DIY Debt Settlement

Hi Reny -

I would definitely advise starting with the smallest and working up (a' la Dave Ramsey's advice). But don't go a month without paying SOMETHING on the bigger ones.

If the big ones are too big to tackle in a few monthly payments, those are the ones you need to make arrangements on for long-term payment plans.

If the small ones (say under $300) can be broken into 3 monthly payments, get those out of the way ASAP, and then start snowballing that amount into the larger bill payments once the small ones are paid off.

Hi Reny;
If you go to google and type in cnn money debt reduction planner, you will find a link that will take you to the cnn website where you can type in your debt amounts and their interest rates, as well as how soon you want to become debt free, and the site will calculate a plan of who to pay what and when in order to make that happen. It is a great tool!

Good luck to you!

Definitely it is a good idea to start with settling the smaller debts first. Like a post above mentioned, while doing this make sure you do not miss any payments on any of the larger debts.

Once you have settled some of your smaller debts, and those are freed up, try rotating debts, this will save you interest payement and will reduce your debts faster. I have said this on many other posts, and I know people who have tried this and it has really benefitted them.

I have the same question as lmale and don't really see an answer in the posts.

If you are trying to settle yourself, have numerous debts, and they all want something now, what do you do? Okay, so you can focus on the smaller ones to settle, but why make payments to the other ones, even if it's a small amount, when they are charging an arm and a leg in APR and racking up fees? You're putting more toward a debt that is simply growing bigger and bigger when this $ could be used to settle faster.

And yes, some of the creditors will offer a relief program, but in my experience, they don't lower the payments enough and they have strict restrictions - be even 1 day late in a payment and the whole agreement is void and you are back at square one.

I thought settlement entailed saving and working on paying one creditor off at a time; unless, you happen to have a big lump sum to settle quickly, and if that is the case, then why not just pay the debt as agreed.

I've read tons on settlement and dyi, but am still unclear, like the original poster about how to juggle all of this and not get sued by the companies that you can't deal with right away.

BTW, I have an arbitration I just received over a $3600 cc debt that I was never offered settlement for and went to arb after 5 months. These companies are getting more aggressive about suing IMHO.

Whatever you do I feel it is in your best interest that you do not miss any payments if you can. A good credit history will always go a long way for you. It is best that you do not think you should start missing payment so that they will then eventually go in for a settlement.

Waiting it out and making all the payments and mainting a good credit history will always be worth much more than anything in the long run.

Hi,

Debt settlement really hits your credit hard, it should only be used if you are already late, and your financial situation is such that you will easily win if the creditor should take you to court.

You are correct, neteffect, but there is no way to predict who will take you to court - it really largely depends on the person(s) handling your account (and a little bit of luck). So for the bigger ones (especially over $5k) it is always best to try debt management (interest negotiation) first. You will probably have to send them a hardship letter detailing your financial situation, and reminding the creditor that you are being responsible by requesting such assistance. Any lapse at all though, even by one day, usually results in the creditor immediately withdrawing the offer.

It's really a simple matter of taking or making a couple of phone calls, writing a few letters, and then sticking to a plan. Do your part in a fully documented (send any letters by Certified Mail/Return Receipt Requested) and polite manner, and you will have some legroom just in case the creditor should get nasty on you - you will be able to prove that *they* are in the wrong.

But each case is different. You can read all you want about the process, the plethora of info out there may confuse you, but once you start, you will find that it requires a minimum of intelligence (there are sample letters on this site to use for your creditors) but some determination to become debt free.

Indebt2, there are also calculators on this site, see the menu bar above.

If you get stuck along the way you can always ask.

Good luck!

chrys

You need to keep a tab on your spending habits and start saving to manage your debt effectively. I can say from my experience that Freedom Debt Relief works better in debt negotiation with a goal of lowering debt levels. Their debt settlement program helped me to lower my monthly payment and also reduced my total debt.

This is a great question, I, too, would like to know what to do in a situation like this, because I am in the same boat. I have gotten to the point where I've been paying all of my minimums, some at outrageous interest rates such as 29.99%, and find myself getting nowhere with them and also unable to pay my other very important bills after doing so. I am new to this and really don't know which way to go about it either, some people are saying to keep paying at least something to all of them, others say to let them go 3-4 months and then try settling. I'm very confused and time is of the essence.

Something that I had read in one of these threads, and it does make some sense, is that it is not necessarily in your favor to pick one over the others to continue making payments to, because your other creditors will see that you have money to be making payments but you are choosing not to pay them. That may make them less likely to work with you if trying to negotiate. I don't like the idea, but it does seem to make sense. So perhaps it is best to stop paying all of them for a while, keep saving as others have mentioned, and then begin negotiations to pay each of them off in a lump one at a time. This is NOT expert advice, as I said, I am new to this and learning too!

Hi maggie,

Again, my suggestion is to request debt management for the larger ones. If you are just making some kind of payment, and it is less than the original payment, you will accrue late fees, etc.

If you wish to go the settlement route, it does take some time, as creditors are not going to be willing to discuss a settlement unless they feel its better to get some money than none.

To put it another way: If you loaned me $100, can I pay you back a 20 and be done with it?

Probably not.

But a year later, I might be happy to accept $30 just to have some of it back.

As far as the plethora of advice, yes it can be tricky wading through it and deciding which to apply to your situation, which includes income, assets, hardship, etc. But each situation is different and requires a different method.

So, yes, if you are deciding to settle your debts, its best to do as you have said.

Good luck, and welcome to the Community!

chrys

Sorry, that was me.