A debt reduction negotiation involves a debtor and a creditor agreeing to settle an account for less than the outstanding balance.
This is beneficial for a debtor as he does not have to pay the full balance but why would a creditor agree to such an arrangement.
In this article we will discuss how settling the debt can be a win-win situation with your creditors.
Most of the debtors try to find debt relief solutions when they are unable to keep up with the minimum payments on their account.
This happens only when there has been a shortage in the inflow of money due to some reason like illness, unemployment or accidents etc.
Many of them even consider the possibility of filing for bankruptcy to put an end to their debts.
The creditors want their money back and the debtor is unable to repay.
In this condition if the debtor files for bankruptcy, the creditors stand to lose all the money that is due to them.
To get some of their money back they agree to settle their account.
Another condition in which the creditors agree to settle the account is when the account is about to be sold to collection agencies.
Most of the collection agencies buy the accounts from creditors for pennies on the dollar.
Hence, it is better for the creditors to settle the account and get a percentage of that money back.
A debtor can take advantage of this situation and offer to pay as less as 25% of the total amount to his creditors.
A good negotiation can get a debtor reduction of about 40 % to 60 % of the total balance.
A settlement company can help you get the best deal through these settlement negotiations.