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Debt Settlement 101

Your heart is telling you to settle your bad debts and you’re not sure the best way to do it. I recommend that you not deal with the collection agency if one handles your debt. These are middlemen and they are in the business of harassing, threatening, and scaring you into paying your debt, plus interest and service charges on that debt. If you really feel compelled to make good on your debt, then you need to approach the original creditor and make the arrangements to pay off that account. We all know that you must do the right thing if possible and pay debts owed. But we also know that everyone experiences money problems some time in their lives.

You should know that by the time your debt was sent to a collection agency, it has already been written off by the original creditor as an uncollectible debt. In other words they took a write-off on their tax returns… so when you approach them, they consider your offer to pay them back as windfall. If you are able to pay the full amount, do so. But if you are still in a bind, you can negotiate a lower pay off amount. In fact you can start as low as 40 cents on a dollar and work your way up. But your real goal should be payment in return for the removal of the negative item on your credit bureau reports. The creditor may seek all or most of the amount owed for this option, but that’s for you to work out.

I feel the best possible result on your credit reports is to have the item totally removed, or at the least marked as “Paid”. Also request any mention of this item by a collection agency be removed at the same time. This is part of the deal. “Paid” is a neutral entry and will not affect your credit score at all. If you can’t get them to agree this, second choice is “Settled”. This is negative, but it’s much better than “collection charge off”. Here is the list of terms that you do not want to agree upon: “Paid Charge-Off” -Charge-Off”- “Paid Collection”- “Repo”. These are all still very much negative and should never be accepted.

All of us live in a society that is inherently forgiving and most companies are willing to work with you. On the other hand, most collection agencies are in the business of collecting debts, and they have never heard “…forgive us our debts, as we also have forgiven our debtors. Mt 6:12″. I hope you’ll consider taking control of your past by repaying your debts as best you can. Use the tools provided by the CreditMania portal to accomplish this. The first step is just getting on the phone making the call to the original creditor. Try negotiating a pay-off agreement on the phone, then get it in writing. And do yourself a favor, fire the collection company pronto, this will stop the harassment.

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