Negotiating with Creditors
Often techniques such as reducing spending, increasing income and following a strict budget aren’t enough to solve financial difficulties, thus making it important to contact creditors to help negotiate a new, more affordable debt repayment plan.
DebtBusters follows a systematic process and efficiently negotiates with creditors on behalf of clients.
The DebtBusters negotiation process includes:
1. Creating a detailed list of the clients debts
For each debt on the clients list the following information will be listed for the provision of the creditors
- The name of the creditor
- The amount the client is supposed to pay each month
- The interest rate on the debt
- The debts outstanding balance
- Whether the debt is secured or unsecured
2. Deciding which debts to negotiate first and what the client wants to ask from each of creditors
Not all debts are equal. Certain debts are considered more important than others, as the consequences of falling behind on those obligations are more severe. For example, when defaulting on secured debt payments, the creditors may take back their collateral i.e. the assets used to guarantee payment. Therefore, it is important to negotiate high priority debts with creditors first. These debts include:
- Past/due rent
- Car loans
- Utility bills
- Court-ordered child support obligation
- Past/due taxes
- Student loans
When negotiating lower priority debts, usually including unsecured debts such as credit card debt, DebtBusters will start by negotiating the debt with the highest interest rate, as it costs the client the most each month.
When a creditor agrees to settle a debt for less, ask the creditor to report the debt as current and to remove all negative information related to the debt from your credit report.
3. Reviewing the clients budget or creating a new one if necessary
4. Pulling together all relevant financial information
Certain creditors may want to review the client’s financial information before they agree to negotiate. This is why it is essential that DebtBusters gather as much of the clients information as possible.
- Household budget
- List of all debts
- List of assets and their approximate values
- Loan agreements
A creditor may make having a co-signer a condition of any new agreement. DebtBusters suggest that clients determine in advance if a friend or relative would be willing to co-sign for them. This means that if the clients default on their obligations, the co-signer will be liable for payment.
5. Put it in Writing
Once DebtBusters have come to an agreement with a creditor, all transactions will be put in writing and made official.
The agreement will include:
- It’s duration
- All deadlines
- All payment amounts
- Applicable interest rates
- The amount of any fees the client has agreed to and under what circumstance you must pay each fee
- Everything the creditor has agreed to do or not to do. For example, the creditor may agree to waive certain fees, forgive a past-due amount, or not report to the credit bureaus that the client’s account is delinquent
- When the client and the creditor will be considered in default of the agreement and the consequences of the default