When executing a settlement, first thing you need to do if at all possible is to tape record all conversations with the creditors or collection agencies. Many times consumers have done settlements and a collector will come back and state that they still owe them money and deny that they ever offered you a settlement, and you have no proof that you were offered a settlement therefore you have no recourse. Recording is very important.
When asking for a settlement always pick an odd amount like 52% or 63%, so that the settlement requested looks like you actually figured out what your debt is and how much you have to settle with. Don’t tell the creditor or collection agency you are getting a loan to obtain the funds because if you do the creditor or collector will want to know the loan officer’s name and bank they work for and may find out you have more money than you stated, this could cause a big problem. Simply state “I am trying to settle my debts to avoid bankruptcy, I don’t have any money but I am getting a loan from a family member, and their funds are limited as well. I am trying to settle this debt to the best of my financial resources.”
Once an agreement for settlement has been reached you must ask for a letter stating that this settlement will satisfy the account and no more money is owed. Ask for 7 days to get the funds to them, and ask for that to be included in the letter. Once this letter is received call back the following day and ask for the western union address and wire the money to them so that it is there immediately, because sometimes a collection agency will hold on to your check until the 8th day and state you missed the deadline then come after you for the rest of the balance.
Note: Creditors will not settle on current accounts because they are getting paid. However, this does not mean to let your accounts go delinquent in order to get a settlement. Remember each delinquency is 35 points or more off your credit score.