Working with Creditors

Chalana Williams, First Federal of Lakewood

You’ve made bad financial decisions in your past, and now you have the debt to show for it. Large amounts of debt can easily be overwhelming. Fortunately, you do have some options. You might be able to work with your creditors to reduce the amount of money you owe or get more time to pay it back.

Before Negotiating
Take an honest look at your financial situation and debts. You need to know exactly how much money you can afford to pay each month to reduce your debt.

To do this, create a household budget. Determine how much money comes in each month. Then total the amount of money you need to spend on expenses like mortgage payments, utility bills, groceries, car payments, insurance, etc. Once you compare monthly debt obligations to monthly income, you’ll see how much you have left over. You can then decide how much of this money you can dedicate to paying back your creditors.

What to Negotiate
Once you are ready to talk with your creditors, you can ask for several concessions to help repay your debt. For instance, you might be able to negotiate a lower interest rate with a credit card company to reduce the amount owed each month. Or, negotiate new terms for a car loan, maybe persuading this lender to extend your payback period, lowering monthly payments in the process. Maybe a creditor would allow you to skip some payments without penalty to help catch up.

You might even be able to negotiate bigger-impact solutions, like a settlement to pay 50 percent of what you owe. Others might create a repayment plan that allows payment over a timeframe that works for you without added interest or fees. Don’t expect to get off without having to pay anything back. Your creditors don’t have to negotiate at all.

Tips
There are certain tips you should remember while negotiating with creditors.

• Federal law protects you from harassment. Your creditors are not allowed to call you several times a day or at odd hours, or to threaten you.
• You can’t be jailed for failing to pay back your debt.
• Don’t be impatient. Negotiating with creditors can last for weeks with several rounds of offers and counter-offers.
• Never agree to a settlement that requires you to pay more each month than you can afford. This will just get you in more financial trouble.