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Source: Jose Luis Pelaez Inc / Getty

Article By: Georgette Miller, Attorney at Law


Dealing with creditors can be stressful, confusing and infuriating. They often use scare tactics, bullying and sometimes falsehoods to try to get you to pay a debt despite the fact that you have repeatedly explained that you are unable to pay. You may want to pay the debt but, due to unforeseen circumstances, are unable to do so immediately. When you have past due debt, it is important to avoid these pitfalls when negotiating with creditors.

IS THE DEBT SECURED OR UNSECURED?

Secured debts are those that have an asset connected to them, such as a car, boat or home. If you do not pay this debt, the creditor may come take the asset, known as repossession or foreclosure. Unsecured debts have no asset connected to them and are often obtained simply on your signature. These are credit cards, store accounts or personal loans. Unscrupulous creditors may attempt to convince you that a loan is secured when it is actually unsecured, so knowing what type of debt you have can help you avoid these pitfalls when negotiating with creditors.

KNOW WHAT THE LAW ALLOWS

If you are negotiating with a creditor who is a debt collection agency, they must follow the Fair Debt Collection Practices Act (FDCPA) which limits what they can do to collect a debt. The actual creditor is not subject to the FDCPA, but states have laws that protect consumers from many collection tactics. For example, a debt collection agency may not contact a debtor before 8 AM or after 9 PM or at any place that is inconvenient to the debtor. If the debt collector learns that a debtor may not be contacted at work, they are forbidden from doing so.

DON’T USE SECURED DEBT OR RETIREMENT FUNDS

If you can pay a debt in cash, you are more likely for negotiating with creditors to be easier. However, avoid taking out a home equity loan to pay off credit card debt or withdraw retirement funds. If you have problems paying your home equity loan, you could lose your home. Withdrawing retirement funds can leave you with a hefty tax bill at the end of the year. Some retirement funds can be taken out in loans that you must repay, but it is often not worth the added payment to get rid of unsecured debt.

BE CAREFUL NOT TO OVERPAY

If you have cash available, consider offering the creditor a settlement. However, start with a very low offer. Many experts recommend offering 50 percent or less of the total debt. Often, creditors will accept a low settlement offer simply to get some of the debt repaid.

REMEMBER TO TAKE NOTES

Too often, while negotiating with creditors, people neglect to write down details of the conversation. You want to note the date, the time, who you spoke to, the company they were with and the phone number they called from. Try to get a mailing address from the creditor as well as you should always follow up the phone conversation with a written letter outlining what was agreed upon. Keep copies of all correspondence. In fact, negotiating with creditors over the phone is not recommended. If you agree to a settlement over the phone, ask the creditor to email, fax or mail a written agreement before you provide payment. Also ask that they send a letter indicating the debt was paid in full once you have paid the debt collector. You may need the information in the future.

If you or a loved one is dealing with past due debts, you want to avoid these pitfalls when negotiating with creditors. Contact The Law Office of Georgette Miller and Associates at 1-866-96-GMLAW or visit our website to learn how we can help you negotiate your debts and get back on the road to financial freedom.

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