One of the worst things about being in debt is that it can seem there’s no way out. You might certainly think negotiating with your creditors is a non-starter. After all, they hold all the cards, don’t they?
It’s not as bleak as you might think, though. In some cases, a negotiated settlement could be your way out of debt.
How Does a Negotiated Settlement Work?
What you have going for you in negotiations is that your creditors may prefer getting something right away than to have to wait indefinitely until you may or may not be able to pay the whole sum. If you have some funds available (by selling some assets, for example), they may be willing to take that in payment and write off the rest of the debt.
Obviously, you’d have to be in a position to make an offer that would be worth their while. It also tends to work best if only a few creditors will be sharing the money.
Before going into the negotiations, make sure you’re clear about what you owe each creditor and how much you can offer them. Then open negotiation, which have to be handled carefully. It’s essential that the creditors accept you’re acting in good faith and that the offer is reasonable.
Pros and Cons for a Negotiated Settlement
As with any solution to a difficult situation, there are pros and cons to a negotiated settlement for your debts. The main points in favour are:
- Your remaining debts will be will be written off.
- Once the payment has been made, you’ll be debt free.
- You won’t have to live with the practical and psychological pressures of being pursued by creditors.
- You’ll avoid the risk of bankruptcy, which could have negative effects on your future prospects.
However, there are also points against a negotiated settlement, such as:
- You might not be able to raise a realistic sum of money.
- Your creditors may not accept your offer, and knowing you have some money could lead to each creditor demanding full repayment.
- Negotiations can take time to complete, during which your creditors are entitled to continue pursuing legal action against you.
- A negotiated settlement can have a negative effect on your credit rating.
Whether you’re considering making an offer of a negotiated settlement or whether you’re a creditor who’s been offered one, it’s important to get expert advice. You very welcome to get in touch with me. Even if I’m not the expert you need, I can point you in the right direction.