Contact your creditors, explain your situation, and make a reasonable offer.
Inform them that you are sending this offer to all your creditors and the ones who accept the offer first will be paid first.
Keep all acceptance letters, send in the amounts agreed upon, and request a receipt stating that the debt has been "Paid in full".
Repeat this process each month and adjust your debt settlement offers upwards until you are debt-free.
Make sure that once you have paid the debt in full, you get the "Paid in full" letter you requested.
Don't forget to obtain a fresh credit report once a year and keep yourself updated on your account status!
How to settle your debts yourself if the debt is held by a collection agency
Contact the collection agency (CA) by letters.
Record the name and direct phone number of each collection agency representative you talk to.
Send a debt validation letter to verify that you owe the money. Accept a reply only when it contains the following:
Proof that the CA has been assigned to collect the debt by a creditor.
Detailed payment history starting with the original creditor.
Copy of the original signed debt agreement or credit card application.
If the reply is not satisfactory, inform the CA that they are violating the Fair Debt Collections Practices Act and they need to remove the collection listing from your credit report or you will sue them.
If the CA validates the debt, you need to contact the creditor. Ask them to pull your account back from the collection agency. If your creditor doesn't pull back the account from the CA, negotiate with the collection agency.
Offer a lump sum payment to the creditor.
If you don't have enough money, make your creditor(s) aware of your inability to pay the total debt in a lump sum, and offer them an alternative payment plan.
Avoid sending cash and get a receipt. Don't forget to mark your envelope as "Payment enclosed".
Don't miss any payments and make sure that your check doesn't bounce when paying the CA.
Try to clear the debt quickly so that you don't have to deal with the CA again.
If you aren't comfortable dealing with creditors/CAs, you can get help from a debt settlement company/law firm who will negotiate on your behalf and help you to settle your debts. You need to go for a no-obligation free debt counseling session with the company you choose so that they can assess your financial situation and then decide how much you can offer your creditors.
By signing up for counseling session, your provided details (Name, Email ID and Phone No.) will be forwarded to the company advertising on the DebtCC. However, you have no obligation to use their services.
Some creditors and collection agencies refuse to lower the pay off amount, interest rate, and fees owed by the consumer.
Creditors/collection agencies can make collection calls and file lawsuits against the consumers represented by the debt relief companies.
Debt relief services may have a negative impact on the consumer's creditworthiness and his overall debt amount may increase due to the accumulation of extra fees.
The amount which the consumer saves with the use of debt relief services can be regarded as taxable income.