When you are facing financial difficulty, bankruptcy is an option. Many people feel it is necessary to try everything else before taking that step – including working with creditors to settle your debts. Before attempting to work with creditors without professional assistance, knowing what to say is essential. Your creditors are well-versed in all things financial, but you may not be – so here are a few tips to help you achieve a settlement offer that works for you.

1. Timing is Everything

This may be the most critical tip for negotiating a debt settlement. If you approach your creditor too early, they will know you are at risk for nonpayment and turn your debt over to a collection agency. Needless to say, your offer would likely be turned down. Experts recommend speaking with your debtor between 90-120 days past due to discuss a settlement offer.

2. Assess your Creditor’s Interest in Settling

When you’re in conversation with a creditor, you should try to gauge their willingness to settle the debt before making an offer. Some creditors are open to accepting settlement offers from their customers, while others prefer to make their own settlement offers. Some do not settle accounts at all, and you don’t want to alert them that you cannot pay. A simple “How much money do I need to settle the account today?” may suffice in giving you the knowledge you need to move forward in the best way.

3. Offer a Dollar Amount

Individuals sometimes believe that speaking in terms of percentages will make them appear more financially savvy. But if you offer a dollar amount, it signals that you only have a certain amount of money to settle your debt. Tell your creditor the amount you’ve saved, and ask them if it will be sufficient for settlement. If the creditor begins to speak in percentage, feel free to follow suit.

4. Don’t Be Afraid to Counter

Creditors will often provide you with an offer to start the negotiation, but it is rarely the lowest amount of money they are willing to accept to settle your debt. If the creditor asks you to pay 80% of your outstanding balance and you don’t have the ability to pay, counter with an amount you can handle. If you have the confidence, you can counter with an amount lower than you can afford to pay – this gives you negotiating room to meet in the middle. If the creditor doesn’t come down to a reasonable level for your budget, you can back off for a while. Most “charge off” debts at 180 days, so you can wait until that deadline is approaching and try again.

5. Be Realistic About Your Budget 

If your creditor agrees and accepts your settlement offer, you will be expected to make payment on that offer quickly – typically within a few days. The creditor will provide an expiration date that must be adhered to, or you could lose the opportunity.  Therefore you should not agree to a deal unless you have the money to back it up.

These tips need to be applied to every debtor individually, and you should commit time and resources to understand your own budget and financial capabilities. Take a deep breath and have your numbers worked out – and you’ll find your confidence increasing with each call.

Sometimes Professional Help is Needed

Financial institutions have the expertise, lawyers, and resources available to them that individuals do not. If you are unable to work a deal with your creditors even after your best efforts, bankruptcy may be a more prudent option. Call an attorney at the law offices of Richard V. Ellis for more information about your bankruptcy options.