Debt Negotiation > Debt Negotiation Program
HOW THE DEBT NEGOTIATION PROGRAM WORKS
The negotiation process will make more sense
if we walk you through a “nuts and bolts” example.
To be consistent, we’ll use the previous example.
Let’s say you owe $25,000 on five different credit
cards, each one with a balance of $5,000. You’ve
been paying an average of $500 per month in
minimum payments, making sacrifices along the way,
only to see your total debt stay the same or even
grow due to late fees or over-the-limit penalties.
What happens if you don’t send out the $500 and
put that money into a savings account instead?
Well, the first thing that will happen is that
your telephone will start ringing off the hook,
and the banks will want to know when their monthly
payment is coming. However, there are several very
simple techniques for dealing with the problem of
creditor harassment, and provided you follow a few
simple instructions, most of the nuisance calls
can be eliminated.
When the strategic moment arrives, the
attorney will make contact with the creditor to
inform them of your hardship and your intention to
“settle” the account. The timing of this process
is usually based on how late you are on the debt
and the amount of funds you have available for
settlement. Now, during the initial months, most
banks will not settle.
This is not an overnight process. Sometimes it
takes 5-6 months or more to reach an agreeable
settlement. Let’s say that three more months have
elapsed. Over a total of four months, you’ve set
aside $2,000 in your settlement fund ($500 times
four months), because you haven’t sent regular
payments to your creditors for three months.
What happens next? One of the five creditors
decides to get it over with and agrees to accept a
50% settlement, provided payment of the full
$2,500 can be made within 30 days. Since that
gives you another month to work with, you’ll have
the $2,500 from your settlement budget. Your
attorney obtains a written settlement offer from
the bank and sends you a copy. You release the
funds, payable to the creditor, and the attorney
forwards the payment on your behalf. Everything is
properly documented for your protection and
nothing is left to chance.
So what just happened? You paid $2,500 to wipe
out $5,000 worth of debt, and saved $2,500 in the
process. After five short months, your total debt
stands at $20,000, instead of the original
$25,000. You’ve eliminated 20% of your problem
debt in only five months!
Further, you’ve traded an open situation for a
closed one. That $5,000 debt that we just settled
would have continued growing and growing. Instead,
we’ve traded that never ending situation for a
defined settlement of $2,500, and once you’ve paid
that $2,500, you’re done with that debt. It’s out
of your life forever!
Remember, on the bank’s hardship plan, after
six months, you’d still owe around $4,700.Which
you would rather owe: $4,700, or ZERO? The power
of this approach for rapid debt reduction is
“But what about my other four debts?” you ask.
Good question. It’s important that you understand.
The debts are negotiated ONE AT A TIME, based on
your budget and your ability to handle the
settlements. The other four creditors are informed
of the first settlement by your attorney, when it
is appropriate to do so—and to encourage the other
creditors to cooperate.
The other creditors simply have to WAIT THEIR
TURN. Now, let’s do the arithmetic and see how
long it would take to completely wipe out $25,000
worth of debt using this approach. If we cut
$25,000 in half (50% settlements), that’s $12,500
in remaining debt, divided by the $500 per month
budget, equals 25 months. So in a little over two
years, the client in the above situation could be
completely debt free, without spending any more
per month than they were already paying in minimum
To be completely fair, the above example is
simplified and ignores some of the complexities
that can arise, but the basic math is sound. In
fact, it frequently works out better than this. If
the settlement average comes down to 35% (which is
quite common), then the process could be completed
in only 18 months.
This approach to DEBT REDUCTION is simply the
fastest and safest method of eliminating problem
DISCLAIMER: It’s important that you understand
us plainly here. We’re not advocating that
everybody suddenly quit paying their bills to
force their creditors into settlements. There can
be negative consequences to your credit score
through this negotiation process, which should
therefore only be used in the event of legitimate
financial hardship. If you have sufficient income
to reduce your debt load the ordinary way (by
reducing the balances with payments in excess of
the minimums), then you should definitely do so.
The negotiation process works best in the
event of LEGITIMATE FINANCIAL HARDSHIP.
program work for you?