The concept of debt settlement is very simple. Your creditors – believing they may never see all of the money for the debt you owe – agree to you paying a one off lump sum for less than you owe. You get up to 80% of your debt written off and walk away. Sounds simple right?… Wrong.

In reality however completing the debt settlement process is far from simple, especially when dealing with creditors who are intent on getting you to pay 100% of the debt by any means possible. And if it is the first time you’ve ever negotiated a debt settlement, you play right into their hands. Creditors like nothing better than an inexperienced person to negotiate with because you will have little idea about the lengths they will go to preventing you from getting a debt settlement, such as:

Accepting your cheque and then asking for more

When you spoke to your creditor on the phone, they said they were happy with the debt settlement you were proposing and asked you to send a letter about the offer with a cheque. You send the cheque off with a letter and wait for their confirmation that your debt is paid off. Instead, you get a letter thanking you for the payment and requesting a date when the rest will be paid.

Deadlines you are not supposed to meet

Your lender accepts your debt settlement proposal and tells you it will send an agreement that you have to sign and return within 14 days. Trouble is, the letter arrives 12 days later leaving you only two days to get it back to them. It’s clear this was deliberate because the postmark is dated only the day before but the letter is marked well over a week ago. You quickly sign and post the document, but to no avail. Your creditor ‘claims’ it hasn’t arrived in time and demands 100% of its money back.

Misinterpreting terms and conditions

You write what you think is a clear letter to your creditor offering your debt settlement proposal. However, you didn’t realise one of your comments could be misinterpreted and provide a loophole for your creditor to wriggle out of and claim you broke the agreement. For example, you initiate a BACS transfer on a payment date agreed between you and your creditor. Your creditor then claims you broke the terms of your agreement as the funds were not cleared on the date agreed. They then thank you for your payment and then demand the remaining balance.

Tying you up in knots on the phone

You’re faced with a rude aggressive creditor who claims you lied on your original application form and threatens to take you to court. Frightened and believing you must have filled in the form incorrectly by accident, you agree to whatever they want. Only when you get off the phone do you realise you’ve been lied to. Your copy of your application form shows you filled it in correctly and the creditor lied to scare you into agreeing to their demands.

Hassling your friends and family

Thanks to the generosity of 73 year old Great Aunt Nelly you’re finally able to offer a debt settlement to your creditors and get rid of the debt that has been dragging you down for years. Enthusiastically you tell your creditor Aunt Nelly’s offer and they sweetly ask for contact details to arrange the debt settlement payment directly with her. Suddenly Nelly starts getting nasty phone calls requesting she pay for the full 100% of the debt. She rings you in tears claiming the last call was so bad it set off her angina and she’s going to scrape her life savings together to pay off the whole debt and get rid of them.

You can’t be faint of heart when you tackle the negotiation of a debt settlement. Creditors will do anything they can to get their money – preferably 100% of it – and they will employ nasty unscrupulous tactics to do so. If you have a strong stomach and can avoid falling prey to them, DIY debt settlement can be good move and save you thousands on your debt. But if you think you’ll be brow beaten or taken advantage off, don’t attempt it.

These are thousands of debt settlement companies out there but how do you know which one to choose? Use our free debt settlement calculator here to find the right company for you or visit our debt settlement faq for more advice.