The Debt Negotiation Process
The debt negotiation process is a strategic and a timely matter. There are many contributing factors to consider, in order of ACHIEVING successful negotiations. First off, you must verify the delinquency status. A creditor is more likely to engage in negotiations according to the age of the account, in an attempt to avoid a net loss. (A debt is written off around 180 days to 220 days) During that time period, you can achieve a significantly lower settlement offer. Once the debt has been written off, it is no longer an active asset. At that point, the original value of the debt has depreciated, and the creditor must recovery net gain in order gain profit and maintain a financial relationship with investors. In order to obtain a net gain, the creditor must either employ a collection agency at a fraction of the cost, or sell the debt to debt buyer. Secondly, if the debt has to be negotiated with a collection agency or debt buyer, the third-party collectors are directly regulated by the Fair Debt Collection Practices Act administered by the Federal Trade Commission.
It’s for these reasons that consumers oftentimes seek the help of a debt negotiation company. Professional debt negotiators are thoroughly trained and learn effective and strategic negotiations skills to arbitrate debt settlement with creditors, collectors and attorneys on behalf of the consumer. Professional debt negotiations is the most effective alternative to reduce the total outstanding balance on an average of 40%; the payback is considerably less and the time frame for the payback is shorter; which enables the consumer to regain control over their personal finances, rather than just reducing interest and fees.
Robert Zangrilli
http://www.articlesbase.com/debt-consolidation-articles/the-debt-negotiation-process-139079.html
8 Comments to The Debt Negotiation Process
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I am in the process of fixing my credit so I can buy a home. Would it be easier to deal with the creditors?
myself and go through the negotiation process or allow a debt counselor to help me out?
If you choose the debt counselor can you please give me a few names as to some good agencies to go through and if you have ever been through this process can you give me some good tips that I can use.
It is not that hard to do it yourself, Save the fee the debt counselor will charge and use it towards one of your debts. Keep in mind that if you do negotiate with your creditors for a lower amount than you owe that you will end up paying taxes on the amount not paid.
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hi, i’m actually a Mortgage Banker and my opinion is to try to fix it your self. Sometimes its harder to get home financing if your in the middle of a credit couneling program. Look on-line at myfico.com (i think) you should be able to contact all three credit reporting agencies. Experian, Equifas and Transunion.
good luck!
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either way.. you have 7 years of negative credit on your report
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Find your local HUD (Housing and urban development) office and talk to a credit counselor there. They are government funded and completely non-profit, so you can be sure they are looking out for your best interests. Every case is different, and they can help you decide what will be the best road for you. This is what I did and I’m getting ready to get my loan now. It’s the best decision I could have made, there are so many pitfalls along this road that I’m sure I would have fallen into without their advice. They usually also offer courses for first time home-buyers full of valuable tips.
And, if they think a debt counselor is a good idea for you, they know which ones are reputable and which ones are predatory. Best of all, they charge little or nothing for their services.
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From everything I have heard, if u have the debt counselor’s "pay" the debt’s, that it actually hurts u because most lenders look at it like filing bankruptcy. It would show them u r not capable of handling your money.
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I am also a mortgage consultant, and I will tell you that if you are purchasing a home any time in the next 7 years, if you go the credit counseling route…most lenders DO in fact treat that like a bankruptcy. That doesn’t mean that you cannot purchase a home but it does mean that your rates are going to be very very high. I also have heard soooo many stories of people that went to debt counselors to only find out that they didn’t pay off their debts and made the problem with creditors worse. I can’t say which necessarily is the best route for you because I can’t see what your credit looks like, but I would try working on it for yourself. If it is too much to handle on your own or get under control…and you have no other options…I would seek out a reputable debt counselor. But again, that is worst case scenario…because that will show on your credit that you are in a counseling program and that will in turn affect getting loans in the next 7 years.
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Facts You Should Know BEFORE Considering
Credit Counseling or Debt Consolidation
http://gaby1221.niesong.hop.clickbank.net
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There is one topic which every
time I write about it seems to generate
some hate mail while at the same time
spawning a flurry of wonderful praise
from consumers. Of course, the hate
mail is always from a few people that
happen to own these "certain types" of
businesses I discussed and those
businesses of course are Credit
Counseling or Debt Consolidation
companies; of which many "claim" to be
non-profit organizations.
You’d almost have to be an ostrich
with your head stuck in the sand to not
see or hear at least one advertisement
a day from a Credit Counseling or Debt
Consolidation Company. However, you
can expect this to change and change
soon. Since this is a topic which
tends to "stir up" the owners of these
businesses, I am going to take a
different approach by NOT sharing my
opinion, but rather, the opinion of
others. I will start with the news
media and the Internal Revenue Service:
"(NPR News, May 15, 2006). The
Internal Revenue Service is revoking
the tax exempt status of some of the
largest credit counseling agencies in
the country. An IRS investigation
disclosed that the firms solicited
business from people seriously in debt
and that they didn’t provide counseling
or consumer education, as required.
Prodded in part by a congressional
oversight committee and consumer
advocates, the IRS began investigating
dozens of credit counseling agencies –
most holding non-profit status — two
years ago. IRS Commissioner Mark
Everson says the companies "poisoned an
entire sector of the charitable
community."
Everson says in many instances,
companies were organized merely to
funnel business to loosely affiliated
for-profit companies. Many of the firms
spend millions of dollars on
commercials that urge anyone with debt
to call them to solve their financial
woes. And because tax-exempt
organizations are not bound by the
federal do-not call list, the firms
were able to randomly call consumers,
pitching their services under the guise
of a non-profit counseling service.
The IRS investigations are also
likely to affect consumers, thanks to a
new bankruptcy law that requires
consumers considering bankruptcy to get
counseling before they are allowed to
file. The IRS wants to ensure that only
legitimate non-profit agencies are
doing the counseling. In addition to
the actions announced Monday, the IRS
is sending more than 700 compliance
letters to the rest of the credit
counseling industry (END)."
Since almost all Credit Counseling
and Debt Consolidation companies claim
a non-profit status, I feel most
consumers are easily sucked in with
their skepticism and defenses at bay.
After all, when most of us hear the
word "non-profit" the first thing we
usually think of is a church or
homeless shelter.
From the NPR article and the
actions of the IRS, I think it’s fair
to assume that many of these "non-
profit" organizations have been
operating under a scenario similar to
that of a wolf guarding a hen house.
However, this doesn’t mean all credit
counseling and debt consolidation
companies are bad but… you do need to
know the truth about how they operate
and their limitations.
The first thing you want to
understand is these companies are ALL
more interested in making money off you
than they are in preserving your credit
rating. The bottom line with either
credit counseling or debt consolidation
is that it absolutely ruins your
credit. I can just hear the companies
arguing this with a consumer right now,
telling them nonsense like "It helps
your credit since it tells creditors
that you’re working on your situation
and not just running away from it."
Listen… if one these places tells you
that than watch out. Why? Because
they will lie to you about other things
as well!
One of the first actions these
programs usually requires you to do is
for you to CLOSE all your revolving
credit accounts. You then make
payments to the organization and they
take care of everything for you. What
this says to all your creditors (as
well as anyone considering giving you
credit) is that you are so out of
control with your finances that you
can’t even manage paying everyone back
on your own. Therefore, you’re hiring
someone else to do it for you!
99% of the time these companies
will claim they can negotiate with your
creditors and get interest rates
reduced thereby saving you money.
While this is true, what’s also true is
you can easily negotiate these same
rates as well as they can by just
calling your creditors yourself. You’d
be amazed at how many of your creditors
would love to hear from you (especially
when the chips are down!). Not too
mention, any money the counseling
company was to save you would more than
likely be sucked back up by their
monthly fees (usually around $500 to
$1,000 per year).
This brings us into a whole other
dynamic of their business model.
Because these companies always make
their money off of monthly fees paid by
the consumer, the longer they can keep
those monthly fees coming in the more
profitable their business will be.
It’s for this reason that most
consumers who sign up with these
companies usually find themselves on
payment plans with the lowest monthly
payment possible (which turns out to
also be the LONGEST payment plan as
well). Not surprising is it?
Am I against Credit Counseling and
Debt Consolidation companies?
Absolutely not. After all, there are
millions of people in America who will
never be able to manage their finances.
Credit to them is a destructive
addiction much like alcohol or drugs
and they will never be able to control
it. Instead, it will always control
them. We’ve all seen these people.
Every time they are extended credit
shortly thereafter they are in
financial trouble (usually blaming it
on some external factor). For these
people I think these credit and debt
counseling programs can be a good thing
(as a ruined credit report is not a
hindrance to them but actually an
asset). It keeps them out of future
financial trouble by forcing them to
live their lives on a "cash and carry"
basis; which is ultimately conducive to
a better standard of living down the
road.
On the other hand. If you’re good
with your finances and have control
with credit but went through some type
of hardship beyond your control in the
past (i.e. divorce, job loss etc); then
the services of these companies will
never be for you. You will do far
better and preserve your credit rating
by taking matters into your own hands.
Reason being is that you understand
your credit rating is a powerful tool
that can help you move ahead faster,
help others and help yourself as well
as create the life you want. It all
comes down to self management. We all
know that those who cannot manage
themselves will ultimately be managed
by others. Credit is no different.
When you learn to manage it well, you
are the master and it is the servant.
If you care about your credit and
want to benefit from it in the future,
then you will never rely on a credit or
debt counseling service to help you get
out of any trouble you find yourself
in. Instead, you’ll look inward and
get yourself out while preserving your
credit rating the best you can. Credit
and debt counseling is for people who
are "ok" with throwing their credit
rating in the trash so they can have
"someone else" manage their payments
for them (since they are unable to
manage them themselves). And again, as
far as negotiating interest rates, you
can do just as good as them or better.
If you don’t believe me just call any
of your creditors and straight out tell
them your situation. You will quickly
find you don’t need to be afraid of
them. They just want to get paid like
the rest of us.
In a few days we’ll be talking about…
"The Truth About Creating an Alternate
Credit File"
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Terry Price is the founder of Consumer
Education Group which publishes the
Credit Secrets Bible (in print since
1994).
For more information on the CREDIT
SECRETS BIBLE you may visit:
http://gaby1221.niesong.hop.clickbank.net
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