Debt Consolidation

How To Respond To A Debt Settlement Offer?

If you have not made any payment toward a debt account for several months despite all those collection calls, the debt collectors are very much likely to make a debt settlement offer to you. As part of this offer, they may provide you an option to settle your entire debt by paying a reduced amount of money (less than what is outstanding in your name). You may be wondering why a lender or a debt collector would make such an offer that seems like a loss to them. Yes, it is true that by making this offer, they are actually agreeing to bear some loss, but they have their reasons.

The Fear Of Losing The Entire Debt

It is very important for you to keep in mind that there is a specific statute of limitations that applies for old debts. If this statue of limitations expires, lenders and debt collectors will no longer be able to collect the debts legally. Depending upon the state you are living and the type of debt you are having, this statute of limitations can be one year, two year, three year, or four years. In rare cases, it can be even longer, but usually it is somewhere between one and four years. This is in fact this fear of losing all of their money that you owe to them that forces them to make a debt settlement offer to you. But, before you accept any such offer, you must keep in mind a few things.

Do Not Do Anything That Resets The Statute Of Limitations

Always remember, the statute of limitations is calculated from the date when you made the last payment toward your debt. Look at how much time has passed since then. If the statute of limitations is very close and you make a small amount of payment when on the insistence the debt collectors, you will actually be resetting the statute of limitations. If your lenders and debt collection agents are requesting you to at least make a small amount of payment now and forget about the rest of the debts for some time, do not accept such requests. Instead, you should request them to make a reasonable debt settlement offer, where you should get a chance to repay all your debts in easy installments but by paying less than what you owe. If you are good in negotiations, you can easily convince your lenders to allow you to settle your debts by paying just 30-50% of the entire outstanding amount, that too, in small monthly installments over a certain period of time.

Lenders also make a debt settlement offer when they fear that you may end up filing bankruptcy because of your debt problems. Bankruptcy is a tough situation not only for debtors but also for creditors. Therefore, if you want a good deal in debt settlement, you may also try to convince your lenders that you are on the verge of bankruptcy, but not in a threatening tone. :)


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