How to Negotiate a Debt Settlement On Your Own

by Contributor ; Updated July 27, 2017

Items you will need

  • Computer with Internet access and a printer
  • Telephone

Debt settlement has become an increasingly popular way to deal with unpaid debt. Many companies will offer to help you for a fee, however, it is possible to negotiate your own debt settlement if you know how.

Step 1

First, you will need to get your hands on a copy of your credit report. You will want to get copies from the three major credit reporting bureaus: Experian, Equifax and TransUnion. You are entitled to one free copy of your credit report each year through the website. Or, if you have recently been denied credit, you may also send a written request to each of the three companies.

Step 2

Once you have your credit reports, you will need to compare them and make sure that the information that's being reported is correct. You will also be able to see whether your account is still with the original creditor or if it's been turned over to a collection account.

Step 3

Before you contact anyone, have a plan. Decide what percentage of the original debt you are able to pay and how much you are willing to pay maximum. Know what your first offer will be, your second and third. If you are going to negotiate a monthly payment plan, know exactly how much you can pay beforehand. The amount a creditor is willing to settle for will vary so you must be prepared to make multiple offers. Start low, but be prepared to have your first offer rejected if the creditor feels the offer is too low. Fifty percent is often a good starting point but again, it depends on the individual creditor.

Step 4

If you are dealing with the original creditor, you may find the process to be slightly easier, although the longer the debt has gone unpaid the more success you are likely to have. Explain to the creditor how the arrangement will benefit them and if they initially decline, then hang up and try again. Also, try calling at the end of the month as they often have quotas they need to reach and may be more flexible at this time.

Step 5

If you are dealing with a collection agency, be prepared to do a little more work. Collection agencies are often more aggressive in their attempts to collect a debt and will do whatever they can to get the most money out of you. Know your rights under the Fair Debt Collection Practices Act before proceeding with any interactions with a debt collector. Know how to request validation of your debt as well as what the statute of limitations on debt collection is in your state.

Step 6

If you are able to reach a settlement agreement, then before you send a penny, get everything in writing. You need a statement saying that the creditor has agreed to accept X amount as payment in full for the debt. At this time, you may also want to negotiate how the account will be reported on your credit, as settled or as paid in full. If they will agree to list the account as paid in full, have that included in the agreement, as well. Once you have this statement in hand, then send payment via a money order or certified check. Never give a creditor direct access to your bank account.

Step 7

Keep track of all your paperwork and continue to monitor your credit report to make sure that the debt is being reported properly. Without a written agreement, you run the risk of the creditor coming back to collect on the debt a second time.


  • Know your rights under the Fair Debt Collections Practices Act, as well as what the local laws are regarding debt collection in your state. Keep a written record of everything that occurs between yourself and a debt collector. Remember, time is on your side. The longer the account goes unpaid, the more likely you are to get a better deal.


  • Forgiven debt may have to be reported as income on your taxes unless you can prove you were insolvent at the time the settlement was made. Your credit is going to take a huge hit if it hasn't already. Be prepared to pay higher interest rates and deposits on just about everything in the future.