An initial settlement offer is usually only the first step in a settlement process. Although it is possible that you'll receive a settlement offer that you think is fair, there is often room for negotiation in a first offer. Just like you would try to negotiate the best possible settlement deal for yourself, whatever creditor sent you the offer is looking for the best deal as well. While you don't want to respond with an offer so outrageous that further negotiations are impossible, sending an offer with terms more favorable to you can often work to your advantage.
Read and understand every word in the settlement offer. Since a settlement offer is legally binding, reading the fine print is critical. What seems to be a generous offer on the surface could have onerous terms that are only spelled out in footnotes or in confusing legal language. Do not respond until you fully understand the language of the offer.
Calculate the amount you are able to pay. It won't do you much good to agree to a settlement offer that you can't afford, even if you think the terms are generous. For example, if a creditor agrees to let you pay back just 20 percent of your debt, that might seem to be a good deal. However, if the terms call for a lump-sum payment in 30 days and you don't have the money, agreeing to the settlement won't do you any good and will most likely invalidate your agreement.
Ask for a settlement that you can easily afford. Negotiating a settlement payment below the limit of what you can pay gives you some breathing room in case your creditor responds with its own counter-offer. For example, if you can afford to pay 50 percent of your debt in a lump sum, consider asking for a 25 percent agreement. If your creditor comes back and agrees to a 30 percent or 40 percent settlement, you can afford to agree to the settlement while still improving on the initial offer.
Request a "paid in full" notation on your credit report. If you agree to a settlement offer, you are taking the first step towards repairing your credit. However, if the debt shows on your report as "settled" rather than "paid in full," future creditors may be more reluctant to lend to you. A creditor does not legally need to notate your account as paid in full, but they may consider doing so in exchange for a satisfactory settlement payment.
Ask for the dismissal or prevention of any lawsuits regarding the debt. A settled debt is supposed to be the legal end of the debt and any collection attempts. However, sometimes unscrupulous creditors may claim that since you didn't pay the full amount you are still liable for the remaining balance. Getting an agreement in writing that no lawsuits will be filed can help prevent this.
Request the removal of any negative remarks regarding the account. Typically, you won't receive a settlement offer until you have already made late payments on your account. Ask if your creditor will remove these notations in exchange for the agreed-upon settlement payment. As with the "paid in full" notation, having your late payments removed will help your credit recover more quickly.
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