Lenders don’t usually enjoy talking about settlements to those they lend to, because with each settlement they will be taking in less money then they theoretically could. It is definitely not something they like to advertise as a possibility. It really depends on the lender as to whether they will consider or accept a settlement offer. Some creditors have a company policy of not accepting any settlement offer, some (especially higher risk loans) may have a more forgiving attitude. Below are some common objections that creditors will tell debtors when they try to discuss a settlement.
“Our company doesn’t do settlements.”
For most lenders this is not actually true. If your creditor tells you this, don’t be too quick to accept it as policy, as this is most likely just a bluff. They will often say this at the start to get you to continue paying the minimum payment while you look at your other options. You will find that as you continue to miss more payments and a default looks more likely, they may start to change their no settlement policy, though are still not likely to offer the kind of discounts you might expect during initial negotiations.
“Your records show you’re making your mortgage and car payments on time.”
Creditors can look at your credit report to see if you have been making any or some of your loan payments to other creditors. They will use the fact that you can make these other payments as evidence that you can afford to pay off their debts in time.
“A settlement will hurt you credit score.”
While this is true, the reality is that your credit score has probably already been hurt significantly by you not making payments on time. Debt settlement usually requires you to default on your payments intentionally – if you haven’t done so already. Don’t let the lenders scare you away from settlement for this reason.
“How about a hardship payment arrangement?”
This is a temporary reduction in interest rates that is used to keep getting some sort of payment from the debtor. While it will make your monthly payments smaller, the problem with this is your rates will eventually go back up again. Sometimes, you will find yourself in more or less the same situation you were in before you made the hardship agreement. So if you know that your financial situation will not improve over time, don’t agree to this and stick to debt settlement.
“We can sue.”
Sometimes companies will say they don’t settle because they can just sue you for the money owed if not paid in full. While this is true and within their legal rights, the fact remains that they will have to cover the legal costs for this action, and at any point many debtors will just file for bankruptcy and the creditor will get next to nothing. Most creditors will do everything they can to stay out of court.
You have to remember that creditors will say anything to just to get you to pay them. Be wary about their tricky techniques to force you to pay your dues. In the end, knowledge is your best defense and protection. Read about the Fair Debt Collection Practices Act or the FDCPA. This is the law that protects you against the abusive practices of debt collectors. Visit the Federal Trade Commission or FTC website for more information about this law.