Direct Negotiation with Creditors
Negotiating directly with your creditors is something that you can do yourself. If you need help, I am more than happy to work with you in the negotiations. In general, you can try to get your creditors to lower your interest rates, reduce the amount you owe, or adjust your payments to a more manageable level. In asking a creditor to lower your interest rate or adjust your payments, the worst thing that can happen is for them to say “No.” This option is like the concept of “nothing ventured, nothing gained.”
Usually a Lump Sum of Cash is Required
Getting your creditors to accept less than the full amount you owe them usually requires you to have a lump sum of cash that you can pay to them immediately. If you have a number of creditors this can present a problem. Either your creditors will not all accept your offer or you will not have enough money to work out a solution with all of your creditors. One of the dangers of direct negotiation is that you find yourself unable to resolve all of your problems. A piecemeal solution to your financial problems is not the answer; it can be like putting a bandaid on a cut that needs stitches. You may need to find a more comprehensive solution to your debt problems.
Be Careful Not to Create Tax Liability
Another problem that arises with debt negotiations is the potential creation of tax liability. If your creditors agree to take less than you owe them, the difference between your balance and the amount you pay will likely be treated as income by the IRS. In other words, you got rid of some of your debt (which could have been discharged in a bankruptcy case) only to create taxes payable to the IRS (which will not be dischargeable in a bankruptcy case for at least 3 years.) Before you agree to a final settlement with a creditor, be sure you understand the tax implications to avoid making your situation worse.
A Free Consultation is available to you
I can explain all of your options to you. I offer a free consultation to you and we can discuss any direct negotiations you might want to consider. Although Bankruptcy is always an option, there can be other solutions that can help you. Together we can investigate those options so you can make the decision that is right for you. A comprehensive solution is usually best because it handles all of your debt. Give me a call and see what we can do together to help you live a better life.