Five Pitfalls to Avoid When You’re Negotiating with Creditors

Is debt overwhelming you? If so, you can negotiate with your creditors. However, avoid the following common mistakes when bargaining with them:

Using a Debt Settlement Company Instead of a Lawyer

Debt consolidation companies charge substantial monthly fees. However, these companies offer no guarantees. In Scottsdale, debt relief lawyers from Barski Law Firm PLC can analyze your situation and offer practical advice. The attorneys will also help you if your creditor sues you.

Being Unaware of Your Kind of Debt

Is your debt secured or unsecured? Secured creditors may take back collateral if you fall back on payments. Conversely, unsecured creditors can’t take back your merchandise. You should know if your creditor is secured or unsecured. Otherwise, an unsecured creditor may attempt to convince you that your debt is secured. If you fall for the trick, the creditor may try to take back your merchandise.

Disregarding Your Lender’s Strengths

Secured creditors can repossess assets. All creditors can send demand letters or file a lawsuit even as you negotiate. If they win a case against you, they can covet your wages and levy your bank accounts. You may be tempted to stop negotiating if your creditor continues to harass you as you bargain.

Being Unaware of Your Lender’s Weaknesses

All creditors have weaknesses that debtors can take advantage of. Most collectors have to abide by the Fair Debt Collection Practices Act. Also, since litigation requires time and money, a creditor may be reluctant to sue unless there is no other option. Creditors don’t want you to seek bankruptcy protection.

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Settling with the Wrong Cash

You should not tap into the equity in secured assets to offset unsecured debt. There is a risk of losing your home or car if the debt continues to overwhelm you. You should also not use your retirement fund to pay a debt. There may be tax implications. You might have to return the money if it was advanced as a loan.

Overall, debt negotiation can help relieve your financial burdens. However, before you call a creditor, understand the basic concepts of debt bargaining.

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