Working with your lender to settle a debt may be an ideal alternative to bankruptcy. Most creditors would prefer to get at least a portion of the debt rather than risk getting nothing after you file for bankruptcy. Typically, you can obtain a settlement on your own, which may further reduce the cost of obtaining debt relief.
The information you need is readily available
Your lenders should send you an account statement every month detailing your current balance, interest rate and due date. This information will likely help you determine which debts you can pay off or tackle first. While paying off the debts with the highest interest rates may save money over the long run, paying off the lowest balances first may help motivate you to stick to your debt relief plan.
Be prepared to negotiate
There is a chance that your lender will refuse to forgive some or all of an existing balance. This may be because you’re still current on your balance or because there is no evidence that you’re at risk of defaulting in the future if you’re less than 30 days behind on a payment. However, a credit card company might agree to waive the interest on your balance for the next several months, making it easier to pay it down.
Get an offer in writing
If you can get a debt relief deal on your own, make sure to get the terms of the agreement in writing. This reduces the risk that your lender will go back on the deal or otherwise attempt to claim that you are in default despite following a revised payment plan.
Ideally, you will contact your lenders immediately if you can’t pay on time. Doing so may reduce the risk of a lawsuit, wage garnishment or other negative consequences associated with not paying a bill by its due date.