Letters To Write To Creditors - Advice About Negotiating Debt Settlements

When you are deep in debt and trying to find a way out of it, one option is to see if you can reach an agreement with your creditors yourself.  This is a very positive step, and is certainly better than ignoring the situation and hoping that it might go away.  If you are able to reach agreements with your creditors to change the repayment terms on your debts so that they become affordable for you again, this is certainly one of the most direct ways of dealing with debt problems.

Writing letters to your creditors is the best way of negotiating, as it ensures that you can state clearly what you want to say, and makes it easy to keep clear records of what you have said and done and what their responses are.  You will need to write several letters, starting off with an initial one to explain what your situation is, how you got into it and to say that you are trying to address the problem.  You need to ask each creditor to confirm exactly how much money they are owed, and get them to state clearly any interest charges or late payment fees included in that.

You then need to use the information you get back to make a list of all your creditors and how much you owe to each one.  Before you can write letters to your creditors again, you need to split them into two groups.  In one group you put all your priority creditors, and the other your secondary creditors.  Priority creditors are ones where the consequences of not paying are serious, such as your mortgage.  Secondary creditors are generally unsecured debts such as credit cards, store cards and unpaid household bills.

Before you can make offers to your creditors, you need to be able to demonstrate how much you can afford, otherwise they will not know if your offer is reasonable or not.  You do this by preparing a personal financial statement showing all your income and expenditure. Do not include your secondary creditors in this for now.  Your financial statement will show you how much money you have left over each month to go towards your debts.

This is when you write letters back to your creditors to make offers of payment.  The fairest way to do it is to share out what you have spare proportionately among your creditors.  This will be the easiest to justify and defend if you are challenged over the amount.  Do not be persuaded to increase your offer to one at the cost of another, and start to make the payments you have offered even if they refuse your offer.  That way at least you are continuing to pay off some of the debt.

This kind of personal debt settlement can be effective, but you need to know what you are doing and be very well organised too.  If you do not feel confident about taking on the process yourself, you could approach a debt management or debt settlement company to help you.  They will go through your finances with you and make a proposal for a way forward that best suits your needs.

If you do decide to talk to a professional debt advisor, you should be aware that some are better than others, and that some are definitely to be avoided.  To make sure you get good advice, you should only approach reputable organisations who have been in business some time, and who can demonstrate a history of successfully helping people like you.  You should also approach more than one, so you can make a comparison between what they offer you.