Could a negotiated settlement help you get out of debt?
By Mr Bankruptcy
23rd May 2019
The thought of negotiating a debt settlement with creditors may seem daunting and unlikely route to get you out of debt. Where would you begin? However, it could be an option worth considering when there is expert support available to you.
What is a negotiated settlement?
With a lump sum of money, you may be able to negotiate with creditors a one-off payment to settle debts using this lump sum. If your creditors feel a reasonable amount has been offered, they consider your financial situation is unlikely to change and debts may take a long time to settle, they may agree to the lump sum as settlement, even though it may not be the full amount of money owed.
When would you consider a negotiated agreement?
Not everyone will have access to a lump sum of money. However, if you‘ve sold some assets, been given money from a family member or you’ve inherited some money, you may want to use this to pay towards your debts.
This type of debt settlement is likely to be most effective if you only have a small number of creditors who would have to share your lump sum between them. It can be more difficult to negotiate across numerous creditors as you would be asking each to take a smaller amount from the lump sum than if you were only negotiating with just a couple of creditors.
How does it work?
Once you know how much you have available to pay, you’re clear about the creditors you have and how much you owe each, then negotiations can begin. The challenge is that you are asking creditors to write off part of your debt to them, so they need to feel that this is the best outcome given the circumstances. The art Negotiating is as much about feelings as it is about hard figures and to be successful everyone needs to feel they’ve got something out of them. If your creditors feel you’re acting in good conscience and the amount offered is considered as reasonable as possible, then negotiations can come to a satisfactory conclusion for all sides.
What should you consider?
As with all debt management solutions, there are potential positives and negatives that you need to consider when deciding whether it’s the right course of action for you:
Positives
• Debts are written off even though less than the original debt owed
• It may help avoid bankruptcy
• Once agreement is reached you will no longer be pursued by creditors
• You can pay debts off early
Negatives
• Creditors do not have to accept the lump sum offer
• Creditors may want the full amount repaid if they know you have a lump sum
• You need to find a lump sum
• It can impact your credit rating which could be on file for six years
• It can take time to negotiate a settlement
• Unlike an Individual Voluntary Arrangement (IVA) there is nothing preventing a creditor from continuing legal action until the agreement it reached
I always advise anyone with an unmanageable debt to seek expert advice when considering a negotiated settlement, to help give them a broader perspective on all debt management options and to help them to conduct a successful negotiation.
Professional advice from James Rosa Associates
Please be advised that this is a very general overview and should not be taken as formal advice. Every case depends on your circumstances and my advice is to seek advice to explore your options.
James Rosa associates is a firm of debt negotiators, debt advisors and debt adjustors. With a supportive and friendly approach, we offer a full range of advice and professional services to individuals and business owners/directors facing unmanageable debt or involved in civil or commercial disputes.
Our services include:
● Insolvency support
● Personal assisted bankruptcy
● Mediation
We are authorised and regulated by the Financial Conduct Authority (FRN665061) to work with clients to produce bespoke solutions to fit their specific circumstances.
Are you eligible for a free consultation?
If you want to deal with an unmanageable debt, or bring a dispute to a swift and cost-effective resolution, contact James Rosa Associates, ring 0845 680 7217 or email enquiries@jamesrosa.co.uk to explore whether you qualify for a consultation.
Please be advised that all views expressed in these posts are those of the author and not of James Rosa Associates ltd.