Did you know you DO NOT NEED to hire a firm to help you with your debts? You can attempt to negotiate your debts yourself. But just like anything else in life, can you do the best job for you? If you decided to try and negotiate your debts yourself, you could do the following:
Call your creditor. Ask what kinds of help they have available when you are unable to make the full payment they want. If any of them suit you, then you can agree and start down that path. As long as you stay on the path, the creditor won't take any more drastic steps to collect. But if you can't keep up with that path, you risk the down side…a lawsuit…which can give you a judgment, which give the creditors powers like this:
Garnish Your Wages. Depending on the state you are in, the creditor can cause the court to garnish your wages, which means they can take up to 25% of your gross income every paycheck until the total debt is resolved; and
Levy Your Bank Accounts. The creditor can ask the court for a levy, which freezes your funds in that bank for 30 days. At the end of the 30 days, unless you have worked out something with the creditor, they will take whatever money you have in the bank to pay what you owe; and
Lien Your Property. If you own any real property, house, lot, building, a lien can be placed on the title that says you owe money. That lien will stay with the property until you sell it, and will have to be paid before escrow can close on that sale.
It is up to the creditor whether they do one, two or all three of these remedies. Most people are terrified of having this happen, which could be catastrophic. And the creditors know this. They count on it. If you are scared enough, you will pay what you owe in some fashion.
An experienced debt negotiator may be more effective than you, because he works with all the creditors and knows more than you do about how they work and what their limits are. A consultant will go through your budget with you to truly understand the challenges you face. Once that is done, he will negotiate for you. If you have savings that could pay off the debt, he can negotiate a lesser payoff, sometimes as low as 40 cents on the dollar. Sometimes 50 cents and sometimes higher or lower, but 40-50 is normal. If you have savings, you would use it to pay off the creditor and be done with him. The negotiator charges fees to do this for you. For more information, see "Debt Settlement" below.