Although the legal aspects of debt and debt recovery may appear to be cut and dried, how you are actually affected by debt can depend on the type of relationship you establish with your creditors.
For many, debt is a financial embarrassment, something they would rather not confront. However, dealing with your creditors can sometimes see a reduction in payments, possible interest holidays, and a freeze on charges to your debts.
Clear goals
When negotiating with creditors, there are a number of key points to keep in mind. First of all, you have to have a clear goal. Understand what is possible and likely. There is no point going into negotiations with unrealistic expectations and a creditor will not take kindly to suggestions that the debt can simply be cancelled or forgotten.
They will also not be impressed if you try to play the blame game. If the debt is legal and the debtor has behaved within the law, then it is futile to try and shift or deny responsibility for the situation. They want to hear about what you intend doing to redress the problem, they are not concerned with your views on the state of the economy or the behaviour of your former employer.
Be courteous and polite in all your communications. This is important for a number of reasons. First of all, and most obviously, people respond better to courtesy than rage. Also, if you behave rudely, it will indicate that perhaps you are not coping and that therefore your suggestions cannot be taken seriously. It is essential you come over as having thought carefully about the situation and are not simply flying off the handle or making wild promises.
Measured communications also play well if negotiations break down and legal proceedings take place. Magistrates are impressed by someone who can demonstrate that they have made a genuine attempt to solve their issues outside the court processes. They are considerably less impressed to learn of negotiations which involve personal threats or violent language.
Brief yourself
Brief yourself thoroughly. Nothing undercuts a case more quickly then trying to argue without the proper facts. If the creditor gets the impression you have not read the relevant documents or that you do not understand your situation, then they will see little point in continuing to deal with you. Of course, when talking to someone about a highly sensitive issue, it is easy to get flustered or forget something. Compiling a good briefing file, or note, before beginning negotiations can be very useful in overcoming this challenge.
Such a note will also help you not to forget any important concession or consideration during the negotiations. It is futile to come to an agreement, only to suddenly remember you have forgotten to ask for another concession.
Explain your financial situation fully. Creditors are real people and they understand that everybody’s circumstances can change at any time for various reasons. Be aware though, that your creditors will ask detailed questions and may require proof of your change of circumstances. These can include a doctor’s note if you are claiming sudden illness or official letters if you have been made unemployed or had a reduction in income.
Remember, these people are not fools and they have dealt with debtors and their excuses before. In fact, the variety and range of matters put forward in debt negotiations is literally amazing. There is no, or very little chancethat you are going to come up with an original excuse and pull the wool over their eyes for any significant period of time, and the same applies to magistrates in court proceedings.
And, of course, once you lose your reputation for honesty, then you will find yourself in a worse situation than before, nothing you say will be taken seriously.
Keep to your goal. The creditor is coming from one position, you another. The aim is to reach a mutually approved resolution. It’s not for you to give way and agree to what the debtor wants after a few phone calls. If you have a clear case stating it confidently and then being firm will most likely give you an advantage. Do not let your creditors persuade you to offer more. Before you even contact them decide exactly what you can afford and stick to it, even if they are being “difficult”.
Be persistent, but keep your temper. You may feel provoked, but you must not respond negatively. If you do get angry it will give the other side a perfect reason to break off negotiations.
Understand the offer
Make sure you clearly understand the offer. Ask to have it explained in detail. Many people focus on the debt itself, and forget to ask their creditors to freeze the interest. What this means, is that your debt continues to grow and becomes harder to clear.
Keep an accurate record of all you say and do and date each event. Be sure to note the name of each individual you deal with as well. Setting out your case in a letter or an email is a good idea as you can demonstrate, if it becomes necessary, whether your creditor has responded appropriately. If you can show that they did not answer your calls, emails or letters reasonably and in time, then you have reinforced your case.
Finally, although creditors do not generally get a good press, it would be wrong to assume they are not going to be reasonable. What they want is for you to show them how you intend addressing the problem. Present your case clearly and calmly, and you could be surprised.