10 tips for negotiating debt when you’re flat broke

By Sarah Li Cain

Reviewed by James Heflin

Jun 02, 2024

Read time: 4 min

A concerned lady talking on smartphone and negotiating with a credit card company

Key takeaways:

  • Handling negotiations with creditors yourself is possible.

  • Creditors may agree to accept less than what you owe.

  • Providing ample documentation on your financial situation increases the likelihood of negotiating successfully with your creditors.

You know how to get creative when times are tough, and you can do it again. If your income isn’t enough to live on, let alone pay back debt, don’t lose hope. One way you could get some breathing room is by negotiating with your creditors. Creditors might be willing to negotiate if it’s clear that you can’t afford to fully repay your debt. Compared to getting nothing, creditors might prefer to forgive part of your debts. 

Unsure of where to start? Don’t worry, we’ve got you.

Sit down, take a deep breath and use these 10 tips for negotiating your debt.

Read more: Small steps, deep breaths: How to get out of debt on a low income 

1. Understand your rights

If you’re behind on your payments or even have some of your debt going to collections, you still have rights as a borrower. Creditors can’t call you in the middle of the night or use harassment or other abusive strategies to get you to pay. You also have the right to contact your creditor with any concerns. 

2. Look at your income sources

Understanding how much you make can give you an objective view of how much you’re able to pay creditors after covering necessities. Take a look at your paystubs or other income documentation. How much do you bring home each month? What are your fixed expenses, like rent and insurance? How much money do you have left over to pay your creditors?

3. List out your debts

Make a list of your debts—the balances, the interest rates, the required payments, and the types of debt—so that you know exactly where you stand financially. This gives you a starting point before reaching out to creditors. 

How much do you owe each month to your creditors? Are you current or behind on your payments? Are any of your debts the kind that are known to be negotiable, like medical debt? Could any of your debts cause severe hardship if you don’t address them, like a mortgage?

Knowing the details of your debts helps you prioritize them and face your financial challenge head-on.  

4. Build your case

You don’t need to feel alone if you struggle with debt payments. Others before you have been able to negotiate with their creditors. To increase your chance of success, you may need to present a compelling argument for why your creditor should reduce the amount you owe, lower your monthly payments, or temporarily pause them until you get on your feet. 

You could build a stronger case if you’re facing some sort of financial hardship, like a job loss or medical emergency. 

5. Get creative with expenses

Being flat broke makes it hard to pay down debt, so you’ll have to get creative with money. 

The only way to get rid of a debt without paying any portion of it is to go through Chapter 7 bankruptcy. Not everyone qualifies, not every debt can be wiped out, and bankruptcy isn’t free. Talk to a bankruptcy attorney to find out if Chapter 7 might be a realistic option.

For the rest of us, start getting money together by looking for ways to reduce spending and increase income.

  • Ask for overtime at your job

  • Sell stuff

  • Get a roommate

  • Drive for a ride share app

  • Offer childcare

  • Rent out space in your garage

  • Tutor students or teach classes online

  • Become a virtual assistant or an in-home organizer

  • Join a clinical trial that pays

6. Consider reaching out to family and friends

Reaching out to family and friends often feels awkward, but there may be people in your life who care and want to support you as you work your way to a better financial future. 

Be sure to honestly explain your financial situation (use the documentation you’ve gathered in steps one and two if you have to) and why you need the money. If you’re offering to pay them back, put your promise in writing. This document should include your plan for how you’ll pay them back. 

7. Offer a repayment plan

Let your creditors know how much you can afford to pay, and whether you can afford to clear the debt now or you need a payment plan.  

Lenders may come back with a yes, no, or a counter-offer. Before agreeing to any terms, sleep on it. Be sure you can afford the new payment plan. 

8. Ask for professional help

Negotiating with creditors on your own can feel overwhelming. It’s ok to ask for help. You don’t have to handle negotiations by yourself. A professional debt resolution company could do the heavy lifting for you while you work on building up funds to offer your creditors. You’ll do this by making an affordable monthly payment into a dedicated account (it’s your account and you control it). Expert negotiators work out agreements with your creditors to resolve your debt for less than the full amount you owe. Once they reach an agreement and you approve it, the payment is made from your dedicated account and the creditor closes out your debt. The debt resolution company’s fee is paid from the same account. You and your team can start working on the next debt.  

Read more: How does debt resolution work?

9. Get your agreement in writing

Even if a creditor reaches an agreement with you on the phone, don’t assume it’s locked down until you get it in writing. Request that the written agreement include your name, account information, the amount you agree to pay, and when you need to pay it. Double check that the written agreement states your loan will be completely paid off once you pay the amount according to the new payment terms. 

10. Follow the new repayment plan

If you don’t follow the new repayment plan, chances are your creditor will cancel the agreement. Make on-time payments for the correct amounts. 

What’s next

  • Assess your income and debt situation.

  • Cut back on spending. The sooner you set aside money, the sooner you could clear a debt.

Breathe. If you want a helping hand, put in a call to a debt expert, someone who can help you understand your options.

Sarah Li Cain

Sarah is a contributing writer for Achieve. She is a financial counselor accredited by the Association for Financial Counseling & Planning Education®, and a writer for other Fortune 500 publications.

James Heflin - Author

James is a financial editor for Achieve. He has been an editor for The Ascent (The Motley Fool) and was the arts editor at The Valley Advocate newspaper in Western Massachusetts for many years. He holds an MFA from the University of Massachusetts Amherst and an MA from Hollins University. His book Krakatoa Picnic came out in 2017.

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