Settling a Three Month Old Debt

“Dear Michael,

I have just sold some real estate and I would like to can I negotiate to reduce the balances of my (unsecured and secured) loans BEFORE I pay them off? Is this possible?


Creditors agreeing to accept less than the full balance of what you owe them, when they have not been paid for 90 plus days, becomes increasingly appealing to them. But many creditors are going to be the most likely to settle with you, for a better rate, or at all, when you are a couple months more behind than you are now.

Settling with your creditors does not come without concerns. Some immediate ones are:

  • Is the secured creditor you refer to more likely to want to exercise their security interest (if that is possible or likely) rather than settle with you? It would be helpful if you were to post details about each of the secured debts you are behind with paying. Not all debts are created equal, and some should not be settled if you can avoid it.
  • Will you have enough money to settle all of your debts before your risks of aggressive collections increase? More on this below.
  • Do you have any credit or financing goals for the next year to two? You are already behind with payments by 3 months, which means 90 day late pays on your credit reports are already hurting you. Settling now may be the better option for your credit goals. But that is not always the case.

Do You Have Enough Money to Settle All Debts?

Assume you can negotiate with every one of your creditors for a 50% savings (though your savings estimate could be better). Do you have access to that amount of money in a short period of time? Because you are already 3 months behind, if it is 90 days more you need from today, you are in good shape to negotiate your settlements at the earliest stages of collection.

If you cannot pull together all of the money needed to settle all of your past due accounts, how long will you need to come up with the amount needed? If you are going to need more time after you are considered 6 months past due, than you will want to strategize who you will settle with in the near term, and who you can settle with later on, and after you have more time to put the money you need together.

You can outline your creditors, the balances on each account, and how much money you will have available to settle in the next 2 to 3 months in the comments below. I can use that information to offer feedback about settlement percentages to target, and when, if you are interested in doing the settlement work on your own.

Please post your responses in the comments below to reach me.

Michael Bovee founded CRN, a unique company offering debt negotiation education and services, in 2004. Bovee has been contributing articles and free reader feedback on this site for several years.

Michael is a debt industry professional who has volunteered his time to help answer reader questions.

If you have a debt related question you’d like to ask our team, just use the online form.

See also  My Credit Card Companies Refuse to Settle My Debt. - Peter

Leave a Comment