This afternoon I received a very interesting and timely book, The Road Out of Debt: Bankruptcy and Other Solutions to Your Financial Problems*, by Joan Feeney and Theodore Connolly. This book is a great resource for anyone dealing with debt. Chapter 2 offers up 20 Keys to Successful Negotiating with Creditors along with a few thoughts:
1. Get Prepared: The More You Know, the Better – Develop a budget so that you know what you can afford to pay back. Familiarize yourself with the Fair Debt Collection Practices Act (PDF). Understand your loan terms. Get all your bills organized and take good notes.
2. Be on Guard When Dealing with Creditors – Credit companies have one goal: to get your money.
3. Remember That No Two Creditors Are the Same – What works for one creditor won’t work for another.
4. Communicate – This is no time to stick your head in the sand. Don’t avoid the calls.
5. Make Collectors Stop Calling and Writing – The book has sample letters that can be used to get creditors to stop calling. If they don’t, you can contact your state’s attorney general and report them.
6. Make Offers to Your Creditors – Make a reasonable offer to your creditors and see if they accept. If they think you are serious, they will be more willing to work with you.
7. Remain in Control – Remember that you have something that your creditors want: your money. This puts you in control.
8. Be Patient and Persistent – Be patient. If you get nowhere, call back and speak to someone else. If that doesn’t work, talk to a supervisor. Be patient.
9. Have No Fear – Don’t let creditors scare you. I’m sure that some of them will say some pretty scary things. Remember you’re in charge.
10. Threaten to File for Bankruptcy – Creditors hate the idea of you filing for bankruptcy. The authors recommend saying the following to a supervisor: “Without a sharp reduction in my rate so I can afford to pay, I will have to consider bankruptcy.”
11. Call Once, Then Use Certified Mail – After an initial call, it’s best to use certified mail. Certified mail gives you signatures and receipts for your records.
12. Get It in Writing – If a creditor offers you something, get it in writing before you pay anything. Without it being in writing, creditors may “forget.”
13. Only Agree to Terms You Can Afford – Why would you do anything else?
14. Never Agree to Pay a Debt You Don’t Owe – Makes sense to me.
15. Use Time to Your Advantage – The longer you stretch out negotiation, the better it is for you. Debts expire after the they reach the statute of limitations. Creditors are aware of this and are more willing to negotiate the closer you get to the statute of limitations.
16. Uncover your Creditor’s Bottom Line – Chances are good that your debt was sold to a debt collection company. The authors say that debt collectors pay $.02 to $.08 for each dollar of debt. That means if you had a $1,000 debt, the debt collector paid $20 to $80. Understanding this gives you power to negotiate. The authors say that debt collectors might be willing to settle for 50% to 70% of the original debt.
17. Don’t Let Legal Jargon Trip You Up – If the creditors use terms you don’t understand, ask them to explain. Do not let the jargon scare you. Remember, take notes. Use Google and research what you don’t understand.
18. Be Honest in Your Dealings – Don’t lie. You lose credibility if you lie.
19. Never Assume Another Person’s Debt – Make sense to me.
20. Use Honey, Not Vinegar – Be nice.
Most of the twenty keys are addressed in depth in the book, which is around 350 pages. This book (from what I can tell as I have not yet had time to read it in its entirety) treats the subject of getting out of debt in great detail.