Brought to you by Bob Whitaker of the Entrepreneur Network USA, LLC

       This is part 4 of a 4 part series on understanding debt and how to eliminate it as quickly as possible.  This section is entitled: “Alternative Ways To Eliminate Debt”.   If you missed out on the first 3 parts of the series on eliminating debt and creating wealth, then you can go now to, join the network for FREE and get the full version of our Debt Elimination and Wealth Creation manual immediately at no cost.

SECTION 4 – Alternative Ways To Eliminate Debt

 Chapter 1: Debt Negotiation for Unsecured Debts

Sometimes people find themselves in a situation where a debt rolldown plan is impractical and no other method they have tried has worked.

What do you do if you have so much credit card debt that you can’t make the minimum monthly payments?  Maybe you already have late payments.  What if you don’t have any equity in your home to consolidate debt or you can’t refinance your loan for whatever reason (credit issues, high debt-to-income ratios, etc.)?  What if you have already tried to reduce your expenses as much as possible, and you still can’t make it work?  Most people in this situation think about going to a consumer credit counseling service or filing for bankruptcy.  However, there are better options.

A better way is to negotiate your debts. You can either do it yourself or pay a professional to negotiate them for you.

Keep in mind that you can only negotiate “unsecured” debts. You cannot negotiate debts that are secured by property (i.e. a home loan, car loan, etc.). Government loans, like student loans, are also bad candidates for debt negotiation. Also, credit unions are harder to negotiate with than banks. You may not be able to negotiate as low if your account is with a credit union, and you will probably lose your credit union membership. Typically, credit cards and medical bills are the easiest to negotiate. This being the case, if you don’t have enough money to pay for all of your debts, make sure to pay your mortgage and car payments first to avoid foreclosure or repossession.

Before starting a negotiation, you must realize that you have a very powerful position in the negotiation. You don’t have enough money to pay all of your bills, so you have to prioritize them. Your power comes from telling each creditor that you will pay the companies that are the most helpful and flexible first. If they aren’t willing to be flexible, they will have to wait in line until you get back around to them. If they push too hard, you can threaten bankruptcy because you will be left with no other choice. Remember that the creditors just want their money as soon as possible.  But you decide who gets what and when.

DON’T LET THEM INTIMIDATE YOU.  They will try it for sure.  They will yell, scream and threaten, but don’t back down. THEY WILL NEGOTIATE.  If they refuse to negotiate, give it a month and try again.  Keep trying until they do.  If your patience outlasts theirs, you will win the negotiation.

You need to know going in, that debt negotiation will hurt your credit in the short term. You may not be making payments or you may be making reduced payments. This will likely be reported to the credit bureau. But if you remember one thing in your negotiations, you will come out better off in the long term. Whatever you decide to negotiate, get a signed statement in writing from the creditor that when the process is over, the creditor will delete the tradeline from your credit report.  DO NOT NEGOTIATE

ANY THING WITHOUT HAVING THIS IN WRITING AS PART OF THE DEAL. This one point will save you heartache over the long term. This way, when you fulfill your part of the agreement, you can put it behind you for good. Without it, your life could be stressful for a long time to come. Just make sure that when you are done, you keep after them until it is deleted.

There are many strategies you can use to negotiate directly with your creditors. No matter what you negotiate, GET THE WHOLE DEAL IN WRITING before you start sending payments. Some methods include:

  • Stop making payments to your creditors for a time. Instead, try to save up lump sums to pay each one off at a discount. If this goes on long enough (usually six months or more) you can usually negotiate settlements at 35-70% of the balance due. Sure, the late payments and over the limit charges may start to accrue, but ultimately, you are negotiating a one-time complete settlement. With this method, you won’t be able to negotiate it up front. You will probably have to miss several payments completely before they will discuss a settlement.

During the time you are not making payments you will probably also start to get harassing phone calls, but you can send them a cease and desist letter and BY LAW, they MUST stop calling you. They can send you letters – but no phone calls. Be sure to send the letter by certified mail with return receipt and keep it for your records. If they violate the cease and desist, keep track of who called and when, and you can use it to your advantage in your negotiation because they have violated the law. If they keep calling, you can sue them and you will likely win. Keep your phone bills and a log of their phone calls.

  • Tell them you can’t pay what is required but you will be willing to make the payment you can until it is paid off (even if all you can do is $10 a month for now). When using this strategy, make sure they stop accruing interest, late fees, and penalties. Negotiate the balance at a discount if you can. Make sure they are willing to delete the tradeline from the credit report before you start this process. Get everything in writing before you commit. This strategy is similar to what credit counseling services will do for you.

  • Be creative and come up with whatever works for you and the creditor. Some things to remember:

  • Make sure your checking, savings, money market accounts, etc. are with an institution other than the one you are trying to negotiate with. Your account agreements may have clauses that will allow them to take money from another account to pay your credit card payment (even without your consent).

  • Don’t be intimidated by the creditor. They will be rude and they will threaten you. But don’t ever agree to something unless you know you can live up to it. If the phone conversation isn’t going anywhere, don’t be afraid to hang up and try again in a month.

  • Try to keep the accounts from going to a third party collection agency. If they do, you won’t be able to negotiate as much of a discount because now the creditor wants as much as they can get and the collector wants their cut, too. Try to keep the account with the credit card company’s collection department. You can usually do this by staying in contact with them regularly (every month or two) and letting them know of your intentions to pay them when you can. You can also appease them by sending even very small payments on a monthly basis.

  • Once you negotiate an agreement, stick to it.

  • During the process, you may not be able to get any other credit. This is to be expected, so if you know you are going to move to a new home or have other situations where having poor credit would hurt you, consider all of your options. Debt negotiation usually works best for people who are trying to avoid bankruptcy but who are already having a hard time making their minimum monthly payments.

  • There will likely be tax consequences to debt negotiation. Whatever you “save” by negotiating your debts will probably be reported to the IRS as income. Still, it will save you much more than not negotiating.

If you would like more information on debt negotiation, you can contact a debt elimination specialist at

Chapter 2: Consumer Credit Counseling

Consumer credit counseling is almost never a good idea. There are many reasons to avoid credit counseling. They include:

  • The success rate is EXTREMELY low. More than half of all people who enter the program do not finish.

  • Most credit counseling services are PAID BY THE CREDIT CARD COMPANY. And yet they tell you that they are your advocate. A little conflict of interest? Yes!

  • When you enter a credit counseling service, a notation will be made on your credit file that you are in such a program. This can make it hard to get approved for credit– especially for a mortgage. In fact, even if your credit scores are good, we have yet to find a mortgage company that will give you a loan. Most require you to be out of the program for at least two years in order to get a loan. In that case, you might as well file for bankruptcy.

You can get a mortgage the day after your bankruptcy discharges.  Granted, you may not like the terms, but at least you can get one!

  • You can do what they do all by yourself, and probably get a better deal. All the credit counseling service does is negotiate more favorable terms for you (lower interest rate, lower minimum payment, a payment and payoff schedule, etc.).

Most importantly, there is a better way to get rid of your credit card debt. See the prior chapter on debt negotiation.

Chapter 3: Bankruptcy

Bankruptcy is advisable only as a last option when everything else has failed. In most cases, creditors prefer to work with you than have you file for bankruptcy. If you file for bankruptcy, they will most likely get little or nothing. If they work with you, at least they get some of the debt paid back. Because of this, many creditors will be willing to negotiate settlements, lower required payments and interest rates, etc. in order to help you pay what you can.

If you have tried everything else without results and bankruptcy is necessary, we recommend that you consult a competent bankruptcy attorney.


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