Not all types of debts can be settled. Secured, collateralized debts such as a home or automobile usually cannot. Since creditors can simply repossess the property on which you've defaulted, there's no convincing reason for them to negotiate. You might be able to renegotiate a short payment relief for a secured debt, but don't expect to settle the account while you are still in possession of the property.

Unsecured debts, on the other hand, are often negotiable. An unsecured debt is one where there is no collateral. These include medical bills, credit cards, department store cards, personal loans, collection accounts, student loans, amounts remaining after foreclosure or repossession, and bounced checks. Interestingly enough, utility companies generally won't settle for less than the full balance. Creditors who will never compromise are few and far between. Most will accept less than full payment to close a delinquent account.

But before a creditor is willing to settle a debt they must have a good reason to want to do so. If your account is current and there is no recent history of late payments, it will be difficult to convince the creditor that they should settle. After all, they've gotten your money in the past so there is no reason they shouldn't get paid now. This is not to say that you should stop paying your current bills, which will only make your credit situation worse. Under certain circumstances, however, you may feel you need to stop paying your current bills and try to settle them in order to make your debts manageable. Naturally if you do this, you do so at your own risk.