Learning how to correctly manage your money often takes getting into a bad financial situation first. If you are in a bad financial situation and cannot figure out how to get out of it, you might want to seek professional help from a credit counselling firm. This type of company will not only help you learn better methods for managing your money, but they may also be able to help you find a way out of debt. Using debt settlement is one option they may tell you about, and this is something you might be able to complete yourself.

What Is Debt Settlement?

Debt settlement is an alternative to filing for bankruptcy, and it is a method that allows you to get out of debt without paying back every bill you owe. It involves creating a plan to repay only certain portions of your debts, and many creditors are willing to accept these plans because they know that bankruptcy is a common alternative.

You can use debt settlement if you have a lot of cash on hand to pay your debts upfront, and you can also use it even if you do not have a lot of money to pay the debts right now.

How Is This Done?

If you decide you want to get out of debt through debt settlement, you have two options. The first option is to hire a company to handle the negotiations for you, and the second method is to try to complete the task alone. If you decide to do this alone, you will need to gather the most current statements from all the debts you have.

At this time, you should also take a careful look at your current budget. Write down your income and all your normal expenses that you must pay each month. Add in other expenses that you may also have monthly, such as gas and groceries. Finally, subtract all your expenses from your income to determine how much extra money you have left each month.

This extra amount is what you will need to use to repay the debts you have, and this amount is important for your negotiations. For example, if you have $400 left each month, this will be the total amount you can promise to your creditors, but you will have to split it up if you multiple creditors.

What Strategies Should You Use?

Once you know how much you owe and how much extra you have, you can work out a plan to repay your creditors. You will need to call each of them, and you will need to explain the following things:

• Your hardship – Explaining to your creditors that you are experiencing a financial hardship right now is vital. Because you are having a hard time in life and because you are calling them, they might be willing to negotiate.
• Your offer – You will also need to explain what you are trying to offer. For example, if you owe the creditor $2,000 and are offering to pay back $1,000 to settle the account, explain this to them. You must also explain how you are willing to pay this back, and this could mean paying them $100 for the next 10 months. You may want to start your offer at a lower amount than what you are actually willing to pay. This will give you more room to negotiate.
• What other creditors are doing – If another creditor agrees to your offer, let the other creditors know this. This might encourage other creditors to follow.

If you can successfully work out plans with your creditors, make sure you stick with them. You may also want to attend credit counselling classes to help you learn strategies for managing your money in the future, and this could help you avoid falling into the same problem later on in life.