How to Negotiate Unsecured Debt

Work with creditors to negotiate unsecured debt.

Work with creditors to negotiate unsecured debt.

Your secured debts are the debts that have property attached to the loans -- your car or your house, for example. Your unsecured debts are the debts that have no attachment to the loans – this could be credit card debt, student loans or medical bills. Although you might get offers from companies offering to help you resolve unsecured debt, you can probably take care of it yourself instead. Go ahead and negotiate unsecured debt with your creditors. You may just succeed in saving your credit score.

Add your monthly income from all sources, including wages, interest and child support. Add all expenses for a one-month period. Once you see your income and expenses together on the same page, crunch the numbers to figure out what you can afford for paying off your unsecured debt.

Collect all documents connected with your unsecured debts, including invoices, statements and collection letters, if applicable.

Call one of your creditors or a collection agency representing the creditor. Provide your name and account number to enable the representative to access your information.

Explain your financial situation to the representative. If you have extenuating circumstances, such as unemployment or illness, for example, include this information as you speak with the representative.

Tell the representative the amount of money you calculated that you could afford to pay on your unsecured debt. If you wish to offer a reduced lump sum to settle the debt, present this offer now. The representative will either accept or counteroffer your offer.

Analyze the offer you receive from the representative. Do not feel that you need to make any agreements until you have enough time to evaluate and analyze the information. Tell the representative that you need time to evaluate, if necessary.

Counteroffer the payment plan, if applicable. Continue working with the representative until you reach a mutually agreeable plan.

Expect a written confirmation of the payment plan within five business days of reaching the agreement. Included in the confirmation, you should find the creditor’s name, the collection agency’s name, the negotiating representative’s name, your name and address, the date of the agreement, payment amounts and due dates according to the payment plan, the address where you should send the payments and any other information connected with the agreement. File this agreement with your financial records.

Begin making payments according to the plan. After you make the final payment, you should receive a confirmation of payment in full within 21 calendar days. Follow up with the creditor if you do not receive this confirmation.


  • Start a lump sum offer at 25 percent of the total amount due. Creditors trying to collect bad debts may pay as little as 2 cents on the dollar to collect debts. You may save significant money when you settle your debt this way because the creditor will accept a smaller lump sum payment.
  • If your present situation makes it impossible to make any payments at all, provide an estimate for when you will be able to make payments.


  • If negotiating by telephone becomes difficult, end the conversation and write a letter instead, detailing your offer. Send the letter by certified mail.
  • Keep in mind that a debt reduction, even with your creditor's blessing, may still adversely affect your credit score.

Video of the Day

Brought to you by Sapling
Brought to you by Sapling

About the Author

Kathryn Hatter is a veteran home-school educator, as well as an accomplished gardener, quilter, crocheter, cook, decorator and digital graphics creator. As a regular contributor to Natural News, many of Hatter's Internet publications focus on natural health and parenting. Hatter has also had publication on home improvement websites such as Redbeacon.

Photo Credits

  • Ryan McVay/Photodisc/Getty Images