How to Negotiate Your Debt
The following is presented for informational purposes only and is not intended as credit repair or credit repair advice.
Debt has always been easier to create than it is to undo. If you look up one day to find that your debt is simply more than you can manage, you’re not alone.
Now, when it comes time to repay your debts, your first thought may be, “Do I really have to pay all of this back?”
The answer to that is, “Well…it depends.”
It is possible to negotiate down certain debts, but there are a lot of conditions to consider. Here's what you should know:
You may need to stop making payments
Your credit card company is very unlikely to offer to forgive any amount of your debt, especially if your accounts are current. Same goes for most lenders, especially when the loan is secured with real property (like a house or a car). There's really no incentive to let you pay less than what you owe.
If you're struggling with your payments, some creditors may be able to offer some form of short-term hardship program, and some may even be able to reduce your interest rate if you make the request, but if you’re hoping to get your debt reduced or completely absolved, there's not much chance of that happening.
Allowing your accounts to fall behind can have severely negative consequences for your credit, and you'll almost certainly start hearing for the debt collection department. So you'll need to carefully weigh your ability to manage the debt as is, versus the fallout you may experience if you miss one or more payments.
Of course, if you're already behind on your payments, the damage may already be done, so the consequences may not outweigh the benefits.
You may need to wait for accounts to charge off
If you're attempting to negotiate a reduced payment on your debt, things may need to get a little dire first. If there's no room to negotiate even after the account becomes delinquent, you may need to wait until the creditor charges off the account. Once a debt has become severely delinquent, the creditor will likely charge off the debt for their own tax purposes.
It's important to note that you're still responsible for the debt. After the charge off, the original creditor may sell the debt to a third party, which will begin making efforts to get you to pay them for the debt.
Because they purchased your debt for less than what's owed, a debt collector is much more likely to be willing to discuss a reduced payoff of your debt. This is called a settlement.
You'll need to negotiate a repayment plan
If you're in a position to settlement your debt, a full repayment may be off the table. That means it's time to connect with your creditors or debt collectors and discuss a partial repayment. Your goal is to pay as little as possible. Their goal is to get you to pay as much as possible. So the negotiation process can be tricky.
That's why you may want to consider working with a settlement expert to negotiate on your behalf. They can handle the haggling and act as your advocate during the settlement process.
You should negotiate debts upfront when possible
Medical and service-related debts usually have more leeway for negotiation. That doesn’t mean private practices or large hospitals will definitely forgive portions of your debt. It just means that there’s a general recognition that medical debts are often overwhelming and many patients need assistance repaying those debts.
The best time to talk about pricing and repayment options is actually before any procedure has been performed, but that’s often not possible, especially in an emergency situation.
Once you’ve received a bill and verified with your insurance that the amount you owe is accurate, contact the applicable billing department and discuss the situation. Many hospitals have hardship programs to help defray the cost of medical expenses, in which case you may need to provide certain documents and complete the required paperwork.
Whatever caused the debt in the first place, if you don’t feel like you’ve got the financial ability to repay everything that you owe, financial counseling from MMI is free, confidential, and available online or over the phone. Let us help you understand your options and walk you through the steps you need to take to reach your goals.
"Without MMI, I'm not sure what we would've done. You look at statements where it says, Oh, you'll pay this off... if you pay the minimum, you'll pay this off in 40 years. You reach the point where you really feel imprisoned."
Hear how MMI client Jarred overcame costly medical debt:
