Debt Settlement Simplified: A Step-by-Step Guide

Debt Settlement Simplified: A Step-By-Step Guide

When your debts are already past due, your creditors start transferring or selling them to collection agencies.

Collection agencies are third party businesses that buy debts from creditors and make their own attempt at collecting your debts. Others don’t buy accounts but simply charge a fee on the collected account. These collection agencies can be aggressive at collecting your debts, yet despite this aggressiveness, you might still be able to negotiate with them and settle your account for less than what you actually owe. On this post we try to simplify the steps to this process.

Verify the debt First thing you need to do is to know if the debt is actually yours and if the debt amount is correct. You can do this through a process called debt verification or validation, where you ask a collection agency for certain details of your debt. The collection agency is required to send you a validation notice within 5 days of contacting you. If you don’t respond or dispute the debt, it means that you agree that the debt is yours. However, if they can’t validate the debt, they are required to stop the collection.

Contact the debt collector If, after debt validation, the debt happens to be yours, then contact the collection agency and ask speak to an account manager, or someone who is in the position to make decisions about negotiating a debt. Ready your

account details and make sure you know the reason why you want to settle your debts. Merely stating that you want to negotiate may not be enough to convince them with your offer.

Now, there is no guarantee that collection agencies will even listen to you.

You just have to keep trying. As someone trying to settle your debts on your own, you are not very familiar with the actions of debt collectors and creditors. The only way to learn is do it, while expecting setbacks in the process.

Debt settlement companies are different because it’s their business and they talk to creditors and collectors every day. They know how to navigate the settlement process with ease and come up with a good settlement amount.

State your offer Start with the least amount while building your case for settlement with them.

Maybe you can start with a 20% offer and gradually increase it up to 50%.

But make sure that you have the lump sum ready because it increases your leverage on the negotiation process. Collection agencies would rather settle on a lump sum amount when it’s readily available, rather than not be paid at all.

Get everything in writing Once you and the debt collector agree on a settlement amount, ask for a written agreement. This will serve as a strong evidence that they are allowing you to pay less than your actual balance.

Pay the agreed amount Mail a check to the collection agency and request ask for a receipt or possibly a satisfaction letter, stating that you have already paid the amount in full.

Lastly, keep all these documents in a safe place.