Paying Off Debts With Creditors

Nobody applies for a credit card, loan, mortgage or car payment with the intention of not repaying those debts. But life happens, and many people find themselves in a position where once manageable payments now strain their monthly budgets.

When debt become overwhelming, it can be tempting to ignore phone calls from unknown numbers, leave suspicious letters unopened and ignore emails from creditors. And though this might even seem to work – for a while – creditors don’t give up. They know they’ll get their payment, one way or another, and will pursue that mission until they do.

Instead of avoiding the inevitable, here are some strategies you can use to negotiate with your lenders and reduce or eliminate your debt.

Negotiate with Your Creditors

Here’s the good news: Provided none of your accounts have gone into collections you may still be able to negotiate with your creditors. Contact them as soon as you know you will not be able to make your payments to learn what temporary solutions they can offer.

Utilities
Utility companies (e.g. hydro, natural gas, telephone / cable, etc.) are likely willing to discuss your arrears, interest and service charges. This is especially true if you have an upstanding history and can demonstrate your current troubles are only a temporary setback. They may be open to reducing or eliminating late fees or service charges and / or arranging a manageable payment plan that will allow you to pay down your arrears while keeping up with your current bill.

Credit Cards
If your issue is with a credit card company, your first negotiating tactic will be lowering the interest rate. If you’ve kept up with your payments and have not exceeded your limit, your interest rate may already be typical for the product you have. However, you may qualify for another product with a lower introductory rate to which you can transfer your current debt – so it never hurts to ask what’s available.

Home & Auto
Finally, many mortgage lenders are willing to defer a mortgage payment. And automotive financing companies may also be willing to rework your vehicle loan payments to give you some relief.

Make the Call

Review your budget before contacting your creditors to determine what you can offer as a lump sum or monthly payment. You want to be organized, confident and clear about your intentions to pay. This will help to build trust and rapport. 

Remember, it’s in both your interests to negotiate a reasonable arrangement. Your creditors are not the enemy, nor are they the reason you’re having financial difficulties. Creditors will be more willing to work with you if you’re honest, reasonable and calm. 

Don’t commit to an amount you can’t afford. For instance, if you are expecting a raise in the next six months, don’t make a payment promise based on the potential new income. Deal with the reality of your income today. 

Get payment arrangement in writing. Ask the representative to add notes to your file and request an email confirmation of the arrangement. Make your own detailed notes as well, including the name and agent number with whom you discussed the arrangement. This way you will both have a record of the agreement.

Stick to the payment arrangement. If you cannot make your payment as scheduled, phone your creditor(s) immediately and explain the situation. Remain calm and patient and keep your explanations simple and clear. Hopefully, they will understand and continue the payment arrangement.

How to Negotiate with Collection Companies

But what options do you have if your credit accounts have gone to collections? Facing that dreaded letter or call from a debt collector can be a very stressful and trying experience.

First, be mindful. Some collection agents are nice and some are not – treat all of them the same. Remain calm, communicate clearly and avoid arguments. Recognize their job is to collect debts and their sole purpose is to get money from you. 

Some collections companies may offer a one-time settlement or a short, potentially unrealistic payment arrangement. Others may take a more threatening tone and not be willing to work with you at all. Find out what they require and be prepared to explain your ability to pay. If you cannot reach an agreement, it is time to look at other options.

Debt Solutions

Although it’s possible to negotiate with your creditors and collection companies, you may encounter obstacles which prevent a plan from working out.

Maybe you can’t pay what your creditors propose – or their timeline is untenable. Perhaps you have too many creditors to pay at once and not enough money to go around. Also, if your situation has negatively affected your credit or you have a decline in income, applying for a consolidation loan from a bank may not be an option.

You may feel tempted to wrap all your debt into a high interest loan from a subprime lender. However, you’ll want to explore the solutions a Licensed Insolvency Trustee offers before signing any loan document with debilitating interest rates that could potentially make your financial situation even worse.

Consumer Proposal

Offering a proposal to your creditors through a Licensed insolvency Trustee can reduce the overall amount of debt you repay while ensuring your creditors still recover a percentage of what’s owed to them. It also consolidates your various debts into one manageable monthly payment and protects you from current and future collection attempts and garnishments throughout the process. Depending on your circumstances, your Licensed Insolvency Trustee can customize your proposal to suit your income and debt load.

Bankruptcy

If a Consumer Proposal is not a viable option for eliminating your debt, it may be worthwhile to explore filing a Bankruptcy – another effective means to eliminate your debt, silence creditors and halt current and future legal actions against you.

Like a Consumer Proposal, Bankruptcy is a legal process only a Licensed Insolvency Trustee can administer. However, instead of making a payment offer to your creditors, Bankruptcy involves selling assets and potentially surrendering a portion of your income for the partial repayment of your outstanding debts.

Defeat Your Debt Once and For All

If you’re struggling with debt, have exhausted all your options and wonder if a Life-Changing Debt Solution such as Bankruptcy or a Consumer Proposal is right for you – reach out to a Licensed Insolvency Trustee for a Free Confidential Consultation today. During this no-obligation meeting, a qualified debt professional will seek to understand your entire financial situation, goals and challenges and identify opportunities for you to achieve the financial fresh start you need and deserve.

Whichever strategy you decide is right for you and your budget, always read the fine print, explore every option and never sign or decide anything out of fear, anger or expediency. Especially when you feel like you’re running out of hope, remember it’s always possible to fix your finances. It’s only a matter of finding the right strategy that will benefit you now and over the long term.