Credit Problems? How to legally reduce or eliminate all your debts.
How You Can Negotiate Debt Reduction With Creditors and
Lower Your Monthly Payments and Interest.
ARRANGE AN EXTENDED DEFERRAL OF YOUR DEBTS
Maybe even reduce the total amount you owe.
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or Money Problems Lawyer
STEPS TO A SUCCESSFUL DEBT REDUCTION
DO YOU QUALIFY?
There is no "qualifying" to negotiate a better payment arrangement if you are having financial problems. It is a matter of your convincing your creditor that it is their best interest to make a better arrangement with you. Generally they will cooperate and try to work with you.
HOW MUCH DOES IT COST?
It does not cost anything to make arrangements with one or more of your creditors. Just contact them and negotiate.
A reduced interest rate or payments made over a longer period will incur additional costs. But a special debt repayment arrangement will make life easier.
WHAT ABOUT YOUR CREDIT RATING? Since you can meet your new commitments, you will minimize the negative impact on your credit rating and probably improve it. Your credit rating is probably pretty poor or you would not be in this situation in the first place.
You can probably make new payment arrangements for all types of debts except mortgages.
Mortgages may sometimes be eligible depending on the financial institution and on your financial situation.
Some lenders offer a mortgage payment relief period of up to six months if your circumstances qualify. Phone and ask.
WHAT TO ASK FOR:
- Reduction in your payments
- Lower interest rate on your debt
- Extended deferral of your debt
- Maybe even a reduction in the amount owed.
- Inform them your money problems mean you can't pay your bills.
- Mention that going bankrupt is a possibility.
WHERE TO START?
Make a complete list of your creditors, account numbers, account balances, monthly payments and payment due dates.
IN WHAT ORDER? WHERE DO YOU START?
By reviewing your budget, you will be able to see if reducing the monthly payment for a single debt is enough to get your finances in order. If so, it won't be necessary to contact all of your creditors. However, if a payment reduction from just one creditor doesn't quite get your head above water, you could choose to contact all of the creditors to whom you owe the largest amounts of money. This will have a greater impact on your monthly budget.
TEST THE WATERS FIRST:
Call all your creditors, and without revealing your identity, ask if they have a program whereby debtors can negotiate a better deal. Find out who to call.
CONTACT YOUR CREDITORS YOURSELF
Contact your creditors and tell them you need either a reduction in your payments, an extended deferral of your debts or a reduced rate of interest (or all three).
They already know you are having credit problems. No need to be embarrassed They want to work out problems since it is better for them to avoid the cost and effort of collection problems.
DO IT NOW! Start making your calls.
Yes, you can do this. Just pick up the phone and plunge right in.
You are the best person to convince your creditors that you can meet a negotiated settlement and pay your debt. The most they can do is say no.
The financial institutions that issued your credit cards may require that you stop using your credit card or may even revoke it. Be flexible and open. You are not in a position to refuse. Cooperation goes a long way.
MAKE A CLEAR PROPOSAL:
Make a clear proposal, based on your budget and how much you are actually able to repay.
Clearly explain your financial situation to your creditor so that they fully understand your situation. The key to success is to show good faith and your commitment to repay your debts.
Mention you do not want to go bankrupt but will if no other option.
Remember they know from your credit report exactly how much you owe them and others. Do not mislead them It will not work.
PICK THE BEST PROSPECTS
Use the list of debts you made up since it includes a complete list of your creditors, account numbers, account balances, monthly payments and payment due dates,
It will help you plan your proposal. It will help you determine who you should pay and when, as well as what commitments you are able to make.
YOU CAN TRY TO NEGOTIATE:
- Ask to have your payments spread out over a longer period, thereby reducing your minimum monthly payment;
- Negotiate a reduced rate of interest, which should also reduce the amount you have to pay (some credit card issuers offer cards at a reduced rate of interest — ask about them);
- Obtain a deferral for some payments;
- Have your total debt reduced (for example, you owe $5000 but you offer to pay $3000 cash right away using money that you may, for example, have received from an income tax refund).
Be sure to obtain a written notification of your agreement from each creditor before you make any large payments.
WHAT IF YOU CANNOT MEET YOUR NEW OBLIGATIONS?
If, after making the arrangements, you are no longer able to honour your part of the agreement, call your creditor as soon as possible and explain your new situation. You must try hard to maintain a good relationship with the person with whom you made the arrangements.
How To Lower Your Credit Card debt, Monthly Payments and Interest Costs and/or get an extended deferral of your debts and reduce the amount you owe. Negotiate with your creditors.
BE FIRM, BUT VERY POLITE:
Whatever method you choose (telephone or mail), be polite but persistent. Remember, you are asking them do help you. You need their cooperation. Eat a little crow, it won't hurt and may help get you what you want.
WRITE DOWN THEIR NAME:
When contacting your creditors by telephone, make sure you write down the name and contact information of the people you speak with. You will need this information if you have to contact them again.
ASK THEM TO SEND YOU A WRITTEN AGREEMENT:
It is advisable to get a written confirmation of the agreement. You can prepare a brief summary of your telephone conversation and send it to the person you spoke with (by fax or by registered mail).
WHAT DOES THIS MEAN?
Making arrangements with your creditors is a way to ease your debt repayments. Call them and see what they say. You will be amazed at what they will do.
Creditors will agree to negotiate with you since their ultimate goal is to recover the money you owe them.
Contact your creditors with a proposal for either a reduction in your payments, an extended deferral of your debts or a reduced rate of interest (or all three).
You can exclude certain creditors if you wish — it is up to you. If negotiating with one creditor provides you with the relief you need, you don't have to work out an agreement with the others.
Be realistic — don't make a proposal that you will be unable to implement.
Your creditors ongoing cooperation is completely voluntary. They are not legally obliged to make any special arrangements with you, nor are they required to abide by them. If you do not honour your agreement, you will probably not get a second chance.
Yes, you can negotiate a better deal on your existing debts get lower payments, get reduced interest, and/or extended deferral of your debts and reduce the amount you owe
CanLaw Guide to the Law on Debt for the Layperson
On line Since 1996