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How to Negotiate with Creditors

Sarah Edwards | April 23, 2024

Sarah Edwards
Legal Expert
Sarah Edwards, BS

Sarah Edwards is a professional researcher and writer specializing in legal content. An Emerson College alumna, she holds a Bachelor of Science in Communication from the prestigious Boston institution.

Edited by Hannah Locklear

Hannah Locklear
Editor at SoloSuit
Hannah Locklear, BA

Hannah Locklear is SoloSuit’s Marketing and Impact Manager. With an educational background in Linguistics, Spanish, and International Development from Brigham Young University, Hannah has also worked as a legal support specialist for several years.

Summary: To negotiate debt with creditors, explain any financial hardships, make a fair offer, prepare for counteroffers, avoid empty threats like bankruptcy, and know who to contact to negotiate the settlement. SoloSettle can help you start negotiations and get on the right track towards debt settlement.

Your unpaid debt can leave you feeling like you’re treading water if you’re making payments on the interest without making much progress on the principal. And some high-interest debts can leave you feeling like you’re drowning entirely. That’s why it helps to know how to negotiate with creditors to reduce your debt.

You may be able to settle your debt for less than what you owe, which will help you eliminate your debt once and for all.

In this article, we'll share tips and tricks on debt negotiation from an attorney and steps you can follow to settle your debt for good.

Negotiate debt with your creditor.

Have you been sued for debt? You can still negotiate debt settlement with your creditor. SoloSettle makes it easy.

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What is debt settlement?

When you negotiate with creditors, your final goal is debt settlement. When you settle your debt, you’ll pay a lump sum of money to your creditor, which will permanently clear your debt. Negotiating with your creditors ensures that you settle your debt for less than the original amount, which lets you get out of debt for good.

Learn how to negotiate debt with creditors—tips from an attorney

Getting out of debt sounds good, right? But how do you negotiate with your creditor or credit card company to settle a debt?

To find an answer to this question, we asked a consumer rights attorney for some tips. Here’s what we learned:

  • Don’t threaten bankruptcy if you don’t mean it. Many creditors have access to your financial information and may know how much you can afford to pay. Don’t make empty threats. In debt settlement negotiations, it’s best to be honest.
  • Tell your story. If you’re experiencing financial hardship, explain your circumstances. Inform creditors if you are on Social Security, have multiple debts, or are facing other financial burdens like tax liens or child support, which prioritize other debts over theirs. This demonstrates that your capacity to pay is limited, and it may make a settlement more appealing.
  • Make a fair offer. Help the creditor's lawyer understand that your offer is the best you can realistically pay under the circumstances. Emphasize facts that make it difficult for them to collect the full debt, such as existing judgments or garnishments. Check out our guide on how much to offer to settle debt to learn more.
  • Be prepared for counteroffers. Creditors will almost always counter your offer, so start negotiations with a reasonable amount, but not so low that they won’t take you seriously.
  • Negotiate with the right person. Typically, once a debt reaches the litigation stage, you will be dealing directly with debt law firms rather than the original creditor. These firms negotiate on behalf of the creditor or debt collector, and any settlement must be approved by their client.

Watch the full interview with an attorney below to explore these tips further:

Follow these five steps to settle your debt

The tips above will help you negotiate more comfortably and settle your unpaid debt more effectively. Now, here are some basic steps that you can use to settle your debt for less than you currently owe.

1. Save up for settlement

First, stop making payments to the creditor associated with the debt you wish to settle. If you have multiple creditors, you’ll need to decide which debt to tackle first. Keep making payments to your other creditors to remain in good financial standing.

When you stop making payments, your creditor may turn your account over to a collection agency, and you may even be sued for your debt. Be prepared to respond to lawsuits to avoid further complications.

If you’ve been sued, use SoloSettle to file an Answer with the court as quickly as possible.

2. Start saving

When you stop making payments, make sure to keep saving the same payment amount each month. Keep this money in a separate savings account to ensure that you won’t use it for other expenses.

3. Follow the 75% rule

How much should you expect to save? As a rule of thumb, it’s best to save 75% of the total amount of debt you wish to clear. So if you owe $10,000, you’ll want to save $7,500. Once you’ve saved 75%, you’re ready to start negotiating.

4. Make your first offer

You’re now ready to make your first offer. You can contact the creditor in writing with clear amounts and instructions. For example, you might say something like this:

“I am offering to settle my financial obligation for account number XXX by paying a lump sum of $_____. If you accept, please respond to this message with only ‘Accept.’ If you wish to submit a counteroffer, please respond only with: ‘Counteroffer: [$____].’

Please refrain from contacting me in any other way. My offer expires in six days on MM/DD/YY. You can expect payment within 90 days of the settlement date.”

5. Be prepared to receive a counteroffer

Don’t be surprised if your creditor rejects your first offer. They will likely respond with a counteroffer, which you can accept or decline. The goal is to find a mutually acceptable solution that still clears your debt.

Use SoloSettle to negotiate with creditors more efficiently

SoloSettle by SoloSuit allows you to negotiate with creditors more efficiently. You can use this simple platform to negotiate a settlement amount without having to deal directly with your creditors.

Let’s look at an example of how to negotiate with creditors to see how this works.

Example: Thomas had been struggling for months with his high-interest credit card debt. After months of missed payments, Thomas received a notice that he was being sued. By using SoloSettle, Thomas was able to negotiate with his credit card company, offering to pay 60% of the current balance. His creditors rejected this offer but submitted a counteroffer of 65% of the balance. Thomas agreed, signed a debt settlement agreement, and paid off the 65% settlement through the SoloSettle app.


Start your own negotiation process by using SoloSettle today.

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Make an Offer

Debt settlement agencies can help you settle your debt. But you may find yourself paying additional fees in the process, which is why it’s financially better to settle debt on your own. So do your research before working with a debt settlement company, otherwise, consider DIY debt settlement or tech-based settlement services like SoloSettle.

Will settling debt affect my credit?

Unfortunately, settling your debt will impact your credit score. However, settling your debt is better than the alternatives since long-term debt and bankruptcy can have an even greater impact on your personal finances.

After you settle your debt, you’ll be able to start working toward rebuilding your credit by making on-time payments to your other debts and keeping your credit card balances to a minimum.

What are other consequences of not trying to settle the debts and ignoring them?

There are several potential consequences of ignoring a debt and avoiding settlement options. Here are some issues you might face if you don't try to settle your debt:

  • Damage to your credit
  • Debt lawsuit
  • Wage garnishment
  • Frozen bank account
  • Property liens

Luckily, debt settlement isn't as scary as it may sound. In fact, in many cases, it's the ideal outcome. So don't ignore opportunities to settle debt, especially if you want to avoid any of the consequences listed above.

Get a fresh start with debt settlement

Settling your debt will give you a fresh start. You’ll eliminate unmanageable debt once and for all, which allows you to move on with your life. You can repeat the above process for each of your debts, helping you become debt-free.

You have rights under the Fair Debt Collection Practices Act

Note that you have rights granted under the Fair Debt Collection Practices Act that protect you from unfair consumer treatment when dealing with creditors and debt collectors. More specifically, you have the rights to know details about your debt, receive debt validation from collectors, be treated with respect, honesty and boundaries when communicating with collectors, and more.

Check out our guide on FDCPA violations to learn more about how to protect your consumer rights.

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Guides on arbitration

If the thought of going to court stresses you out, you’re not alone. Many Americans who are sued for credit card debt utilize a Motion to Compel Arbitration to push their case out of court and into arbitration.

Below are some resources on how to use an arbitration clause to your advantage and win a debt lawsuit.

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Federal debt collection laws can protect you

Knowing your rights makes it easier to stand up for your rights. Below, we’ve compiled all our articles on federal debt collection laws that protect you from unfair practices.

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Statute of limitations on debt state guides

Like all debt collection laws, the statute of limitations on debt varies by state. So, we wrote a guide on each state’s statutes. Check it out below.

Statute of Limitations on Debt Collection by State (Best Guide)

Check the status of your court case

Don’t have time to go to your local courthouse to check the status of your case? We’ve created a guide on how to check the status of your case in every state, complete with online search tools and court directories.

How to stop wage garnishment in your state

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How to settle a debt in your state

Debt settlement is one of the most effective ways to resolve a debt and save money. We’ve created a guide on how to settle your debt in all 50 states. Find out how to settle in your state with a simple click and explore other debt settlement resources below.

How to settle with every debt collector

Not sure how to negotiate a debt settlement with a debt collector? We are creating guides to help you know how to start the settlement conversation and increase your chances of coming to an agreement with every debt collector.

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Personal loan and debt relief reviews

We give a factual review of the following debt consolidation, debt settlement, and loan organizations and companies to help you make an informed decision before you take on a debt.

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Civil law legal definitions

You can represent yourself in court. Save yourself the time and cost of finding an attorney, and use the following resources to understand legal definitions better and how they may apply to your case.

Get answers to these FAQs on debt collection

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