How to Extend Payment Terms
Start negotiations where you're most likely to be successful., Ask for a statement of the debt in writing., Save up enough money to pay a significant amount of the debt off., Begin negotiations with the creditors., Explain that you might have to...
Step-by-Step Guide
-
Step 1: Start negotiations where you're most likely to be successful.
Creditors with outstanding unsecured loans are the most likely to negotiate with you, because there is no collateral, or security, backing up the loan.
Creditors with outstanding secured debts are less likely to negotiate with you, because they can always repossess the security backing up the loan.Examples of unsecured debt are credit card debts, debts to stores and merchants, and personal loans.
Secured debts are things like cars, houses, and land.
Nonetheless, the general strategy for negotiating reductions in debts is the same regardless of the debtor:
Get a statement of the debt, be prepared to pay an immediate lump sump to clear the debt, then contact your creditor and come to an agreement, explaining that you may have to declare bankruptcy if no agreement is reached. -
Step 2: Ask for a statement of the debt in writing.
In order to plan your course of action, you need to know exactly what your debt situation is.
Debt collectors are required to give you a statement declaring exactly what is owed and the creditor to whom you owe it; if you're dealing with a creditor directly, they shouldn't have a problem issuing a statement.You want to get the statement of your liabilities in writing for two reasons.
For one, you may be unaware of interest and fees accrued since your statement.
You don't want to think you're negotiating a 50% reduction in your debt and only be negotiating for 25%.
Two, debt collectors in particular are not known for their ethical practices.
Make sure to pin them down. , You want to begin negotiations from a position of strength.
Asking a creditor to accept less than they are owed without something to offer gives the creditor no incentive to come to an agreement with you.
Therefore, have enough cash on hand to make a significant dent in the debt before you ask for a modification in terms., At some point you have to personally negotiate with your creditors, and once you've got a substantial amount of money to pay on the debt, reach out to them.
Be polite but firm; explain that you've taken an account of the debt and might be willing to make a substantial payment on it.You want to try not to settle for paying more than 50% of the debt, and 30% is even better.
Therefore, start negotiations at 15%-25%. , In bankruptcy proceedings, most debts (especially unsecured debts) are discharged, meaning the debtor doesn't have to pay them.
When they aren't discharged completely, the debtor often only has pay pennies on the dollar.
If you hint at a possible bankruptcy in the absence of an agreement, creditors are more likely to negotiate.Since the creditor has the prospect of negotiating with you and receiving 30% repayment, or getting nothing if you are forced to declare bankruptcy, most creditors are going to be willing to negotiate if you explain that bankruptcy is your next option. , If you just want more time to pay, you'll still need to call the lenders and speak with them.
They might be more inclined to give you more time if you are near bankruptcy or hint that you might be.
Absent that, you probably don't have much leverage.
You'll just have to ask them and see what they say. , It's important to keep in mind the relative importance of this debt in terms of your entire debt.
You need to get a large enough reduction in the specific debt that it substantially reduces your total debt.Make it your goal to eliminate all debts while you're in negotiations with your creditors.
If you can't achieve complete elimination of the debt, make sure you'll be able to pay off the remainder in a relatively short amount of time. -
Step 3: Save up enough money to pay a significant amount of the debt off.
-
Step 4: Begin negotiations with the creditors.
-
Step 5: Explain that you might have to declare bankruptcy.
-
Step 6: Ask for more time.
-
Step 7: Understand this debt is only a portion of your total debt.
Detailed Guide
Creditors with outstanding unsecured loans are the most likely to negotiate with you, because there is no collateral, or security, backing up the loan.
Creditors with outstanding secured debts are less likely to negotiate with you, because they can always repossess the security backing up the loan.Examples of unsecured debt are credit card debts, debts to stores and merchants, and personal loans.
Secured debts are things like cars, houses, and land.
Nonetheless, the general strategy for negotiating reductions in debts is the same regardless of the debtor:
Get a statement of the debt, be prepared to pay an immediate lump sump to clear the debt, then contact your creditor and come to an agreement, explaining that you may have to declare bankruptcy if no agreement is reached.
In order to plan your course of action, you need to know exactly what your debt situation is.
Debt collectors are required to give you a statement declaring exactly what is owed and the creditor to whom you owe it; if you're dealing with a creditor directly, they shouldn't have a problem issuing a statement.You want to get the statement of your liabilities in writing for two reasons.
For one, you may be unaware of interest and fees accrued since your statement.
You don't want to think you're negotiating a 50% reduction in your debt and only be negotiating for 25%.
Two, debt collectors in particular are not known for their ethical practices.
Make sure to pin them down. , You want to begin negotiations from a position of strength.
Asking a creditor to accept less than they are owed without something to offer gives the creditor no incentive to come to an agreement with you.
Therefore, have enough cash on hand to make a significant dent in the debt before you ask for a modification in terms., At some point you have to personally negotiate with your creditors, and once you've got a substantial amount of money to pay on the debt, reach out to them.
Be polite but firm; explain that you've taken an account of the debt and might be willing to make a substantial payment on it.You want to try not to settle for paying more than 50% of the debt, and 30% is even better.
Therefore, start negotiations at 15%-25%. , In bankruptcy proceedings, most debts (especially unsecured debts) are discharged, meaning the debtor doesn't have to pay them.
When they aren't discharged completely, the debtor often only has pay pennies on the dollar.
If you hint at a possible bankruptcy in the absence of an agreement, creditors are more likely to negotiate.Since the creditor has the prospect of negotiating with you and receiving 30% repayment, or getting nothing if you are forced to declare bankruptcy, most creditors are going to be willing to negotiate if you explain that bankruptcy is your next option. , If you just want more time to pay, you'll still need to call the lenders and speak with them.
They might be more inclined to give you more time if you are near bankruptcy or hint that you might be.
Absent that, you probably don't have much leverage.
You'll just have to ask them and see what they say. , It's important to keep in mind the relative importance of this debt in terms of your entire debt.
You need to get a large enough reduction in the specific debt that it substantially reduces your total debt.Make it your goal to eliminate all debts while you're in negotiations with your creditors.
If you can't achieve complete elimination of the debt, make sure you'll be able to pay off the remainder in a relatively short amount of time.
About the Author
Karen Lee
Writer and educator with a focus on practical DIY projects knowledge.
Rate This Guide
How helpful was this guide? Click to rate: