What You Must Know Before Attepting Debt Negotiation


Visitors: 495

Debt negotiation should be viewed as a last-resort measure before filing bankruptcy. A lender has little motivation to accept a pay off for less than the full amount unless the debtor is already months behind on bills. Debt negotiation, also sometimes called debt settlement or debt arbitration, is best reserved for use when debt is seriously delinquent. If you’re considering debt negotiation, it’s important to be informed about all the options available to help you deal with your debt.

Contact your creditors, negotiate payment arrangements, ask permission to skip a payment, or ask for a lower interest rate. These are simple measures you can take as a first step to manage your debt. Try these options first before you attempt any other course of action.

If you have a large amount of debt, a qualified credit counseling service may be able to help you reduce payments and prevent further damage to your credit report. Although credit counseling can provide consumers with valuable assistance, some firms exist only to cheat their unknowing clients. These companies use their non-profit status to attract customers who are then scamed into paying large upfront fees. Those fees are then sometimes funneled to for-profit companies. Recently, the FTC and IRS issued the following tips for choosing a credit counseling organization.

* Pay very careful attention to the fees you are being charged, the nature of the services the agency offers, and the terms of the contract. * Check to make sure that your creditors are willing to work with the agency the you plan to choose * Consider using agencies that offer actual counseling and education, instead of simply enrolling all clients in a debt management program

Another option for consumers overwhelmed by debt is to consolidate debt by establishing a new loan (debt consolidation loan) with lower monthly payments. A debt consolidation loan helps manage your debt because the loan is usually over a longer period of time and possibly at a lower interest rate than your existing debt. Consolidation should be used when debts are mostly current.

While there are many options to help you cope with unmanageable debt, sometimes debt negotiation may be the only appropriate course of action remaining. For example, debt negotiation would be a good course of action if a long-forgotten debt is the only bad entry on your credit report. However, keep in mind, you may owe income tax on the debt owed. Any forgiven debts of $600 or more are considered income to the consumer. If you do negotate a debt down, the creditor will send you and the IRS a Form 1099-C at the end of the tax year.

As a general safety precaution, anyone who plans on using a third party to handle their finances should remember to check them out with the Better Business Bureau and State Attorney General's Office of Consumer Protection. These agencies keep records of credit repair services that have mislead their customers about the impact the service would have on their credit rating, the fees involved, and the possibility of legal action from the creditors.

If you would like to get more credit information you can visit our website which contains many credit resources. http://www.my-credit-report.info

This article is copyright 2005, but can be freely reprinted, as long as no changes are made, including hyperlinks.


Article Source:

Rate this Article:  0.0/5(0 Ratings)

Related Articles:

Debt Negotiation - Where Can You Find the Top Debt Settlement Services For Your .

by: Matt Couch (December 07, 2009) 
(Finance/Debt Management)

Debt Negotiation - Do It Yourself or Hire a Debt Negotiation Lawyer?

by: Gabe Mars (February 06, 2008) 
(Finance/Debt Relief)

Debt Settlement Debt Negotiation - How Do I Find Good Debt Settlement Debt ..

by: James A Banks (June 02, 2007) 

Credit Card Debt Negotiation Easy Ways to Negotiate Debt Settlement

by: Paul Sarwana (July 22, 2008) 
(Finance/Debt Relief)

How To Avoid Bankruptcy & Get Out Of Debt Faster Using Debt Negotiation!

by: Kris Bickell (November 12, 2005) 
(Finance/Debt Relief)

Debt Settlement negotiation tips: How to get out of debt effectively

by: Subbu Rethinam (September 18, 2009) 

Debt Settlement, Debt Negotiation or Bankruptcy - Which is the Best Option For ..

by: Gabe Mars (February 06, 2008) 
(Finance/Debt Relief)

Credit Card Debt Negotiation - How Do I Enter Into Credit Card Debt Negotiation?

by: James A Banks (June 02, 2007) 

Debt Negotiation and Debt Free Living

by: Michael Louis (February 05, 2007) 

Debt Consolidation Versus Debt Negotiation

by: Gary Gresham (May 11, 2005) 
(Finance/Debt Relief)