Taking the Do It Yourself Approach to Debt Management

Managing debt, and settling the debt you owe, can be a difficult undertaking, and many debtors feel they need to seek outside help in the form of credit counseling. Before you take that step, however, there are a number of do it yourself steps you can take toward debt settlement.

There is no doubt that Americans today are struggling under an ever increasing debt load. If you are behind in your bills, getting calls from collection agencies, or paying bills late it is important to tackle the situation right away instead of allowing it to spiral out of control.

When it comes to taking the do it yourself approach to debt settlement, the first step is to take stock of what you owe. Write down everything you owe, and who you owe it to.

The next step is to determine how much you can afford to pay each month. Write down all of your essential monthly expenses, things like the rent or mortgage payment, utility payments, gasoline, groceries, etc. Add them all up and subtract them from your monthly net income. The amount that is left over is the maximum you can afford to pay under the debt settlement plan you work out.

Now take your list of debts and write the percentage of your debt settlement budget that can be applied to each of the debts. Calculate the monthly amount you can afford to pay.

After you have decided how much you can afford to pay to each creditor, contact each of your creditors or collection agencies and explain your proposed plan and how it affects them. Explain that your financial situation does not allow you to pay them in full. Explain to each of your creditors how much you have available to pay off your debts, and let them know that the same offer is being made to each creditor. Also let them know that the ones who accept the offer will be the first to get paid.

Likely you will receive a number of responses, a mixture of acceptance letters and rejection notices. Be sure to keep all the correspondence you receive in a safe place, and use it to keep track of your plan as it progresses. When you do receive an acceptance letter, be sure to immediately send in the agreed upon amount, and to request a receipt stating that the account has been paid in full.

This process should be repeated the next month, with the debt settlement offers begin adjusted accordingly. As your other debts are paid, you will be in a stronger position to offer the remaining creditors a higher percentage of the money owed. As the percentage increases, the likelihood of the creditor accepting your offer will increase as well. This process can be repeated month after month until all the debts have been paid off.

When working out such a debt settlement arrangement, it is important to get all agreements in writing, and to not pay the amount agreed upon until that written agreement has been received. It is also vital to insist upon a receipt stating that the account has been paid in full.

In addition, all signed agreements, receipts and other documentation should be retained in a safe place, even after the debts have been settled.

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