NEW YORK – LIVING – Being in debt can be stressful and leave you full of anxiety. If you find yourself in the position of having more debt than you can afford, here are a few ways to negotiate the burden into something more manageable.
Negotiate a Payment Plan
If you owe an amount of money to a creditor that you are not able to pay in a lump sum, try your hand at negotiating a payment plan.
To negotiate a payment schedule, present a viable plan to the creditor. This plan should outline the exact amount and timing of each payment, and how long those payments will take to fulfill the debt obligation. If the creditor agrees, make sure to get it in writing. Be aware that missed payments can cause more problems, so be vigilant in paying them on time.
Negotiate a Debt Settlement
Debt settlement is when a creditor agrees to take less than the amount owed and forgive the difference. If your debt is being managed by a collection agency you may have more luck with this, as these agencies are paid a commission on the amount of money they collect. If they are able to get $2,000 of your $3,000 debt, that is better for them then receiving none of it.
Though it sounds simple in theory, it’s more complex in reality. Come to the table with an offer but at the very least, expect to receive a counteroffer. Collection agencies are good at what they do, and they will likely try to talk you out of a settlement or push to see how long you will stand your ground.
Consider Loan Consolidation
Loan consolidation is when you combine any number of unsecured loans into a single payment. For example, if you have $15,000 in credit-card debt at 19% and $25,000 in medical bills at 11%, you may be able to combine the loans and refinance at a lower interest rate.
When considering loan consolidation, be sure to do the math all the way out to the end of the loan. That lower interest rate and the resulting payments may look good in the short term, but make sure the loan doesn’t extend out so far that you’re paying more in the long term.
Relief from IRS Debt
If you have a debt to the Internal Revenue Service (IRS) due to unpaid or underpaid taxes, many of the same methods apply. The IRS allows for payment-plan proposals as long as they fall within certain parameters, and in extreme cases, they will consider an Offer in Compromise. An Offer in Compromise is similar to debt settlement, where the IRS agrees to take a lower amount than that which is owed. For IRS tax debt, it is wise to work with a tax attorney, accountant, or enrolled agent to determine the best outcome for your situation.
Being in debt can be a drain on your energy and resources. Be proactive by negotiating your debt with your creditor, and work toward being debt free for the future.
