DIY Debt Settlement: What You Need to Know

If you are one of the millions of Americans in credit card debt and you’ve been exploring your debt relief options, you’ve likely already discovered that there’s a lot of information on how to settle your debt.Paying off debt can feel like an uphill battle, especially when it seems like there is never enough money to be fully debt-free. Thankfully, there are several debt repayment plan solutions available to you, such as debt settlement.

Key Points: 

• Debt settlement is a process that involves working with your creditors to create a debt reduction plan.
• The negotiation process takes considerable time, effort, and patience. 
• ClearOne negotiators work with creditors every day to get the best possible settlement agreements.

If the amount you owe is over $10,000 in credit card debt, you may have already narrowed those programs down and decided that negotiating a debt settlement is the right choice for your circumstances.

Now, you have another choice to make. Will you choose to pursue debt settlement on your own or negotiate a settlement with the help of a debt settlement company? There are pros and cons to both options. Here are some factors to consider as you make your money management decision.

Steps for Successful DIY Debt Settlement

If you choose to negotiate directly with your creditors, follow the steps below to maximize your chances of success.

Assess your financial situation

The first step before you begin debt settlement negotiations is to make a detailed inventory of your monthly medical bills, personal loans, student loans, credit card debts, income, and expenses. Determine how much you owe per month and how much you can realistically afford to pay to settle your debts. Debt settlement could be in the form of a lump sum or a payment plan that you can commit to without further financial strain.

Research your creditors

Negotiations are easier if you only owe one creditor. They get more complicated if you owe more than one creditor.

So, know your rights and understand who you owe what and their policies are regarding debt settlement. Some creditors may be more willing to negotiate than others. Knowing a company’s track record with settlements can help you tailor your approach. 

Brush up on your negotiation skills

The most important part of DIY debt settlement is negotiation. Are you a good negotiator? Now is not the time to be modest and nervous. You have to stand by your debt relief cause, state your case, and make an offer.

Contact with creditors

Once you’ve decided to settle, contact your collection agency directly. Be honest about your financial situation and explain why you’re looking for a settlement. Remain calm and professional during these discussions. Start by offering a settlement amount that’s lower than what you’re willing to pay, leaving room for negotiation.

Negotiate the terms

Be prepared for a back-and-forth negotiation. Creditors will likely review your initial offer, so be ready to negotiate a middle ground. Any agreement you reach should be in writing, specifying the settlement amount and payment terms, and that the settled debt will be reported as "paid in full" or "settled" on your credit report.

Make the payment

Once a settlement agreement is reached, make the payment as agreed. You must follow through on your end of the deal to avoid any further collection actions or legal consequences.

Risks of DIY Debt Settlement

Credit score damage

One of the most important risks of DIY debt settlement is the potential damage to your credit score. Stopping monthly payments and settling for less will impact your credit score and stay on your credit history for a few years.

Legal action

If creditors are unwilling to negotiate, they may decide to sue the consumer for the full amount owed. This could result in wage garnishment or a lien on your property, which will worsen your financial difficulties.

Tax implications

The IRS may consider forgiven debt as taxable income. This means you could owe taxes on the amount of debt that was forgiven. Consult an accountant to understand the implications of a successful negotiation.

No guarantees

There’s no guarantee that creditors will agree to a settlement, and you may find yourself worse off if they refuse. If you don’t have the know-how and experience to negotiate with financial institutions, you might find it hard to end up with a profitable deal.

Emotional and mental stress

Negotiating with creditors for your personal finances can be stressful and emotionally taxing if you are doing it yourself. There is also the uncertainty that will weigh heavily on you because you are on your own.

Understanding the Process of Debt Settlement

Debt settlement is a specific process that involves working with your creditors to create a debt reduction plan. Sounds simple, right? In theory, maybe, but in practice, it can be a long, tedious process. 

Your creditors are not obliged to work with you to reduce your debt. In our years of experience in negotiating with creditors on behalf of our clients, we have observed that creditors vary widely in their willingness to negotiate student loans or credit card debt. Some are amenable to negotiation, while others are less so.

If you only have one credit card and your balance is less than $10,000 on that card, you may be able to resolve your debt on your own — if you’re up for spending the time and effort it takes to go back and forth with your credit card provider in a long process of negotiation.

However, if you owe money to multiple credit card companies, choosing a DIY approach means that you will need to go through a negotiation process with each of those companies individually; a task that requires considerable time, effort, and patience. 

Assuming you have the time and patience to settle the debt on your own, you will also need good negotiating skills. There is no room for timidity in the debt settlement negotiation process. Persistence and calm resolve can go a long way toward helping you secure a reasonable settlement agreement. 

If the thought of negotiating with your credit card company makes your knees go weak, however, you should not choose a DIY option. There are professional debt settlement counselor experts like ClearOne Advantage who are ready to offer the best alternatives for you.

Debt Settlement Streamlined: ClearOne Advantage

You don’t have to handle debt settlement on your own. You can streamline the process and get the best possible outcome by taking advantage of the expertise of a proven team of debt settlement negotiators. If you want to save money, lower a high interest rate, and reduce the risk of costly mistakes, a professional debt settlement agency like ClearOne Advantage can guide you through the process. 

At ClearOne Advantage, our Certified Debt Specialists talk every day with clients to find the right service for their debt issues. It all starts with a brief phone call to 866-481-1597. 

With deep industry knowledge, our team of professional negotiators works with creditors every day to save you money and get the best possible settlement agreements. We’ll negotiate on your behalf ensuring the lowest interest rates or reducing the overall owed amount, doing the heavy lifting for you so you can focus on other things — like what you want to do when you are totally debt-free.  

Why wait another day for the best financial tips? Get a free savings estimate and start your journey to being debt-free with ClearOne Advantage today.