The best way of reducing your overpowering debts is by opting for a debt settlement. Negotiations with the creditors could be an effective solution to your never-ending debt issue and constant creditor calls and threats. Once you know that debt settlement is the only way out for you, it is best to understand the possible mistakes that you could make while negotiating a debt settlement with the creditors. Let us explore some of the most frequently made debt settlement mistakes.
You Have No Clue Whether Unsecured Debt or Secured Debt
The greatest mistake would be to go ahead with debt settlement negotiations without having any clue whether it is a secured debt or an unsecured one. You must be able to differentiate between the two. Depending on the type of the debt, you would need to deal with either secured creditors or unsecured creditors.
Secured Creditors: These creditors are interested primarily in your assets such as land, car, boat, etc. If you are unable to pay off the debt, these creditors would be taking away your property or asset as they have the right to claim your property or asset in case of a default.
Unsecured Creditors: These creditors actually allow debtors to purchase credit without some sort of a security. In the case, the debtor is unable to pay off the debt; an unsecured debtor would be having no right to claim the debtor’s property or asset.
Before you decide to opt for a debt settlement negotiation with your creditor, you must understand the difference between these two kinds of debts and then scrutinize all your present debts and understand your financial position. Do you think that you have the financial capacity at the moment, to arrange a lump sum for paying off the creditors once the negotiation is done? Are you thinking in terms of paying back half the debt amount owed by you?
More often than not some deceitful unsecured creditors would be trying to convince you that they are actually secured creditors. Often they resort to threats regarding claiming your assets or property. You must understand precisely what kind of a debt you are having and accordingly go ahead with negotiations with creditors for an amicable debt settlement. It is a good idea to browse through debt settlement reviews online so that you are equipped with sound knowledge and understanding of the debt settlement process and what it entails. Unscrupulous creditors cannot take undue advantage of your ignorance any longer.
Not Maintaining Notes during Negotiations
Remember it is the intention of creditors to confuse and misguide you all the time with conflicting information. So, it is in your own interest, you must take down detailed notes relating to the entire negotiation process. You must keep detailed and accurate records regarding the date of the discussion, what was discussed in detail and the amount that was finally agreed upon by both the parties as a debt settlement amount. You must keep these notes safely and they should be readily available in the case there are any issues or confusion in the future. There is no way; you could be fooled by any fraudulent collectors or creditors if you have the notes with you.
Paying Off the Negotiated Amount Using Wrong Funds
Remember cash is all important in the case of a debt negotiation. Cash is the undisputed king for a smooth debt settlement. If you have the necessary funds that could be transferred to the creditors at once, they are willing to settle for even a lower amount. As a debtor, you must necessarily avoid paying off your unsecured debt by taking out a car equity or home equity loans. Moreover, you must not use your retirement funds to pay off the negotiated amount for settling your debts. You would end up paying a hefty tax if you withdraw money from your retirement funds. You would alternatively, need to pay back all the funds provided you had taken the money as a loan.
You End Up Paying More
If you are failing to make the repayments again and again and you have accumulated your debts over a period of time, it is best to opt for a debt negotiation to get rid of your debts. Remember your unsecured creditors would be too happy to get some amount of money back instead of getting nothing. In such a situation, if you are a debtor, you must start negotiating with a low amount and try to keep it restricted to a maximum of 50 percent of the debt amount.
Missing the Overall Picture
The debtor necessarily has to look at the bigger picture and take into account every single aspect. He must scrutinize his entire debt scenario and the possibility of paying 50 percent of that debt. Numerous debtors are compelled to file for bankruptcy protection despite paying thousands toward settling their debts.
Not Taking into Account the Strengths of Your Creditor
Secured creditors seem to be in a dominating position since they enjoy the right to repossess or claim property or other valuable assets. Moreover, unsecured creditors also, enjoy certain privileges. They could use their right to send letters and make countless calls demanding payment. They have the liberty to sue you in the event of any breach of contract. If the creditors win the lawsuit, they could opt for garnishing your wages. They may opt for levying your specific bank account. To be on the safe side, you must avoid any direct deposits. Moreover, maintain a very low bank balance to safeguard your money.
Not Being Aware of the Weaknesses of Your Creditors
Remember you simply cannot oversee the weaknesses of your creditors. It is but natural for your creditors to have certain weak points that could be exploited cleverly by you to your advantage. You must necessarily find out if the creditors concerned are compelled to follow the collection laws. If your creditors are required to conform mandatorily to the Fair Debt Collection Practices Act (FDCPA), they would be compelled to stop at once, any unfair debt collection strategies and curb aggression at all costs.
According to, “They might be subject to collections laws. If you are negotiating with a debt collection agency, it is subject to the Fair Debt Collection Practices Act (FDCPA), which limits the tactics collectors may use to collect debts. While creditors are not subject to the FDCPA, many states have laws that limit creditor collection tactics.
Conclusion
Now that you know about some of the most frequently made debt settlement mistakes, it is best to consciously avoid them. You must have a clear understanding of certain fundamental debt settlement concepts. Once you are aware of these core concepts, you would surely understand their implications. You could go forward with the debt settlement process as you know very well how to negotiate the best possible deal by now. Avoid the mistakes and you are good to go. If you require any professional assistance or expert advice, you may get in touch with a reliable and reputable debt settlement company.
