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How to Successfully Obtain Your Own Credit Card Relief While Keeping Your

Credit Score Intact

Lesson #4 Making it Reality – Settling Your

Credit Debt

By

Richard Geller

Calworth Glenford, LLC DebtWorkoutCoach.org

Back in Financial Control

http://www.debtworkoutcoach.org/

Disclaimer – this limits our liability – Read it!

In plain English, I did my best to make this the best eCourse I could make it, for someone who is facing credit problems and financial difficulties. But I am sure that I left stuff out, forgot some important stuff, and made some mistakes.

Plus, I can’t know the laws of your state, and the facts in your particular situation. And I’m not a lawyer nor do I play one on television. Some of this stuff MAY NOT WORK. Or it may be ILLEGAL. Who knows.

So…

You have to take responsibility for whatever you do or don’t do after going through my home study eCourse. Don’t blame me!! I am not responsible for what you do!!

If I were you, I’d find a good attorney to advise me. And I’d check out whatever it is that anyone tells you to do – me, the attorney, your mother-in-law, whoever.

Then I’d take my chances. Life is full of risks. You could do great following my advice. Or you could fall on your face. Who knows, maybe some of the stuff I suggest is illegal in your state. I don’t know. But regardless, you can’t go after me for telling you to do something or not do it – because I am right now disclaiming any liability. You are on your own!!

And with that out of the way, read on…

While the publisher and author have used their best efforts in preparing this eCourse, they make no representations or warranties with respect to the accuracy or completeness of the contents of this eCourse and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit, credit damage, or any other commercial damages,

including but not limited to special, incidental, consequential or other damages.

And another important note – this one about ethics

The techniques I outline in this eCourse – some of them anyway – may strike you as pretty outrageous. Unethical perhaps. You may find a few techniques that you can swear are illegal.

I don’t advocate anything illegal. And I don’t want you to do anything unethical. These techniques exist. People do them all the time. I don’t want you do be at a disadvantage by not knowing them. So I tell you about them, no holds barred.

I think it’s too easy to judge others when you haven’t been in their shoes. Some people are in frightful situations and they are frankly quite desperate. They need answers. I hope if this is your circumstance, you find answers, some of them here.

That doesn’t mean I think you ought to do things that are unethical, or that things you choose to do are right for everyone. That is for you to decide. Okay?

And a final important note – this one about plagiarism!

You DO NOT have permission to resell this information. You DO NOT have permission to give it away to someone else. This information is sold under a license that lets you read it, use it FOR YOUR OWN USE, but not give it away, make copies, sell it, or resell it.

Thank you!

How to Successfully Obtain Your Own Credit Card Relief While Keeping Your Credit Score Intact

Lesson #4: Making it Reality – Settling Your Credit Debt

© 2009 DebtWorkoutCoach.org. All rights reserved. www.DebtWorkoutCoach.org

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IT IS STRONGLY RECOMMENDED THAT YOU PRINT THIS OUT PRIOR TO READING

Welcome to your fourth lesson:

Making it Reality - Settling Your Credit Debt

Hello, Richard Geller again – I’d like to welcome you back for your fourth and final standard lesson of the How to Successfully Obtain Your Own Credit Card Relief While Keeping Your Credit Score Intact eCoaching and eCourse. We know each lesson builds on the previous. It’s time to really get energized about this week’s lesson. In this week’s lesson, we will be completing the Dimes on the Dollar Method by submitting your credit debt settlement offers and following through to make it reality.

First, a short review of lesson three.

The Dimes on the Dollar Method

The settlement offers include three elements. The first element that the dimes on the dollar method offers is partial payment, that is, dimes on the dollar, over a period of months and years. Second, dimes on the dollar calls for improvement in your credit usually 12 to 18 months after you start. And third, the dimes on the dollar method covers an element of debt forgiveness so that after the payment period is up, you owe nothing further. Lawyers call this a release of indebtedness.

Basically, it’s the credit card company saying “you’re done, even though you took a debt of $20,000 and paid us $6,800 over 3 years, you’re done. Nothing more is owed and the debt is discharged.”

Overview of the Debt Settlement Process

Over a few months, they begin to feel more desperate about collecting from you. That’s right, they’re the ones who are desperate, not you.




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Meanwhile, you save money. You must save money. I’m talking about cash money. Because it’s a whole lot easier if you can send in some cash money with your settlement agreement. You can do a settlement without a good faith down payment but it’s a lot easier if you have suspended payments and instead saved most of that money and now have it available to make small good faith down payments once your credit card companies agree to settle with you. The settlement process is in writing. There is no talking to live people in the dimes on the dollar method except in exceptional circumstances. You can do this stuff in writing if you want. And the settlement is always done by a written agreement. In the settlement, you agree to make certain payments and the creditor agrees that after x payments they will say nice things about you to the credit bureaus and at the conclusion of the payments they will release you forever from any further debt. So you accomplish two things. You get rid of these excessive debts. And you get your credit improved in the long run.

The normal collection process Once you stop paying, you will get a friendly reminder by mail and maybe by phone. The bank has a routine low cost way of handling a missed payment and nothing has escalated yet. Your credit card may still be usable for new charges if you are not at the credit limit, even though you missed a payment. Only when you hit 30 days late will the credit bureau get a report of your being late.

If you try to settle something at this point, they will refuse to deal. They are simply not desperate enough. Only when you get to 90 days late will they begin really trying to deal. Their data say that if you don’t pay for 90 days, the likelihood of their collecting from you drops like a rock off a cliff. So they are very intense about working these 60 to 90 day lates. At some point, around 60 days to 90 days into the process, they will begin to be interested in an offer to settle. They may offer to lower or eliminate interest for awhile. This is easy and we don’t want to stop there.




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In general, the longer you don’t pay, the more concessions you can get. People who use the dimes on the dollar method find that they can even get settlements as low as 20 cents on the dollar but these will always happen months into the process, not right away.

There is an important accounting consequence you need to understand. That is the chargeoff. A chargeoff is the accounting term for when the debt is written off as bad by the bank. At that point, they take the entire amount and deduct it against their earnings and assume they will collect zero. Any money from that point on is found money. And deals that are made just before the deadline is reached of when the chargeoff will take place may be easier to do. After chargeoff, your debt is far more likely to be sold off to someone else and you will not be working with the bank again, most probably.

Waiting Out the Settlement Process

So what do you do for the next 180 or so days? Do you just sit around dodging collectors and going to work each day?

Not quite but it doesn’t take much more than that. There are basically three things you need to accomplish:

1. Monthly simple communication with your credit card company.

2. Calculate your payoff offers.

3. Save a reasonable amount over the next six months to make a dimes on the dollar settlement offer that your creditors will accept.

Easy Tip: Don’t throw away the collection letters as you may want to keep them and use copies to make your case for insolvency to the banks. When bill collectors are coming after you or when you go to make a settlement offer, you can use these to show that it’s impossible for you to repay everything.




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Monthly communication Your tactic here is to convince your creditors that you’re not a deadbeat. That you want to pay them but have no way of doing so.

This is also an opportunity to set the stage for your future settlement offer.

Of course you’ve closed any savings, checking or any other account you might have with the banks that you owe money to.

So, once a month you send them a letter. The letter should contain this type of information:

The account number.

Your name.

Acknowledgment that the debt is yours.

Acknowledgement that you missed the previous payment (again).

A brief statement about your financial woes.

The very strong possibility that you will have to file for bankruptcy – but you are looking for ways to avoid doing so.

A statement letting them know that you don’t see a full solution in the foreseeable future.

A statement that you will get in touch with them as soon as you can offer even a partial solution to the problem.

You want to keep them hopeful but not too hopeful. They really need to understand the prospect of bankruptcy looms on the horizon.

Don’t go into too much detail about anything. The more information they have, the more they can use it against you. This is a waiting game.

I recommend sending the letter once a month. Shortly after you receive your monthly credit card bill. You can put these dates on your calendar so that you can easily keep track of them.




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The last step before the settlement offer You need to put that $1,000 aside each and every month from now until you make your settlement offer. That way you’ll be able to offer a one time settlement and hopefully be done with it forever.

You may have to negotiate a few payments in addition to the lump sum. Hopefully not. But I’ll prepare you just in case that becomes the case down the road. Needing to pay a lump sum and a few future payments primarily depends on two things.

1. How convincing you are that you’re flat broke and can’t afford any more. You do this in the in the monthly letters.

2. How much you are actually able to save during the waiting period – before you make the first settlement offer.

Calculating what you can pay Let’s walk through the process using our $1,000 monthly savings.

So in 180 days (6 months), you should have $6,000 saved towards settlement. Here’s how you decide who gets how much.

Proportional lump sum payments This method totals all of the outstanding balances and then allocates available money to each account based on the percentage each account represents of the total. So if everything adds up to $25,600 and the MasterCard total is $7,050. Divide $7,05O by $25,600. Now take that decimal number and multiply it times what you said you could afford to pay towards debt each month. $7,050 divided by $25,600 equals 0.275. This is multiplied by the $6,000 you’ve saved up. This means MasterCard will receive $1,650 of the $6,000 (0.275 X $6,000). That is what you can afford to pay MasterCard as a lump sum

Easy Tip: Collection agents call this an HLS, for Hard Luck Story. A good HLS, uncollectible, insolvent…these are the ingredients for a successful debt settlement. The worse you look to someone, the better your chances.




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Monthly Payments Maybe you started this eCourse after the chargeoff occurred and your only option is to start making payments. You can offer to settle by making payments much smaller than what the credit card companies are asking for. At this point they’ll pretty much take whatever they can get.

Don’t start making payments until you have a written and signed settlement agreement. The agreement needs to include:

Exactly how much each payment will be for.

Exactly how many payments will be made.

The exact day of the month that each payment will be made.

The consequences if a payment is missed.

The formula is the same as you used for the lump sum payment. The only difference is you substitute the monthly $1,000 for the $6,000 lump sum amount.

Remember that in bankruptcy you’ll be expected to pay for 3 to 5 years. In essence you’ll have to repay the entire amount if you can afford $1,000 per month. Your creditors will hold out for bankruptcy if they see numbers like 18 payments totaling over 70% of the total owed.

That’s where we left off last week, with your calculations to determine exactly what you will propose to settle your credit debt for. And that’s where we pick it up this week. Actually making the offer. This week we’re going to talk about: The right way to approach each creditor to reach a settlement. How to convince them to retract derogatory comments made to the credit bureaus. What to do if they say No and how to handle any that don’t respond. Finally, we’ll be

Easy Tip: Try multiple scenarios using the spreadsheet to find the one that works best for your personal circumstances. Just save different versions with different file names so you can compare them.




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going through exactly how to document the settlement to protect what you have worked so hard to put in place.

You’ve calculated exactly what you can afford to pay each creditor and you’ve let time pass that has convinced them that you really can’t afford to repay your credit card debt.

But you let them know you’re not a deadbeat and have held out hope that you’ll try to offer them something as soon as you can scrape up some money.

Hopefully you’ve been able to do exactly that – save up a small percentage of the total you owe.

You’re in the driver seat now and are ready to make the settlement offer. The creditors have made all the demands they can come up with to no avail. Their threats were hollow. It’s pretty much, take what you offer or get nothing.

And in exchange for the dimes on the dollar that you are offering, they must agree to remove the derogatoriness they have place on your credit report. As a result, your credit score will go up. If they don’t agree to this, there is no reason for you to pay them.

If one or two don’t want to settle on your terms, you can offer those that do a better settlement. Plenty of motivation to settle and no motivation not to.

You may get one or two that try to refuse to settle and we’ll discuss how to handle them. Same with any that ignore you by simply not replying.

And you need to get the settlement in writing. I want you to have it in language that fully protects you when you comply with all the terms and conditions that are involved.

There are specific dates that you need to take action by and specific amounts of money that you must send to them on deadline. If you don’t comply, they will rescind the settlement offer. You’ll be out all of the hard work you’ve put in along with any money you paid to them. So read that section carefully and be sure it is correctly




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worded in the settlement agreement. We’ll be putting some language in there to protect you and give you some leeway.

Time to get your settlement offer in writing and agreed to.

The whole picture of how the Dimes on the Dollar Method works should be clear to you now. All that’s left is the details to put it in place. What you’ll have at the end of this week are:

A credit card debt settlement offer specific to each lender.

A counter offer letter to be used only if you find it necessary to negotiate beyond your original offer.

A sample settlement agreement that gives you the most protection while still meeting the needs of your creditors.

The step-by-step process for getting the agreement in place, in writing, and signed by the person with approval authority.

A settlement agreement checklist that assures you accurately follow the step-by-step process.

Time to make settlement offers

Chargeoff has come and gone (or whatever point in time you decide to make a settlement offer). Even if you decided to negotiate an earlier offer that the credit card company initiated, these are the steps you need to follow for a proper settlement agreement.

Pull out the spreadsheet where you calculated how much you are going to offer for either a full settlement or a good faith payment towards a set number of partial payments.

Double check those offers against what you have actually been able to save. Do you have enough? If not, now is the time to fine-tune those offers using the exact amount you’re willing to send to them.

Remember, to be ethical and fair, you need to make the offers proportional to what you owe each creditor.




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Writing the settlement proposal Now, to get your creditors to agree to a workout you may want to consider the following:

Don’t pay interest to any creditor

Reduce all creditor’s shares pro rata

Be fair to all creditors without favoring one

So what you will do is freeze the amounts owed, so that you do not recognize any more interest accruing. And then you deal with all the creditors on a “principal owed” basis, with no interest charges getting in the way.

Now, you figure what you can afford to pay, put it together into a workout proposal, and present it to your creditors based on 36 months. But be prepared to go longer, up to 60 months, but no more.

Of course, the big trick will be getting your creditors to agree to whatever you can live with…

Workout agreements: How to get your creditors to agree Now you know how much you plan to offer each creditor. We’ve already figured that out. It’s time now to communicate with each creditor.

The good news is that you can do most of this in writing. You do need to have someone’s name. The loss mitigation manager or credit manager. Someone you are dealing with there.

This section will explain how to do it with one creditor; you will write a similar letter to each creditor.

First section is the “Header” Section. Put in your name, your spouse’s name if he or she shares liability, and your account number.

Second section is the “Problem” Section. You explain the problem briefly. You want to make sure you explain the source of your financial difficulties. And you want to set the stage for your offer. All in just a paragraph or two- don’t get long-winded. Just stick to the facts.




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And I would try to explain things in terms of being a victim of circumstance. Never lie. But if you had a medical problem, or prolonged job loss, or had to take care of a sick parent, then say so.

What if you simply spent too much for too long?

Well, I wouldn’t say “I ran amok with credit cards like a drunken sailor.” I’d say “I fell victim to a mental illness that involved compulsion to shop and spend. I am now undergoing treatment” if you are seeing a therapist about your compulsive behavior.

I am going to assume that you are jointly responsible with your spouse in the example but we will write it from the point of view of you, the husband. And remember, names are used fictitiously here, and are not meant to be identified with particular lenders or financial institutions.

So here is our example of a Problem section:

Dear Mr. Smith, About a year ago, we started to experience financial difficulties. My father had to move back in with us and he has Alzheimer’s. My wife lost her job at the same time and had trouble finding a new one. We fell further and further behind. I thought we could pay everything and stay current but we can't. Now we must reach a settlement of our debts because we do not make enough money to pay our current expenses and our debts.

That's all you have to say. Now the next section is the Options section. You spell out your options.

We have three options:

1. Default on our obligations completely. Just stop paying. This is tempting but we would rather not.

2. File for bankruptcy protection. This is also tempting. But we would pay a lot out in fees and costs, and in the end, our creditors would get very little. And our filing would harm our credit and hurt our chances of improving our




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lives and raising our incomes, which wouldn't be good for our creditors anyway.

3. Do a workout agreement where we settle on reasonable terms with all our unsecured creditors. Half a loaf is better than none and we think this is the best option.

Now comes the Proposal section. You spell out the proposal and how you are offering the same terms to all unsecured creditors in as fair a manner as possible:

We are offering all creditors a similar offer. That means that we offer to pay Citi $293.00 for 36 months, as full and complete payment for all our obligations to Citi. Payment will be made within 10 days of acceptance, and by the 25th of the following month and for each month thereafter until the 36th payment has been made.

The next section spells out your requirements. This is chiefly a requirement that your credit be favorably affected.

Citi will make positive reports of timely payment to credit bureaus you normally report to. After 12 timely payments, you will delete negative reports you have made in the past. After the last payment has been made, you agree to report "Paid - Satisfactorily" or equivalent.

I would stick to this “delete negative reports” because otherwise, your incentive to settle is vastly reduced. That is how you get your credit to be improved. You kill two birds this way -- you improve your credit and also pay off the creditor to the best of your ability, without wasting money on needless attorney’s fees.

If you are proposing a one-time lump sum settlement, the derogartories should be removed from your credit report within 60 to 90 days after they receive the payment.

If you’re proposing a payment plan that goes beyond 12 months, you don’t need to wait until the end of the payment plan to have the




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derogatories removed. Instead, request or require the derogatoriness be removed after you complete the first 12 payments on time.

Remember, you are doing a great service given your situation. Believe in what you are doing and the good that it brings. There really is no use crying over spilt milk, and you are taking lemons and making lemonade. Good for you!

Sometimes lenders will say “we can’t and don’t delete.”

I would never retreat from requiring the creditor to stop reporting negative information, and I would strongly recommend you stick to your ground with regard to deletion, also. If not deletion, you now have another (and little known) tool, “unrating”. A lender that "never deletes" may “unrate”. This is crucial to your improving your credit and your life situation.

The last section of your workout offer is the Signature section:

We are making you this proposal and if you accept, please have an authorized representative sign and return one copy to us. Signed: ___________ ___________ JOHN JONES JANE JONES We agree to this offer and I am authorized to approve this agreement.

Easy Tip: Keep in mind an alternative to deleting derogatory credit information. This alternative is “unrated”. The creditor reports you as “account closed/zero balance/not rated by credit grantor”. This is better than deletion, as it helps improve your credit score. You will have an aged credit relationship that is neutral showing up on your credit report, and your FICO score will be higher!




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CITI Signature: ___________________________________ Name: ______________________________________ Title: _______________________________________ Date: _______________________________________

And mail them at the post office “certified mail – return receipt requested.”

That’s it.

Now you wait.

You usually won’t wait long. You may get a complete “yes”, or you may get a complete “no way”. Or something in between the two. You may hear nothing from some of your creditors.

There is a sample letter attached as a separate file. Use the information you learned here along with the sample to create your proposal letter. You now have the upper hand and are well on your way to a final settlement.

So let’s discuss how to negotiate after your settlement offer has been made – right after your assignment.




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When you have to negotiate a settlement

You’ve got your workout agreements sent out and you are hearing back from some creditors. You are hearing nothing from others, and a few who flat out say “yes”. What do you do with the ones who don’t say yes, or the ones you don’t hear from? This section will explain.

First off, don’t do damage to your cause. Be careful about what you say and what you write.

I would not provide any detailed financial information. I would not fill out any questionnaires. I would answer only in general terms. Anything you provide can be used against you later, either in court or out of court. Better to just not provide information at all.

I wouldn’t provide much more than is already included in your letter. No need to.

So here are the scenarios...

The majority of creditors accept…then implement the settlement with the creditors who have accepted. And pursue those who haven’t.

The majority of creditors don’t accept…then prepare a new offer, perhaps for a longer term, and make that new offer.

The majority of creditors want to negotiate… then you can negotiate a bit. But I wouldn’t grant one creditor terms that are vastly different from terms you are granting another.

Your “Assignment” for Stage #1

• Review your actual financial situation now that it’s time to settle.

• Recalculate any proportionate changes you need to make with all of your creditors.

• Write debt settlement proposal letters to each of your creditors.




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In general you should wait until all results are in before you start negotiating with individual lenders.

But you can in fact treat some creditors better than others if you have to.

All you have to do is tell them to deal with you in writing. Explain to anyone that calls that you mailed an offer in, and ask that they respond in writing.

First, they will try to offer you a lower rate. They will do anything to get you to start to pay the full balance. The trick is that you look on the spreadsheet you created and you already decided how much you could afford to pay.

So stick to it.

We are after principal reductions. If your debt to Citibank is $12,000, and you can only afford $100 per month to Citibank, then you first offer 36 months of $100 per month, or $3600 total. This is a huge principal reduction.

They will first offer to lower your rate. Don’t budge. Negotiate only for 48 months or at most 60 months (maybe), but no more. And don’t offer $150 per month if you can only pay $100 per month.

“I will have to file for bankruptcy and you will probably get nothing that way,” you remind them. In writing is fine.

Now, if you get a “no”, you should write to that person. Just ask them to reconsider. Sometimes that does the trick. If that doesn’t work, then you should write to the company’s CEO and provide a cover letter and a copy of your offer. Explain that most of your other creditors have said “yes” and that it is in the company’s best interests to agree also.

Negotiating payments over time If you conclude that you will need to make payments over time to one or more accounts you can still try to settle at paying 50% or less. You can get an agreement in place that clearly spells out exactly how many payments will be made, how much each payment will be for and when




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the payment will be due. Getting this type of arrangement in place will probably require a “good faith” payment as soon as the settlement terms are agreed to. Of course the size of the “good faith” payment can be negotiated. It should be at least 15% of the negotiated settlement total.

An example of a payments over time settlement can begin with a total debt of $10,000 that you negotiate to settle at 50% or $5,000. A 15% good faith payment when the settlement is reached will be $750 that you will need in cash at that time. There will be a $4250 balance remaining that you will payoff over time. If you make 12 equal payments each will be $354.17.

The example assumes a clause be included in the settlement that no additional interest, late fees, or any other charges be added to the amount owed as long as you make the payments on time.

I realize that payments over time are a needed tool in the settlement toolbox but you reduce risks if you can pay in a lump sum. Although you can afford the agreed to payments right now, there is no certainty that you will be able in the future. A payment over time settlement will have a clause in that states “if any single payment is missed the entire settlement is null and void.” This is how they hold your feet to the fire. Some version of that statement will be included. After settling for dimes on the dollars they will demand that you make the payments.

If you are paying for more than one year the clause might be altered to allow you to miss two payments per year, three payments over 18 months or whatever is appropriate to your circumstances.

Easy Tip: What you should try to do is include a clause that allows you to miss a payment or two in the event an emergency comes up. The clause would read something like: “In the event of an unforeseen future financial difficulty, John Williams may miss two monthly payments during the agreed to payment period. These two payments will be added to the end of the payment period effectively extending it by the number of payments deferred.”




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The lender is not going to be in favor of this clause but there is a good reason for you to work hard at having it included. Without it, if you miss a single payment the entire settlement will become null and void. Instead of owing only 50% of the old debt, you will be back to owing the entire $10,000 less whatever payments you have made. Interest, late fees, and other charges will again accumulate. Obviously none of that is good which is the reason I prefer lump sum payments even it means not reaching a settlement with some of your creditors until after charge off has occurred and the account has been sent to a collection agency.

Another thing I want to remind you of is that payments over time reset the charge off clock. If you had reached the 100 day point on the 180 chargeoff clock, once you make that partial good faith payment the clock resets to day one and does so with every payment that you make. Nothing wrong with that as long as you finish making all of the payments.

Resetting the payment clock might not be all that important because if you miss a payment the lender may lose trust in you and refuse to settle a second time anyway.

To make sure you have all the information you need to make your decision, there is one last thing that I want to mention about payments over time. Each payment that you make also resets the statutes of limitations clock. The length of time varies greatly from state to state but in almost every state the clock begins running from the date you last missed a payment. That information was provided to you back in lesson one

How I once won after I initially lost I once had a huge charge that I contested. The credit card company ultimately decided against me. I was very upset. It was such a huge charge that it seriously threatened my solvency, and the charge had been incurred on a company credit card. So it was a company debt but under the rules I was personally liable.

I wrote to the CEO of the credit card company and made my case. After a few weeks, I heard back from the credit card company -- they




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completely gave in to my side of the story, and reversed the chargeback. I was greatly relieved.

A lesson for you is that there are real people involved in this credit game. And they may reconsider, think twice, see things your way...even after saying “no” at first. Hang in there, try again, then go to a higher authority. Some large banks have a whole department that work on behalf of the CEO resolving issues like this.

You may have to increase the number of months you pay this particular creditor. You can offer this in another letter (keep everything in writing). Get into a dialog with them and you are much more certain to reach an agreement.

Now what about the creditors whom you do not hear from?

If you don’t hear from certain creditors, send the proposal again, with a cover note. Explain that most of your creditors have accepted, and you want them included so they can get paid, too.

If you still hear nothing, write to the higher authority, such as the CEO, as we already discussed. Treat someone who hasn't responded after two tries as a “No” and act accordingly.

Bottom line is that most of your creditors should say “yes” to this settlement. Then you start paying on it and simply ignore the creditors who didn’t agree. If most say “no”, you need to rethink the whole thing.

But if you have made a reasonable offer, most will say yes. And most of the others who don’t will eventually go away.

There isn’t much you can do about them. There may be a chance you can negotiate later. The receivable may be picked up by a collection agency or attorney and they may want to settle with you and agree to your terms. You never know.

But you have already done a lot. You have reduced your bills and improved your credit, while avoiding bankruptcy. Congratulations!




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What to do for those who do not respond For creditors that don’t respond, mail the letter again. Then forget them if they still don’t respond. You can use Google to find the name of a “vice president credit card collections” and then use that person’s name and send the letter a third time if you want. Sometimes dealing with a higher up will get the settlement done faster and more effectively. Ultimately, a manager will make the decision to go along with the debt settlement process with you, and the higher up the offer goes, the more likely it is to be accepted.

Don’t make any payments until you have a written agreement and don’t agree to anything orally. At this stage, it has to be done by written agreement, signed by the bank and by you.

At this stage, they may just charge off your debt. A collection agency will take over. And you can at a later time do the same settlement process described above with the collection agency. They love lump sums and you may have one because you have saved so much money. You may have put away 20% of what you owe, and now you can settle with one lump sum and move on with your life. Or you can settle for the payments we discussed.

You can always negotiate with them to remove derogatory reports on your credit and to accept partial payment. This can be done now or six months from now.

Nothing is forever. This will get you out of debt and you can start your new life.

Remember to used rounded whole dollars Never talk in terms of percentages, at least not until they do. Always use rounded off numbers that make sense. Besides wanting them to think you are working with a specific amount of money there is another reason not to negotiate in percentages. If you use percentages your dollar amount can go up if additional fees are tacked on to your total.




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An example of how it should go is:

If the full amount owed is $8,257.63 35% = $2890.17 you should offer $3,000 40% = $3303.05 you offer $3300.00 45% = $3715.93 you offer $3650 or $3700 50% = $4128.82 you offer $4,100 or $4125 Try to stick with offers rounded off to $100 for larger accounts. Rounding to $50 is fine and even $25 if it is important to your settlement plan. However, if $25 is important to your settlement plan, you probably have not left yourself enough breathing room. At the lower percentage (below 45%) it is best to offer good round numbers either in rounded $1,000s or rounded to the nearest $500. This leaves you wiggle room to come up if necessary without first indicating you are negotiating with your last $100. Of course they do not know that you have money to come up on the offer or that you will come up on the offer. But if you round to $25 or $50 they likely will conclude you cannot come up with another $500 and if they are willing to settle at 45% but not 35% they might not even make the offer if they are convinced you do not have the money to pay 45%.

On the other hand if you are close to your limit, your offers should communicate that there is not much room left to negotiate. If their plan is to go no lower than 50% but your increases become much smaller around the 45% point, they might just decide it is best they are going to do and accept an amount close to 45% rather than get nothing. On yet another hand, when it comes to monthly payments, $25 can be quite a bit. For monthly payments there is not reason not to negotiate in $5 increments.

Settling on a small account You would not think so but settling a small account for dimes on the dollar can be one of the most difficult things to accomplish in this process. The problem is that the amount is so small that they cannot believe anyone cannot come up with that amount.




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This most typically happens with a department store or gas station account where you probably have a $500 or $1,000 limit that is maxed out. You might make a first offer to settle for 35% of the $500 at $175. They just cannot believe you cannot come up with the entire $500. Next you move all the way up to your max at $250 or 50%. This does not look any better, you are willing to pay $250 but claim not be able to pay the difference of $250. The only strategy that I can offer here is to make a one-time offer and stick with it. Explain the bankruptcy thing to them and tell them that funds are extremely tight. You have several creditors trying to collect and you want to be as fair as you can to all of them. If you give this one the full amount, someone else will get less than their fair amount. Make your offer one time and do not come up. That means it should be close to 50% if that is what you are willing to settle with others for. If they reject it or only come down very little, ignore the counter offer. Like I said, coming up $100 at a time on a small debt looks bad. Send your original offer again. If you have finalized other settlements tell them. Tell them the money really is gone and this is the best you can do. Tell them if you have accepted plans that require you to make payments over time. Tell them that if you do avoid filing bankruptcy for the next two years, you will get back with them at that time to discuss making a full payment. Tell them this is the best plan you can come up with to avoid bankruptcy and you are sticking with it. They will either accept or reject the offer. What is important to you is that you not let this small account throw you off settling the bigger picture.

For your next assignment, I realize that you will not likely be negotiating settlements before this course ends. However, I do want




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you to practice writing counter offers. A sample counter offer letter is included as a separate file with this week’s lesson.

Reaching the settlement agreement

Under no circumstances give them your banking information over the telephone. Never, never, never.

Never simply send in a check and expect everything to be settled. They will post it to your account as a payment. The charge off clock will reset and the statutes of limitations clock will reset. Even if they send you a first offer to settlement at 30% do not accept the first letter as final documentation. First of all, if that is their first offer, you can probably do even better. Just as important, it is not adequate documentation. If you receive a highly attractive settlement offer when you are not in active negotiations, study your calendar carefully. Learn if there are any looming deadlines that must be met, or if you miscalculated something. It could be they are trying to get you to pay something before their chances plummet at the 90 day mark or time is

Your “Assignment” for Stage #2

• Review the sample counter offer letter.

• Select the account that you think is the most likely to try negotiating a settlement with you.

• Write a practice count offer letter to that creditor (using fictitious numbers if necessary).




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approaching the 180 mark and they want some of your money as soon as they can get it. With the original lender it is probably the charge off date. With a collection agency it is probably the end of the month quota. They will not tell you this but you will know if it is past the 20th day of the month. They are trying to meet month end quotas. What do you care other than you just received a great settlement offer? When they offer an amount that you want to accept. Say something to the affect that: “I think that I can do that, lets go ahead and agree on that amount and I will see if I can pull all of the money together.” Another useful tactic is to say: “I think I can do that, can we do this in two payments because I might need a little more time to pull the extra money together.” It does not matter if you actually have the money; you want to convince them that you they have squeezed everything plus a little you don’t have. It also buys you a little time if you have regular income coming in and want to use some of your current money to settle a small account. However, do not let two payments blow the deal if they refuse. If they say “no this offer requires the full payment to be in our office no later than 4:00pm on Friday.” You reply with: “Boy, that’s going to be tough but I really want to get this settled once and for all. I’ll do everything in my power to get the money to you by then.” Another thing about negotiating the settlement price. Once you make an offer do not say anything else until they either accept it or make a counteroffer. One of their tricks is to let you bid against yourself. They will remain silent hoping you become uncomfortable with the silence and say something like “well, maybe I can do a little better than that, how about $XXXXX? Do not do it. Wait until they respond to your offer. If you have to say anything it could be: “I am encourage by the silence it looks like you’re seriously considering settling, which is good because




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it’s going to be rough getting this amount pulled together but I really want to get this out of the way.” Again followed by silence. They also might try to use language trickery to squeeze the last dimes out of you. They might say “I guess we can accept that amount?” Notice they said “guess” they did not commit to the amount. They want you to get all excited about having reached an agreement. When you reply “great lets do the deal.” They will comeback looking for a little more with: “Oh, I was thinking out loud, now that I Iook at the numbers a little more carefully, you are $200 short of the lowest we can accept. I’m sure you can come up with a mere $200 more.” Do not fall for it, especially if the last offer really was the final and best offer you planned to make. Your reply should be something like: “I thought I heard you accept my offer. I need a definite yes or no? Have you accepted the offer?” Only when you get a definite answer have you come to a settlement amount. You can also use a tactic similar to the last one if it sounds like they are close to agreeing on your last offer but are trying to get you to come up a little more. They might say something like: “I don’t’ know if we can accept that small of an amount.” They know perfectly well if they can accept the amount or not. You would reply with: “Is there someone else that I can speak with that can accept that amount?” At that point they either have to acknowledge they can accept the amount or pass you on to someone that can. Knowledge is power and with the knowledge you have gained for negotiating debt settlement you can expect favorable settlements that will let you regain your financial health. What you need to know next is how to correctly document the settlement so that it stays in place and accomplishes what you expect it to.

Documenting and completing the settlement The lender will immediately want your bank information over the telephone to process your lump sum or good faith payment. I mentioned before that you can never to this. You are never going to




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give them your banking information not now and not even after you receive a signed formal settlement agreement. We will discuss how you will make the payment shortly but that is what they will be asking for. The next step that you need to insist on is documenting the settlement. It is absolutely essential that the settlement be correctly documented. I have never come across an exception to this rule. It is not a settlement until it is properly documented, signed, the payment is properly sent in, and correctly posted to both their internal computer system and with the credit bureaus. Creditors are not above saying they will not provide a written letter or that the offer they sent out is all that you need. It is not adequate and they will provide the right documentation if you insist. If they try to dodge providing a properly documented letter, what you need to do is tell them “I am glad that we have come to an agreement that might help me avoid bankruptcy and it is extremely important that I dot all of the Is and cross all of the Ts as I move forward. This could be a turning point in my life and I want to make sure it is done right. Mr. Cash, I am going to need a formal agreement letter before I can send the settlement funds to you.” They might tell you there is not enough time to write the letter before the deadline. You can offer to write the letter yourself and fax it to them but you have to insist that a letter be written and signed. Be gracious and professional remind them that you are very thankful that it has gotten to this point and all that remains is to get a letter signed so that you can send the money. They might tell you that the letter will be put into the mail tomorrow or right after you make the payment. You already know that creditors will play tricks on you. There will not be a letter in the mail. They will apply your payment towards the account without relieving you of future obligations. Do not fall for it.




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If they claim time is running out, ask what the exact day and time the chargeoff will occur. You should have a good idea of what it is if you have done your homework. Even if it is not a trick, people make mistakes, heck the person that you are talking to might walk out of the office and get hit by a bus – maybe wishful thinking on your part - but there will be no record of the agreement. You do not want to send the check and have a mistake or anything else prevent you from being able to prove an agreement is in place. Insist on the letter. A faxed copy is OK but insist that it be followed by a hard copy through the mail. You can make your payment based on the faxed copy, these are acceptable legal documents. The signed settlement letter is very important. You have been sent two sample settlement letters and a checklist as separate files this week of what needs to be in those letters. Read and study them carefully.

In addition to the checklist, if legal activity such as a summons or other court action has started but not completed you need a statement that current legal action will be withdrawn and no further action will be taken upon payment in full based on the agreed settlement. If there are multiple payments involved and legal action has started there needs to be a clause that all legal action will be stopped and will only resume if the debtor defaults on the settlement If they have agreed to remove derogatory comments from your credit reports this should be noted also (however this is probably not a deal breaker). The consequence of missing one of multiple payments must be clearly spelled out. This will usually result in the entire agreement being voided and the full amount again becoming due unless you negotiate something different. Try to get a clause that allows you to miss a payment or two each year if an emergency comes up. The missed payments can be added after the last scheduled payment.




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Often a new account number is assigned when it passes to the collections department or to an outside collection agency. If the account number has been changed during the collection process, both accounts must be cross referenced. Now you have a properly documented agreement. Sound legal advice is a good idea at this point.

Go over the letter that they sent to you slowly and carefully. Use the checklist to be sure everything is correct and included. You are only going to have one chance to do this right so do not rush even of you are jumping up and down with excitement from reaching your first your settlement. Remember to take the tortoise approach, slow and methodical wins in the end. The formal letter must have each and every element on the checklist to fully protect you. Again, debt collectors are not above trickery, you just talked them out of a lot of money and they might try leaving important information out to create a loophole to try getting that money back. Be thorough. Another reason to be diligent here is that debt collectors are known to be sloppy about the details with everything. They make incorrect entries to the credit bureaus all of the time. It dramatically affects people’s lives and they do not care. They do not care if they get this letter correct either as long as they get your money. If something is missing or not correct, call the representative back and clearly explain what is missing. If it is information that you can provide, offer to email or fax it to him. Faxing is probably better so that you do not give a collector your email address. You could set up a temporary email address and delete it once this little issue is finished if that suits you. With the settlement agreement fully documented you can move on to making the payment.




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Making the settlement payment They are going to put a lot of pressure on you to settle over the telephone by giving them your checking information or credit card number. Under no circumstances are you going to do this. You watched the calendar and should know there are several days or even weeks before month end quotes must be met or the charge off will occur. If they waited until there was not enough time to receive the payment through the mail, shame on them, they know better, you’re the amateur in this process or so they think. No PayPal, no personal checks, no credit cards. You are not going to pay with anything that gives them your personal banking information. Nothing they might be able to trace back to your finances. Got that, nothing of the sort. Wire transfer and Western Union are too expensive. There are only two acceptable ways that the settlement can be transferred from your account to the collector’s account. First and by far the preferred way is through a cashier’s check drawn on a bank that you do not bank at. You will draw the money out of your account as cash. Plus enough to cover the $5 or $10 charge to have a cashier check drawn up at a different bank. The other method is to draw the cash out of your bank and purchase a money order. The cashier’s check is preferred because it is easier to trace and prove that it was cashed than a money order is. Besides not providing any of your financial information to the collector both of these methods assures that they can immediately be deposited and credited to the collector’s bank account. Once they get your money, there is no way they can claim that a hold was put on the funds that passed the deadline resulting in the agreement becoming null and void. A bank to bank check is instantly credited to their account and a money order is the same as cash. Before going to the bank, be sure you know exactly who the payee is so that the check is made out correctly. Have the account number that is




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being settled printed on the check. And before leaving the bank, be sure to read the check to make sure all of the information is correct and the exact dollar and pennies amount is printed on the check. The other method is to draw the cash out of your bank and purchase a money order. Never send it through the US Postal Service. They do not track it 100% of the time while it is in transit. Not even certified mail. The other method is to draw the cash out of your bank and purchase a money order.

Make sure you send it signature required so that if anything goes wrong you know who accepted the check on behalf of the collector.

If you have a little time you can save a little money sending it 2 or 3 day express delivery. If you are running out of time send it overnight express. Be sure to keep all of the receipts for the cashier’s check and the mailing, along with the tracking number. Keep them long after you know that the collector has deposited the funds. If the creditor asks for the tracking number it is fine to give it to them. There is nothing there that you care if they know about. Something to remember if time is running out, Saturday and Sunday do not count if you use 2 or 3 day express mail. If you mail it on Friday with 2 day express mail it will get there on Tuesday or Wednesday if you use 3 day delivery. Of course add another day if Monday happens to be a federal holiday. You are almost done but not quite. Follow up with the collector a day or two before the check is suppose to arrive. Call and ask them if they have it. Certainly, you are not going to use personal checks but in the interest of full disclosure I am going to warn you about another trick the collectors try. If you agree to multiple installment payments they will pressure you to post date all of the checks to the dates that you have agreed to make payments and mail the checks to them all at the same




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time. Of course, this is a big no-no. Banks do not recognize post dated checks. The creditor can present them to the bank for payment any time they chose. Of course, cashier’s checks will not be post dated. When you are ready to make that payment, be sure to review the process and use the checklist that’s been provided to you. There you have it. You have completed your first settlement and can rest assured that it has been accomplished in a manner that will not come back to harm you.

Congratulations that debt one is done and gone forever. Not only have we come to the end of this week’s lesson, we’ve come to the end of the this course. I hope you’ve enjoyed taking this eCourse as much as I’ve enjoyed helping you regain your financial health.

If you want to continue down this prosperous path, I offer a few advanced lessons. One helps you raise your FICO score as much as 200 points in 60 Days.

Another goes deep into the nuances of negotiating with collection agencies and debt purchasers, as well as how to respond to a lawsuit if one is filed against you.

To order either one or both of these advanced courses, simply contact me at: www.DebtWorkoutCoach.org




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Richard Geller

This Week’s Assignments Here are the things you need to accomplish in this lesson.

• Review your actual financial situation now that it’s time to settle.

• Recalculate any proportionate changes you need to make with all of your creditors.

• Write debt settlement proposal letters to each of your creditors.

• Review the sample counter offer letter.

• Select the account that you think is the most likely to try negotiating a settlement with you.

• Write a practice count offer letter to that creditor (using fictitious numbers if necessary).

• Post any questions you have about this eCourse lesson or any of the materials on the lesson page.

IMPORTANT NOTE: I am ready willing, and able to help you with EVERY PART of this lesson!

If you need any assistance at all in working through the lesson or understanding the assignments, post questions and comments on the lesson page at http://www.debtworkoutcoach.org/ccrfmod4 and let me offer suggestions, give feedback, etc. for each of these assignments. If you need help, I’m here! (or if you have any questions about the lesson at all!)

Your Final “Assignment” for Stage #3

• Send any questions you have about this eCourse lesson or any of the materials at http://www.debtworkoutcoach.org/ccrfmod4

http://www.debtworkoutcoach.org/ccrfmod4







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Publisher, How to Successfully Obtain Your Own Credit Card Relief While Keeping Your Credit Score Intact P.S. Be sure to review all of the materials that are included with this week’s curriculum package. You should have received six other files:

1. eCourse for Credit Relief Module 4 – Checklist

2. eCourse for Credit Relief Module 4 – Sample Initiating Settlement Agreement Letter

3. eCourse for Credit Relief Module 4- Sample Counter Offer Letter

4. eCourse for Credit Relief Module 4 – Sample Settlement Agreement Letters

5. eCourse for Credit Relief Module 4 – Settlement Agreement Letter Checklist

6. eCourse for Credit Relief Module 4 – Final Settlement Checklist

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