This is a collaborative post
If you’re in debt, then you need to be careful about the methods you take to get out of it. MLMs (pyramid schemes) and payday loans often target those in financial difficulty and often get them into more trouble than they started in. One of the best steps to take as soon as possible is to talk to your creditors up-front. However, if you’re going to start negotiating with them about how to best settle your debt, it’s good to have an approach planned out.
Be real with them about the risks
There’s one word that will get your creditors to pay attention to what you’re saying above all else. You don’t need to get dramatic with them, by any means, but if you tell them that you’re at risk of bankruptcy, then they will be more willing to do what they can to help you. It’s also worth telling them your story, whether you were made ill for some time, out of work, or hit with a sudden expense. Don’t embellish your story, but make it clear that you’re unable to deal with debts as they currently stand.
Offer them a legally binding agreement
If you’re not able to offer too much to make your creditors feel secure about reducing your debt overall, then you might have a hard time getting them to agree with you. However, if you can produce a legally binding agreement and get it in writing, not only does it show your dedication to paying off the debt, but it stops them from taking any further action, such as sending the collectors after you. This is one of the biggest benefits of an IVA, an agreement that freezes the debt and gives you more time to pay it off. Check the IVA pros and cons and see if it’s for you. Often, it might mean being in debt for a longer period, such as five years, but it’s one of the most effective ways to avoid bankruptcy for real.
Know what you’re aiming for
If you have a point to negotiate towards, then you are much more likely to be able to achieve it. In general, you want to aim for having all of your debt charged while paying 50% of more of it. This might mean you have to sell some assets to get the cash together for a final lump-sum payment. However, it is a negotiation, so you should be ready to have some wiggle room. For instance, you might be able to get away with paying off a reduction on most of your loans, giving you wiggle room to pay off the others in full.
If you’re worried that your debt is spiralling out of control, then it’s better to get in touch with your creditors now rather than later. Most of them are willing to help you out, but it’s a good idea to give them plenty of room to do that, rather than waiting until your debt is insurmountable.