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Debt Negotiation - Self Help Tips
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Debt Negotiation - Self Help Tips

When you reach the position where you can't afford your debt repayments, it's time to take action. Instead of running from your situation you need to take positive steps to fix it. If you reach the stage where you canít keep up with the repayments, itís most important that you contact your creditors as soon as possible and explain your situation. It will help your situation as well as your credit rating greatly if you manage to contact your creditors before they contact you.

This behavior on your part will show your creditors that you take your situation seriously and have taken responsibility for the state of your finances. It will further reassure them that theyíre more likely to receive their money - albeit later.

Now this may be hard to believe, but your creditors wonít want to take court action against you unless itís absolutely necessary.

Would you like to know why? Well first, all court action is time consuming, costly and unpredictable. Itís generally a last resort, when all other avenues have been exhausted.

Second, itís a question of mathematics. Itís just a simple commercial decision. Most people would rather receive all the monies due to them over a much longer period than originally agreed, in preference to only receiving 20 cents in the dollar months later when the bankruptcy courts get it all sorted out?

Bankruptcy should only be considered as your very last option.
Most lenders when offered a reduced payment schedule over a longer period (with some reasonable explanation), will accept it. In most cases it will allow them to receive more of their money back than the alternative of bankruptcy.

Always best to contact your Creditors Early !

As soon as you know you wonít be able to keep up with your repayments, get in touch with your lender. Write to them explaining your situation, giving them the reasons for your financial difficulties. Creditors will often be open to negotiation, and dare I say it, quite helpful. They just want to ensure that they get as much of their money back as possible. Chances are they will be prepared to consider a more suitable repayment schedule that will allow you to pay off your debts.

If you ignore your creditors, theyíll have you in court quicker than you can say bankruptcy! Ignoring letters from creditors tends to make them irate. Remember, they donít want to take legal action, unless your actions force them to! But if your general attitude says to them ĎIím in this position because I spend recklessly and have a cavalier attitude towards my debtsí, they wonít have any choice. Furthermore if that is their view of you Ė they will be less willing to negotiate with you at all.

Once youíve drawn up a personal budget and know how much you can afford to pay towards your debts each month, contact your creditors and make them an offer. Itís best to keep your offer of reduced monthly payments as brief and precise as possible. But above all, make it honest and realistic.

This is good - ĎI would therefore like to offer $15 per month to repay this accountí.

This isnít - ĎIím hoping that things will get better over the next couple of months, so Iíll increase my payments as much as I can at that timeí.

Lenders are unlikely to buy this sort of an explanation. Whatever happens, when it comes to making an offer of reduced payments, don't bluff your creditors. Honesty is the best policy.


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