Debt Settlements: Obstacles to Negotiating Debt with Unsecured Creditors
In general, original creditors are always tougher to negotiate with than debt collectors or collection attorneys because --
(1) They haven't given up on collecting the debt yet. They also have a reputation to uphold. If word gets out that they gave in to you, then they will be flooded with customers asking for special treatment. They will negotiate only when they think doing so is the best choice for them.
(2) Their in-house collection departments have certain quotas that must be met. If a credit manager doesn't meet the quota, he risks losing his job or doesn't get transferred to the new location of his dreams.
(3) At least half of all in-house collection departments are headed by females these days. Contrary to what you might assume, female collectors are often tougher and more stubborn than male collectors because they think they have to be tougher to compete in their field.
(4) The people with whom you speak when you contact a creditor often don't have the authority to negotiate debt with customers. They are often poorly trained and simply respond to everything you say with a memorized answer. Their main mission is to get rid of you as quickly as possible, so when you inquire about a new payment plan, they answer with, "I'm sorry, we don't make special payment arrangements." If you ask to speak to a supervisor (and you should always do this if you aren't getting anywhere), they will lie and claim one isn't available or promise that she will call you back later.
(5) Creditors refuse to adopt policies that are in line with national statistics. It is always more cost-effective for a creditor to work with debtors in trouble than to let them default and the account go to collection; yet, few of them will adopt policies that keep consumers solvent. This inflexibility often drives debtors to bankruptcy, where unsecured creditors lose big. Their policies don't really make any sense.
What If A Creditor Won't Negotiate Your Unsecured Debt? If this happens, you must either give up trying to get them to negotiate or let the debt go unpaid until it reaches a new phase in the debt collection process, meaning it is turned over to an attorney or debt collection agency for collection. Of course, this is risky, since you might get sued and have your wages garnished, have to pay collection costs, etc., and doing this will definitely ruin your credit rating. For these reasons, one should only utilize this technique if you really are on the verge of filing bankruptcy. Perhaps a serious illness in your family has caused medical bills to pile up, or you have an unbelievable amount of credit card debt and don't know how long you can continue making just the minimum payments each month. If you're living paycheck to paycheck, you're in trouble.
If the above is an accurate description of your financial condition, it is only a matter of time before some unforeseen event causes you to fall behind or default on your debts. Perhaps it might be a good time to go ahead and take the plunge and get it over with. How do you know if you are ready to stop paying your unsecured debts? It's simple. If you are willing and able to file bankruptcy right now, then you are ready to take the plunge.