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2009 - The Year to Get Rid of Debt

Consumers have truly witnessed an ironic turn of events in the credit card world. For decades credit issuers have ferociously competed to be the first card in your wallet, and now they are just competing to be the first paid back.

As the economy continues to sink into a deep recession and other sources of available credit have all but dried up, defaults on credit card debts are expected to soar to unprecedented heights in 2009. In fact, many banks are preparing to write off close to $400 billion over the next five years, and that is likely a conservative estimate.

Although they won't admit it publicly, lenders and their collectors are beginning to realize they need to round up whatever money they can before things get even worse. In some cases that could mean agreeing to longer payment plans or even accepting pennies on the dollar as payment in full. Bank of America recently announced they waived late fees, reduced interest rates, and even reduced loan balances for more than 700,000 cardholders in 2008. Other lenders and their collection agencies are quickly following suit.

The result is consumers who are trying to dig out of debt have never been in a better position to negotiate favorable debt settlement terms. So, procrastinate no longer if you have been avoiding your financial problems and losing sleep over the enormous debt you have no idea how to pay. You may even be flirting with the idea of bankruptcy right now, but that should only be the last resort. 2009 is the year to take responsibility and control of your own finances, dig your way out of debt, improve your credit score, and manage credit wisely from this point forward!

If you need some help getting started, follow these 3 tips to begin the debt settlement process. And above all, remember to be patient. Good things take time and effort. Digging your way out of old debt is no different.

1. Plan Your Negotiation Strategy for the Right Audience

Make sure the first thing you find out is whether you are dealing with the original creditor or a collection agency. Your negotiation strategy and tactics should be quite different for each. For instance, working with the original credit card company over the phone is actually the preferred method; however, it's often best to keep communications with a collection agency to writing. If your debt is still with the credit issuer, than do everything you can to keep it there. They are generally much easier and amenable to work with.

2. Start Your Offer Lower Than You Think

Decide up front what amount you will offer, and don't be afraid to make the offer first. Most collection agencies have paid cents on the dollar for your debt, and as previously mentioned, even original creditors are willing to wheel and deal these days. If you're negotiating with a collection agency, 25% or less of the total balance is probably a good place to start. The sweet spot will likely be between 25% to 50% when working with the original credit issuer. Of course, every situation is different, so be sure to do your homework and make a decision you can defend.

3. Keep Impeccable Records

Now that you understand who you are dealing with and where you will begin, your organization of records from day one can really make the difference between a good and bad settlement. Record phone calls, take names of supervisors, make copies of every letter, and don't expect anyone to remember who you are or what was agreed to at an earlier time. Keep this principle in mind, and you will save yourself a great deal of headaches along the way.

on Sun, 2009-01-04 16:00