Negotiate Your Way Out

"Those who are skilled at making the enemy move do so by creating a situation to which he must conform." 

                                                            Sun Tzu (The Art of War)

Creditors frequently settle debts with consumers and businesses that are in financial difficulty. They do this to cut their losses and to make the best of a bad situation. Make no mistake, creditors do not offer these concessions because of their compassion for you or your family. They make deals that they believe will maximize what they collect; it’s strictly a dollar and sense decision.

You Won't Go To Jail

Failing to pay bills is not a crime and debtor prisons were abolishd many years ago. So, unless it can be proven that you use credit to steal, you don't have to worry about being prospecuted or going to jail.

Strategy  

Your strategy is your plan of attack; it's how you believe you can convince a creditor to accept a lesser amount to settle a debt. You develop this strategy using a six-step process: (1) preperation, (2) goal setting, (3) establishing a negotiating position, (4) communicating your position or proposal, (5) dealing with responses, (6) making a deal or walking away.

Step (1) - Preperation

Before you attempt to settle your debts you must do your homework. You must develop and understand the issues that you will raise and you must be cognizant of the risks you may be taking, the functioning of the collection and the legal process, the laws that protect you as well as the mindset, the remedies, and the resources of your adversary. The more you know in these areas, the more power you will have and thus the more effectively you will be able to negotiate and the more likely you will be to achieve your objectives.

Step (2) - Set Your Goals

You must decide what you want to accomplish before you begin the negotiation process. Are you looking for an adjustment to the price, an extended time to pay, or perhaps to return merchandise for credit? These goals or objectives must be decided up front to provide a direction in which to proceed.

Step (3) - Establish A Negotiating Position 

Once you know what you want to accomplish you must formulate a basis for negotiation. This is the rationale that backs up your claim or the justification that you provide to your adversary to convince himn to do what you propose. The basis for such justification will be made up of the logic and the leverage of your position.    

Step (4) - Communicate Your Position

Once you know what you want to accomplish and you have established your negotiating position you're ready to go to war. First, you must put the ball in their court; answer their demand for payment by stating your position. Tell them in writing why you believe you should be granted relief. Hardship Letter.

Go for the "slam dunk"- If you have a very strong position, lay it out firmly. Make it clear that you will not pay and instruct the bill collector to cease further contact. If you're offering a settlement, state that you will only pay so much (take it or leave it) and that there will be no further negotiation.

Request relief - If your position is not clear, just state the problem and tell them that there must be an adjustment and perhaps they will make the first offer. If they do, it will show you where they stand and how much leverage you may need to get them within your range.

Use Logic- If you're trying to settle your debts becuase of your won financial difficulties, leverage is all you have; in effect, it's your logic. "Settle, or I'll be forced to file bankruptcy and you will get nothing" or "settle, or I will stop paying and you will get nothing because I am judgment proof.  

Keep It In Writing- It's best to communicate disputes in writing. It gives your adversary time to think about your proposal before he reacts. But be careful; don't give them anything they can use against you if no agreement is reached. Follow the "do's and don'ts" for written communication with creditors and bill colelctors.  

Take Control of the Negotiation - When you communicate your position, suggest an agenda for continuing the negotiation. If you request clarification, documents, or anything else, tell them when you want it. Don't be abrasive but suggest a time frame indicating your desire to resolve the matter as quickly as possible. This will show them that you're not a pushover, possibly dampen soem of their arrogance and create a more condusive atmosphere for negotiation and compromise.

Wait For A Response - Whether you have communicated a "slam dunk" take it or leave offer or a proposal to start a negotiation, the next step is to wait for a response. Give your adversary the opportunity to make the next move. it could provide insight as to where he stands and how they value your position or better yet, you may get a settlement offer.

Step (5) - Dealing With Responses

What if there is no response? - Your letter may be ignored. If so, wait until the next contact regarding the balance and answer it with a copy of your dispute letter. This time make it clear that no money will be paid until the differences are resolved.

If the creditor chooses not to negotiate, your account will probably be sent to an outside collector. If this occurs, continue the same procedure. Send the collector a copy of the same dispute letter and reiterate your position.

If they refuse to accept your logic, restate it and start applying leverage. Tell them you won't pay unless they agree and that you will fight them in court if necessry. If you have reasonable grounds, threaten counter claims for damages or action regarding rights violations. If you're judgment proof, tell them so and add that they will get nothing unless they work with you.

If they make a reasonable offer, make a counter offer but leave room to negotiate further if necessary. Restate your logic to justify the counter-offer and use leverageg by suggesting their alternatives.

Step (6) - Make A Deal Or Walk Away

If an offer is made that meets your goals or comes close, take it. Don't push your luck! If you reject it and proceed further, the cost of doing so will probably negate any additional gains. Be sure any agreement that you work out is in writing. You should be able to make a deal if you have the cards (logic and leverage) and you play your hand correctly.  

Caution:Debt forgiveness may result in taxable income.