| If you are serious about restoring your
credit, creditor-direct work should commence as soon as you see your first
set of credit reports. Creditor-direct requires a lot of time and street
smarts. You will be dealing with savvy negotiators in powerful corporations. You
will often be discouraged, denied, and blamed, but you must not be intimidated.
Remember, if you make the same request enough times within any corporation, you
will eventually get what you want.
Settling Your Debts
Many times we have been asked, "Can I just delete the negative listing without
paying the debt?" In most cases, the question comes from someone attempting to
dishonestly escape a financial obligation. While it is true that negative debt
listings can be deleted from the credit report - even while the debt remains
unpaid - it is also true that these listings stand a good chance of
reappearing on the credit file sooner or later. There is a better
alternative than attempting to escape the debt.
You can create a true win-win situation by settling the
debt with the creditor. It is our experience that the average consumer
settles a debt for about 75 cents on the dollar. It is also our experience that
a professional negotiator will settle an average debt for about 60 cents on the
dollar, including their fee. There is rarely a good reason to
attempt your own debt settlement. Creditors will not take you half as
seriously as they will take your attorney. Handled properly, you will save time
and money by seeking a good attorney to negotiate with your creditors.
Understanding the True Risks and Realities of Overdue Debts
Most consumers overestimate the risk involved with overdue debts.
They worry about possible repercussions such as wage garnishment and property
seizure by their creditors. When the debt relates to a secured
property, such as an automobile or a home, the possibility of repossession is
serious, but unsecured debts, such as credit cards and deficiencies are
much less pressing.
In fact, very few creditors will
push all the way to a garnishment on a relatively small unsecured debt.
Garnishment and seizure are a creditor's most terrifying weapons used to collect
past due debt, but they are expensive and time-consuming. Even if the creditor
went all the way to recover the debt, they probably wouldn't be able to recover
enough to offset their collection costs. There is little risk of a creditor
taking an unsecured debt past simple collections.
It is important to remember, however,
that the creditor would be in his rights to get a garnishment and seize
property, even for a small debt. There is some risk of financial
reprisals when a debt goes unpaid. Many consumers fold under the perceived
strain of unpaid debts. Hundreds of bankruptcies take place in the United States
each week for amounts under $5000.
These consumers are so intimidated by
their creditors, that they flee to bankruptcy, even though bankruptcy can bring
total financial devastation for at least the next ten years. If these same
consumers had simply waited, and ignored the threatening letters and telephone
calls, they would have realized that their creditors were all bark and no bite.
Bankruptcy is the best option for a few consumers, but it is much over-used.
And, when a consumer files for bankruptcy, everyone loses - especially
the creditors.
The risks of judgments, garnishments, and property seizures
must be properly balanced against the likelihood that such drastic collection
measures will ever happen. The risks, and the decision to take that risk, are
entirely yours if you're in such a position.
Which Debts Can Be Settled?
An unsecured debt is a debt where there is no collateral. Unsecured
debts include medical bills, credit cards, department store cards, personal
loans, collection accounts, student loans, amounts remaining after foreclosure
or repossession, and bounced checks. Most unsecured debts can be settled. But,
utility companies generally won't settle for less than the full balance. There
are some few creditors, who will never compromise, but most will take a
less-than-full payment as settlement in full to close a troublesome account.
Secured, collateralized debts, such as
a home or automobile, are another story. If the creditor can simply repossess
the property, why should he negotiate? You can often renegotiate a short payment
relief with a secured debt, but don't attempt to settle the account while you
still possess the property.
Also, the creditor must have a good reason to want to
settle. If the account is paid current, and there is no recent history of late
payment, it will be difficult to convince the creditor that it is in their best
interest to settle. This should not be read as a recommendation that you stop
paying your current bills. If you stop paying your current bills, you will
almost certainly make your credit situation worse. Perhaps bad credit is not an
issue for you at this point and you feel you must stop paying your bills in
order to settle them and get back on top of your debt load. If this is the case,
you make such a decision at your own risk.
What is a Credit Report?
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