A Look At A Typical Debt Settlement Strategy

The goal of any debt settlement strategy is to try and convince the creditor to settle the debt for as little money as possible, and in as short a time period as possible. So how can you accomplish this? Well, in most cases the following four step strategy can employed successfully when trying to negotiate the best settlement deal possible.

Step #1

If you haven't already done so, the first step in a typical debt settlement strategy is to stop making payments to all of your unsecured creditors. (It is important to note however, that you should continue to pay all of your secured creditors if at all possible.)

This first step serves two purposes.

First, it sends a message to your creditors that you are unable to make the payments on your debt. This is important, as you want to give your creditors the impression that they may never collect on the debt.

Second, it allows you to take the monthly payment amounts that you would normally send to your creditors, and begin to build a "war chest" of money with which you will ultimately use to settle your debts down the road.

Step #2

Contact your creditors to begin the negotiation process.

Step #3

Negotiations between you and your creditors take place, and at the same time you compile the funds necessary to pay off any debt settlement agreement in the future. This is the longest "step" in the settlement strategy as it can take anywhere from 6 to 36 months to both acquire enough money and to reach a settlement on all of your accounts. During this time period your credit score and credit report will suffer greatly. As this happens, your creditors will take notice and be more inclined to settle the debt for a discount rather than risk getting nothing in the future.

Step #4

Accept the debt settlement amount offered by your creditors and pay off debts from the money you have saved up. By using this type of strategy to settle your debts it is not uncommon to attain a 60% to 70% discount.

"Who" Should Carry Out The Debt Settlement Strategy?

You basically have four options when it comes to who can implement this type of debt settlement strategy on your behalf.

1. Do it yourself. You negotiate the settlement of your debts all by yourself. Now, if you choose this route, at the very least educate yourself with a good course on how to settle your own debts.

2. Hire a debt settlement company. If you have neither the inclination nor the desire to deal with the complexities and stresses involved in negotiating your own debt settlement, then hiring a professional debt settlement company is an option. They will handle all contact with your creditors and ultimately negotiate the settlement on your behalf.

3. Hire a debt lawyer. A debt lawyer, or a lawyer that offers debt settlement and bankruptcy services, is also an option. A good lawyer can also advise you as to the pros and cons of both the bankruptcy route and the debt settlement route.

4. Debt settlement coaching. This option is a combination of options #1 and 2. Under this scenario you do all the negotiating with your creditors but with the guidance and input of a professional debt negotiator behind you.

At the very least I would recommend speaking to a bankruptcy attorney prior to executing a debt settlement strategy, regardless of whether you are considering doing the negotiating yourself or hiring a professional debt settlement company. They can explain further the pros and cons associated with both options and will likely keep you from going down the wrong path.

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