The main intention of debt settlement is to find the best middle ground between a debtor and creditor so that the debtor pays a reduced amount to fully settle a debt which would otherwise be a complete default or bad debt.
If, as a debtor, you are in a dire financial situation to the point where you are about to declare bankruptcy, it may be a better option to propose debt settlement to your creditor before your financial situation gets worse.
Your creditor will be willing to get into a debt settlement agreement in order to avoid not getting any payment at all. However, before you can prove that you are a good candidate for debt settlement you will need to prove that:
- You cannot afford to pay the full amount you owe.
- You have other unsettled debt, especially credit card debt.
- You don’t have any assets that can be liquidated in order to settle the debt.
Once you are sure that you can prove at least two of the above facts, you should then go ahead and draft a proposal for debt settlement. The 10 steps below should be considered:
Gather and sort out all relevant information
You first need to put together all information regarding the debt and your financial position and sort it out by date. Information such as your discretionary income and debt, the total amount you owe, and any information about your current assets and liabilities will come in handy.
Decide on the maximum amount that you can settle on
By now, you should be able to easily decide what you can comfortably commit to paying as a monthly amount to settle your debt.
You should also know the full amount you propose to settle the debt. Ideally, it should not be more than 70% nor less than 30%. A figure out of these bounds may disqualify you for debt settlement.
Start writing your draft settlement proposal
Address your creditor and include your name, account number and loan/debt identification numbers.
State your purpose
In your introduction, state that you are writing a debt settlement proposal for a specific debt that you have and that you intend to seek an amicable resolution.
Describe the details of the debt
Describe the debt including when the debt was taken, the debt amount, how much has been paid and what is the balance including all interest and late payment penalties accrued.
Explain why you have had problems settling the debt and why you won’t be able to pay it
Explain your current situation and what your recourse is
Explain your overall financial picture and why a debt settlement is your only recourse apart from bankruptcy, which will not benefit your creditor.
Propose your terms for the debt settlement
Propose how much you can afford to pay including a payment schedule.
Request a paid in full status after the settlement is made
Conclude your proposal
Reiterate your proposal in a few words and request for a response to your proposal including that you are available if they need more information.
All the explanations and claims in your proposal should be backed by documentary proof in order to improve your chances of getting your debt proposal accepted.
5 Signs To Watch For To Avoid Getting Scammed On Your Car Title Loan
The Why and How Of Selecting Debt Relief Companies
You may also like
For shoppers, the catalogue credit line offers an easy and convenient way to buy products ...