Negotiating with banks and creditors to reduce your overall debt amount or lower debt payments may allow you to avoid bankruptcy or other asset forfeiture proceedings. Your creditors do not want you to file bankruptcy so they are often willing to renegotiate debt amounts and payment structures. Renegotiation can be beneficial if you want to avoid bankruptcy, its associated effects on credit, the social stigmas, or are disqualified from filing. It also benefits those who have some means to pay off obligations to some extent, just not in full, or those who may have fallen behind.
In order to negotiate new terms, you will still need some cash on hand to be able to continue payments on the debts but you need not have enough cash to pay off the obligations completely. If you are considering bankruptcy, it is important to talk to a lawyer first because banks and creditors will are likely to renegotiate your debts and payments if they know that they are unlikely to collect any amount in bankruptcy proceedings.
If a bank or creditor is put on notice that you cannot make regular payments and are falling behind on debt obligations, they will be more willing to renegotiate the debt terms as opposed to filing claims in bankruptcy. Unsecured debt such as credit cards or personal loans are often the easiest type of debt to renegotiate because the creditors will likely receive nothing in bankruptcy. Therefore, credit card and personal loans may be negotiated for a fraction of the total amount owed. Nevertheless, you will need a solid negotiation strategy and the process may take time to get an adequate settlement that both parties will agree to.
Some creditors may be more willing to accept a lesser amount if paid in a lump sum within a certain time period. Others, who may have a higher balance, are more likely to restructure your payments. There are a few possible outcomes that you may reach with creditors: your overall debt obligation may be reduced, payment periods could be extended, monthly payments could be reduced, interest can be avoided or reduced, or the amount can be settled for less in a one-time payment.
Contact one of our bankruptcy lawyers today. We can help assess your situation and develop a plan going forward to reduce your debt and regain financial stability. We will create a comprehensive plan that considers all of your obligations and tailor a solution that is manageable and affordable. Bankruptcy can be avoided with a well trained lawyer by side, negotiating down balances and payments owed to creditors. Call us today for a free consultation.