Skip to Content
RHM LAW LLP RHM LAW LLP
We Speak English, Spanish and Farsi 213-344-0043
Top
|

There’s nothing fun about not being able to pay off your debt. But debt consolidation can help.

While no one likes to deal with debt collectors, it might be your first step to making your mountains of debts into a more manageable molehill. It might even reduce how much you owe.

Debt Settlement

Debt settlement is the process through which companies are able to collect payment on a debt that you owe them. It allows you to negotiate with creditors, or in some cases collection agencies, to reduce the amount owed, thus allowing you to get back on sound financial ground.

The Process

You’ll either end up negotiating your debt with your original creditor, or with a collections agency. Debt gets sold to a collections agency after you have failed to make payments for a period of more than 3-6 months (typically around 150 days). When this happens, the creditor is paid a percentage of the debt, but then walks away from it. What also happens is you’ll no longer be dealing with the creditor. From now on you’ll deal with the collections agency.

Negotiating with Creditor v. Collection Agency

There are different points you’ll want to focus on when negotiating with creditors and when dealing with collection agencies. Here are some main points:

Creditor:

  • Total amount owed – you can negotiate how much you are able to pay back. For example: You owe $7,000. You might be able to negotiate paying only half of that back.
  • Monthly payments
  • Your account’s standing (this is the part that affects your credit score)

Collection Agency: (you’ll want to get these in writing)

  • The amount you are paying back, and what that amount is for (either paying for the settlement, or paying the principal).
  • What debt the payment is for. This should include original creditor and account number.
  • When the payment is due.
  • Who you’re paying the debt to.
  • Your account’s standing after payment

Consolidating your debt can be tricky, but the important thing is to be proactive and smart about the decisions you make going forward and in your negotiation process.

Categories: 
Share To: