An interesting article

Here is an interesting article on debt negotiation written by fellow blogger David Nikson:

Debt negotiation: A useful technique to come out of debt

Debt negotiation is one of the popular techniques to become debt free. The reason why it has become so popular is that it assures that you can pay a lower amount than what you actually owe. Debt negotiation is also known as debt settlement.

How professional debt negotiation helps you

When you contact a debt negotiation professional to assist you with settlement, you no longer make payments to your creditors; the company you deal with is expected to do it for you. You just have to make a single monthly payment to the debt settlement company and this money is deposited into a trust account. When a debt settlement is decided on, the settlement company collects the money from the trust account for paying off all your creditors.

Under debt settlement, you have to inform your creditors that you're directing your payments to the settlement company. The debt settlement professional talks to your creditors to accept an amount to close the account and term it as "settled". This suggests that the creditor does not receive any payment throughout the procedure. However, you must remember that debt settlement docks your credit score. If you have several creditors, it would be docked again and again. Debt settlement would spoil your credit score to such an extent that it might require 6-12 months to rebuild the score.

Why debt settlement is accepted by creditors

Creditors, particularly credit card companies would agree to debt settlement since they have already profited from you. If you have huge credit card balances and just have been paying the minimum for quite a number of years, or only some extra, then the credit card company probably recovered the whole amount borrowed along with interest. This indicates that the company is not truly suffering a loss when it enters into a debt settlement contract. But debt settlement permits the company to at least get some money, which they would not receive if you file bankruptcy.

Self-help debt negotiation

You can negotiate debt on your own. Nevertheless, it might take time and a lot of effort. You might have to bargain for more time. On certain occasions, you might succeed to get a viable repayment plan or an affordable interest rate from your credit card company.