid to ask. You just might get what you ask for. Inform the creditor of any hardships you are facing but limit your information to general information. Don't let them get too nosy. Put your budget to paper and show them in black and white that your budget is tight or upside down. Also provide any supporting documents to back up any serious hardship.

Before you talk to anyone about the offer call them and ask for a fax number and ask them for the hardship or credit counseling dept fax and phone number, then fax the info to them, give them a couple of days to look at the info and follow up with a phone call.

Go for it. Don't be afraid or intimidated by them and you will succeed. Keep me posted on your progress. GOOD LUCK TO YOU!