If you’re drowning in debt and feel like there’s no way out, it might be time to consider negotiating. The good news? You could end up paying less than what you owe! While settling your debt could leave a mark on your credit, it’s often less damaging than declaring bankruptcy.
You may have heard of debt consolidation companies that offer this service, but approach with caution. Unless you’re working with a nonprofit debt counseling service, these companies could be costly and, in some cases, a scam. The truth is, you can likely negotiate some of your debts on your own.
However, there are some debts you can’t negotiate, like student loans and back taxes. Let’s dive into the specifics of negotiating medical debt and credit card or loan debt that’s gone to collections.
Negotiating Medical Debt
Medical debt is one of the biggest financial burdens for Americans. In fact, it’s the leading cause of bankruptcy in the U.S. And given that medical bills can easily run into the thousands (or even more), it’s no surprise why many people struggle to pay them off.
If you’re facing a hefty medical bill, the first thing to do is call the hospital’s billing department. If it’s a nonprofit hospital, they may have a financial aid or charity care program. If it’s for-profit, your options may be more limited, but it’s still worth reaching out to see what help they offer.
Before paying anything, double-check the bill to make sure it’s for the care you actually received. Billing errors are common, and you don’t want to pay for someone else’s treatment, or for services that weren’t provided. It can take some time and persistence to work through these issues, but every bit of money you can save will help.
Many nonprofit hospitals also have programs that allow them to forgive some medical debt to retain their tax-exempt status. So, even if it seems like an overwhelming bill, it’s worth your time to ask about financial assistance programs.
If you’re unable to settle the debt in full, you may be able to negotiate a long-term payment plan. While this might seem like a never-ending cycle of payments, it’s far better than bankruptcy. Even paying $20, $50, or $100 a month on a large hospital bill can keep you afloat while avoiding more serious financial consequences.
Dealing with Debt Collectors
If you’ve fallen behind on credit card or loan payments, your debt might eventually be handed over to a collection agency. This is stressful, but it also presents an opportunity to negotiate.
Start by verifying that the debt is actually yours. Many collection agencies buy and sell debts, and you have the right to ask them to prove that you owe the money. Once you’ve confirmed the debt is yours, you can try to settle it for less than what’s owed.
Here’s how you can negotiate:
1.Have a lump sum ready: To settle a debt, you need to have at least part of the total amount available to pay upfront. For instance, if you owe $5,000, you might be able to negotiate a settlement for $1,500.
2. Timing matters: It’s smart to wait until the end of the month to call a debt collector. Debt agents often have quotas and commission goals, and they’re more likely to offer a deal as the month ends and they try to meet their targets.
3. Make your offer: When you call, offer a lump sum (e.g., $1,000) to settle the debt. Don’t be surprised if the agent doesn’t accept right away—negotiations usually take a few rounds. Stick to your offer and don’t settle for more than you can afford.
4. Get everything in writing: If the debt collector agrees to a lower amount, get the settlement agreement in writing before you make any payments. This protects you from any future issues.
5. Payment method: Never give debt collectors access to your bank account. Instead, pay via check or money order. This way, they can’t pull more money from your account than agreed.
Once the debt is settled, you’ll get a mark on your credit report that says the debt was “settled for less than owed,” but remember: this is still better than declaring bankruptcy. It may take some time and persistence, but negotiating your debt can provide both financial relief and peace of mind.
The Power of Negotiation
A lot of people don’t realize they have the power to negotiate their debts. While it requires patience, persistence, and sometimes a little bit of back-and-forth, it can save you a significant amount of money and help you get out from under debt.
So, if you’re carrying medical debt or overdue credit card balances, don’t just ignore the problem. Give negotiating a try—you might be surprised at how much you can reduce what you owe, and how much better you’ll feel once it’s behind you.