Debt negotiation

How do I get out of debt? Debt negotiation might be the solution for you. Debt negotiation (sometimes also called “debt settlement) is when you or someone you hire contacts the lenders and negotiates pennies on the dollar.

What are the costs?

  • Some companies charge up-front. They might take a percentage of your debt total, or they might charge a flat fee.
  • Some companies charge a monthly fee. Those who do this may be amassing funds to pay the creditors a lump sum.
  • Some companies charge upon achieving results

Can I do it myself?

  • Sometimes you can negotiate your debt with lenders
  • Often lenders have a policy never to negotiate directly with the consumer

What's the hidden secret?

Debt negotiation assumes that you have cash on hand (or access to cash), in large quantities. A typically negotiated deal might look like paying $5,000 up front and another $5,000 in six months on a $30,000 debt. To negotiate it, you will need to have the money to deliver.

Why would a bank negotiate on a loan?

When you default on payment, banks sell your debt to collection companies. These companies pay pennies on the dollar. If a bank can negotiate the loan with a debt negotiation company, they might get dimes or even quarters on the dollar.

When is the best time to enter into negotiations?

A debt-negotiation company would have the best feel for this. Find a company you want to work with (we do make recommendations), and get advice from them.

  • When I am paying on my loan? Definitely not! As long as your are paying, you can afford to pay, so why would they negotiate?!
  • After I’ve missed a few payments? Maybe. If they haven’t sold your debt to a collection company, they might be happy hear that they can collect seventy cents on the dollar.
  • After half a year of missed payments? This might be a good time.
  • After a year of missed payments? You might be pushing it. If they’re already garnishing your wages, it’s too late. They’ve got you by the balls and they’re going to hang on tight.

Who are the more reputable debt-negotiations in Canada?

We have a Canadian company to whom we can refer you. Cambridge Life Solutions claims to be Canada’s “premiere debt settlement provider.” They are an American company aggressively pursuing Canadian clients. Here’s a review of them (by another debt settlement company, so be aware!).

Do I ever have to repay?

The statute of limitations on debt in British Columbia is six years. If you are “on the radar” (ie employed, filing income tax, etc.) the lenders can take you to court and garnish your wages. You might be able to ignore the debt, but you cannot ignore the courts. That would be criminal.

How will a negotiated settlement impact my credit rating?

Settlement plans are typically not well regarded among creditors. A settlement note on the credit report can have a more negative effect on the debtors’ reading of a credit report than any of the other options.

But my standard disclaimer here applies: Your credit rating is not your be-all and end-all. It does not define you as a person. And once you have cleaned up your debt difficulties, you should aspire never to go into debt again except for a mortgage or a student loan.

Post to Twitter