Do It Yourself Debt Settlement , A How To

Get Organized

Prioritize You Debts
Make a list of your bills. Arrange the them by balance from smallest to largest (I'll explain why later in the tip section).

Determine Your Budget
Total all monthly expenses (except unsecured credit): housing, food, clothing, transportation, etc. Subtract this total from your income. This resulting figure will determine what you can pay your creditors.

Contact Creditors
Call each creditor and explain your situation. Tell him/her that you are not able to pay on your account as agreed. Request that they reduce your interest rate and your monthly payment.

Contact any Collection Agencies
Request for verification that the debt is still valid. This validation should be in writing. Explain your situation and ask that they waive any late fees.

Consolidate Your Bills if Possible
If you're fortunate enough to consolidate and transfer balances onto one (lower interest rate) card, do so. Make sure this new card will allow ample time to pay the transferred balance off before the introductory period expires if applicable.

The following are methods I've implemented for getting out of debt with much success. Be sure your situation will benefit from these tactics before making the call. You may only have one chance to succeed with your initial phone call, and you certainly don't want to use any language that would be detrimental to you.

1. Pay the lowest-payment cards first

Here's why: When it comes to late payments, It doesn't matter (with your credit score) how much the lowest monthly payment is or what the the balance on the account is. A late payment is a late payment. The secret here is to pay on as many small-payment cards as possible. i.e. If you have five accounts with payments of $20 each and one account with a payment of $100, pay on the five cards. This way, you'll only show one late payment on your credit report vs. five!

2. Making the Call

Ask for a manager. Often times phone representatives don't have the power to amend contracts.

Always ask for the agent's name. Use their name as often in the conversation as possible without sounding mechanical. Using one's name sends the message that you are speaking on a personal level. Too, the agent will feel accountable--as you have their name noted.

Don't lose your cool; always stay calm and focused. Having financial problems is bad enough. Getting upset will only result in the agent being defensive or having more ammunition to say "no."

3.Negotiation of balances and Interest Rates

Ask for help in making the interest rate and payments lower. Tell the agent what you're able to afford and why. Sound sincere--never aggravated.

If the company refuses to help you (even after you've spoken to the manager), explain that you'd much rather work out something than pay nothing. You might add that you've other creditors to call and you will only be paying those accounts that are amended. Reiterate your inability to pay as agreed. You might want to say something like, "Gee I was hoping we could work something out. I really wanted to pay you something each month." Remember, these conversations are almost always recorded. Putting the lack of any form of payment in their court is what you'll want reflected on the recording.

Whipping out a piece of plastic to pay for your morning rituals--i.e. coffee and biscuits--seems a lot less painful on your wallet. But the sad fact is that credit accounts belie your purchase power. Just because you can charge it, doesn't mean you can afford it! If your bill isn't paid in full each month, those seemingly innocuous purchases (plus interest) are costing you. Big time!

In order to get a handle on your budget, you must, and I repeat, MUST make a journal entry of every purchase you make. It's easy to overlook those smaller indulgences when they're three and five dollars. But when multiplied, like rabbits, these little rascals can overrun the best laid plans for financial success.

At month's end, you'll be surprised, maybe shocked, to see how the price of those small cups of coffee and .99 biscuits have stacked up to be one monumental figure!

This crucial first step is two-fold: it identifies where your money is going, and pinpoints what you can do (painlessly) without.

I recommend getting a journal with plenty of room to record your successes, too. Perhaps where you may have recorded your morning gratification, you might write an uplifting acknowledgement like, "One step closer to financial freedom!"