Debt Negotiations

Debt negotiations summary:

  • Debt negotiations involve working out an agreement with creditors to accept a percentage of what's owed and forgive the rest.

  • You may negotiate debt with creditors yourself or ask a debt relief company to handle negotiations for you.

  • Debt negotiations could reduce the amount you owe and help you get rid of debt faster than by making minimum payments.

Debt negotiations definition and meaning

Creditors might agree to negotiate if you're experiencing a financial hardship that prevents you from paying what you owe in full. You can handle debt negotiations yourself if you want to. You’ll need to have patience and a strong resolve. It usually takes ‌multiple rounds of discussion to come to an agreement. If you’re feeling overwhelmed, or you just don’t want to negotiate, you could work with a professional debt relief company that negotiates on your behalf.

Key concept: Debt negotiations are the process of working out an agreement between you and your creditor to pay less than what's owed. 

More about debt negotiations

Debt negotiation could offer a way out when you're overwhelmed by debt. It won't mean you can walk away from your debt completely, but could help you pay down what you owe for less. 

Creditors may enter into debt negotiations when a debt is close to being charged-off. Charged-off as bad debt means the creditor has decided it won't be able to collect what's owed. 

In that situation, a creditor might agree to negotiate debt to try to recover some of the balance due. 

Debt negotiations: a comprehensive breakdown

Debt negotiation is when you and your creditors agree on an amount to be paid toward a debt that's less than what you owe. Typically, the amount is set as a percentage of the balance. 

For example, if you owe $5,000 to a credit card, you might be able to negotiate a payment of 75% or $3,750 instead. The other $1,250 would be forgiven. 

Here's how the debt negotiation process typically works. 

  • You (or the debt relief company) make an offer to the creditor to pay a percentage of what you owe. 

  • The creditor can accept your offer, reject it, or make a counteroffer.

  • If the creditor makes a counteroffer, you accept it, reject it, or make a counter-counteroffer. 

  • Once you and the creditor agree on an amount, you'll either pay it in a lump sum or in installment payments. 

  • After you've paid, the rest of the debt is forgiven. 

Debt negotiations usually involve some back and forth, so a little patience can go a long way. Some preparation also helps if you plan to negotiate yourself. You'll need to know how much you can realistically afford to pay if a creditor accepts your offer. 

You’ll probably also have to explain why you need partial debt forgiveness, and possibly document your financial situation.

Being in debt over your head is stressful enough, without the added task of haggling with your creditors. A debt relief company could make things easier. You tell a debt expert about your debts and they handle the negotiations on your behalf. That leaves you free to focus on living your life while you work toward a better financial future.

Types of debt eligible for negotiation

Negotiation is typically a better solution for certain types of debt, namely, unsecured debts. An unsecured debt is a debt that isn't attached to any collateral. Collateral is something of value you own, like a car, home, or bank account. 

Debt negotiations could be an option if you mostly owe unsecured debt:

Those are all debts that a professional debt relief company could help with. 

A debt relief company wouldn't be able to help you negotiate secured debts, utility bills, taxes, or lawsuits. 

If you're late on your mortgage, car loan, or federal student loan payments, you can talk to your lender about ways to get caught up. And if you have federal tax debt, you could set up a payment plan with the IRS or negotiate it through the IRS’s Offer in Compromise program. 

DEBT RELIEF

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Debt Negotiations FAQs

Follow these steps:

  • Decide the amount you can afford to pay.

  • Decide what you want from the creditor—more time to pay, lower payments, a reduced payoff, reduced interest, waiver of fees and penalties, or a combination.

  • Contact the creditor by phone or in writing to make an offer. If you come to an agreement, send two copies of a letter detailing the terms of your arrangement. Have them sign and return one copy.

  • Fulfill your obligation—for instance, make a lump sum payment for the agreed-upon amount. Don’t do this unless you have a signed agreement in place. 

You can also hire a debt relief company to analyze your debts, negotiate for you, and complete the process. 

There are no government debt forgiveness programs for credit cards. Eligible borrowers may be able to get their federal student loans forgiven, however. If you have credit card debt, working with a debt relief company is an option for those who want to pursue forgiveness. A debt relief company could negotiate with your creditors on your behalf and try to lower the balances that you owe.


The amount of credit card debt you could get forgiven varies, but a typical range could be anywhere from 30% to 80% of the amount owed. Several factors influence how much a creditor might forgive, such as the total amount due and how long the account has been delinquent. 

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