Does How You Got into Debt Matter When Settling Debts?

Yes, everything matters to some extent when negotiating debt and settling account for clients. Although there are some creditors who won’t budge on their parameters the “Why” still matters. People get into debt for many different reasons, so if some extraordinary circumstances occur there is a possibility these circumstances could help you negotiate a better deal or save you more money off your principal.

How much and how little you save is a different story, but for the most part everything matters. Your purchase history, the length of time the account has been established can all have impacts on the percentage reduction you get on your debt can all affect how negotiations go. Some creditors are unfortunately more stringent than others and have stricter parameters.

So, the How and the Why do matter. Without a doubt, all the purchases you’ve made, all the interest you’ve paid, all the minimums you’ve paid, those accounts are all written down in a ledger and accounted for.

All this information helps negotiators when negotiating and it also helps portray a story to your credit card companies that you did have things happens to you! It’s not like you woke up one morning and decided to go on a shopping spree. Life happens for a reason and when life happens, there are many ways to experience forgiveness and help from the world. Not everything is shark eat shark, dollar for dollar, and penny for penny. The world is not always a mean place. There is more good in it than bad. We can forgive each other and look past the mistakes we’ve made. This applies to both people and finances. The invisible hand of the free market is meant to maximize profit there’s no doubt about, but that’s not always the sole motivation for business, corporations and individuals. Many companies were established to provide a service and do good. In the age of AI, things aren’t always so robotic as we might think.

The world is big and vast and crazy but financial mishaps do happen and there are financial lifelines available. Having a good “Why” is more likely to increase your odds of saving more money. It's also part of the reason why creditors are willing to take less money.

Second Chances

We all deserve a do-over every now and again. And if you are upfront and honest with your creditors, some are going to be willing to help you with your situation, this is especially the case with those undergoing serious financial hardship. Everyone loves being able to be part of a good second chance story!

Medical Hardship

Technically, under HIPPA no medical hardship needs to be disclosed to anyone for any reason. However, it is your health information so you are at liberty to discuss it with who you like. Additionally, you can instead tell creditors that you are undergoing medical hardship and would rather not discuss it. This is within you right to do, no matter how small or large the medical hardship actually was. If it’s not something you don’t want to discuss you don’t have to but you are still at liberty to mention it and bring it up in discussion.

Length of Time Account Has Been Established

Ideally, if you settling a debt, there is a minimum length of time that accounts should be seasoned for. If the accounts are too new (i.e. the account was opened up last month and the balance went from $0 to $10,000) and you immediately stop paying on it, this could be considered fraudulent. It will also make the odds of the account getting litigated very high. At first glance, this might not be activity that creditors typically sympathize with or want to see. On the other hand, if you’ve been an upstanding customer for years and years and never had issues before, the credit card company is a lot more likely to take this into consideration. Timing can definitely play a large factor with many creditors and it could also play a factor in where and when your accounts get placed with debt collection companies and/or law firms.

Purchase History

Although this can sometimes tend to be less important than some other topics, your purchase history can definitely play a part in what happens to your account and what kind of potential savings you might receive. Again, if you are making substantial purchases within a very short time period this could very well affect the outcome of any potential debts that are settled. If you used a cash advance or borrowed cash directly against your credit card not only will you get charged double the interest but you’ll also have a harder time getting a discount. Although this isn’t always the case, most creditors look down on reducing the amount and offering good settlements for accounts that were used in conjunction with a cash advance.