Using your “Debt notebook” with debt settlement.

Written by Anthony Garcia   // May 10, 2011   // 1 Comment

Debt Notebook

With the recent financial crisis in America, many U.S. consumers collectively owe high amounts of debt to credit card companies. In fact, the average U.S. Consumer is $ 10,000.00 in debt and the average U.S. household is $ 16,000.00 in debt. For many out of work consumers these amounts may seem gigantic, especially when those same credit card companies raise interest rates, fees, and penalties. Before you give up hope on paying off these vast sums of debt, here is a little known fact. You can negotiate with credit card companies to pay or “settle” your debt for much less than you owe. You can do this personally or hire a debt settlement company.

The process of debt settlement is not a magic bullet solution. Most people will find it takes years of haggling with credit card companies, some of them repeatedly, before being able to resolve any debt. One negative aspect of debt settlement is that it will lower or hurt your credit score, since anyone who views your FICO report will see that you did not pay the original amount owed, the accounts were in default, and most of them were charged off. Knowing this information ahead of time can help you make a more informed decision, considering the hit to your credit score is significantly less than with bankruptcy, which will remain on your record for 10 years. Let’s begin by defining debt settlement and understanding how it may affect your credit.

Debt settlement, also called debt resolution, is where settlements on your debt owed are negotiated with your credit card company and other creditors, in which they agree to forgive or wipe out part of your balance, frequently saving between 20%-80%. (Individual results will vary). You then only pay the newly agreed-upon settled balance. You will often pay this settled balance one of two ways, as an agreed upon monthly payment plan or as a lump-sum payment. The forgiven balance is usually considered taxable income by the IRS. Please seek advice from a tax professional about debt settlement income.

As I mentioned earlier, debt settlement will affect your credit report. It will affect your credit more than credit counseling, but not as much as bankruptcy. There is a silver lining to having a damaged credit score. Because you’ll be unable to get new credit offers from department stores, credit card companies, or other lenders. This in turn should help motivate you to cut expenses, budget properly, and not incur future debt.
Before you begin speaking to the collection agents and creditors to pay off your credit card bills, there are a few things to get in order and have handy before picking up the phone.

The “Debt notebook”

I suggest you purchase or have ready a spiral notebook so you can write down your story and be able to repeat it quickly and concisely. Name this spiral notebook your debt settlement notebook. If you are not paying your credit card bills because most of your income is going toward your mortgage or rent annotate that inside your notebook.  If you have recently been laid off or are about to lose your job, write that down too and include it in your story. You need to account for all your household income and where it’s being allocated without any embellishment. In this notebook, tally up and list all your debtors and debts so you can cross reference and not confuse one account with another. Also in this notebook, make a list of living expenses and essentials and have it on hand for reference. By living expenses and essentials I mean any other expenses not related to the debt amount, like monthly food costs, utilities, and insurance costs (home, auto, life).  Another important part of your story, inside this notebook, is to not lie or exaggerate. Credit card companies and collection agencies have access to a lot of information about your income, your expenses, and your financial history. Lying to them is a bad way to begin negotiations. You would not like being lied to by them.

Earlier I had mentioned Debt Settlement Companies. These companies offer to act on your behalf to speak with creditors, and provide you savings on your debt, sometimes with a nominal fee. The biggest benefit in using the services of a debt settlement company is if you do not have the time, expertise, or stamina in dealing with creditors. Especially when considering that the cost of making mistakes can be enormous. This is why it is always a good idea to retain the services of an experienced professional that knows what they are doing. Another big advantage of using a debt settlement company is strength in numbers. A really good debt settlement company may pool together many accounts to gain some leverage over the credit card companies.

So how much should you or your debt resolution company settle for? That’s the important question, and the answer varies tremendously from person to person. Here are a few simple rules to follow.

First, never take the first settlement the credit card company offers.  Just like any other type of bargaining, the participants expect to go back and forth. Remember it is a negotiation first and foremost, so don’t jump on the first offer they throw out. However, on the other hand, do not be unrealistic, like offering to pay 10% or less. This makes it sound as if you’re not serious or just being plain hardheaded and you could end up suspending negotiations or with a lawsuit depending on total debt amount.


Secondly, it is important to commit to a payment or settlement amount that is realistic and which you can repay. Do not promise the moon. This is why I suggested the notebook, so you can easily refer to your income and expenses. You need to always provide as exact an amount as possible, whether its debt or income. This part is very important. If you agree to a settlement with a creditor and then fail to pay that lump sum or program payment on time, you are very unlikely to get a second chance with them or anyone else. Remember, a lot of these companies talk to each other or are one in the same.

Thirdly, keep a paper trail of everything you discussed and agreed to. I suggest making a file folder for each account you are trying to settle.  Inside that debt notebook in a linear timeline, write down the time and date, the person you spoke to, and what progress was made in the conversation.

Example: On May 10th 2011, at 3:30p.m. I spoke with Agent John Dough at and he agreed to send me a free sample notebook.

If an offer is made, ask them to send it in writing. Never just take somebody’s word on it. You can then make a copy of that page in your notebook and include it in the file folder with the rest of the paperwork for each specific account. Keeping detailed folders and paperwork will help at each step of the settlement process and help avoid confusion, especially if you are dealing with more than one company. When you do finally reach a settlement, hang onto and make several copies of whatever you receive saying that your debt has been paid off, this is known as a settlement letter. It’s not unheard of for unscrupulous companies to sell the “settled” balance to yet another collection company, who may call you and try to collect on the remaining balance or amount saved. If you don’t have the settlement letter showing that your original settlement with the original collector is legitimate, you will have to begin the process all over again and you will be out the initial money paid to the first company. That debt notebook and detailed file folders will be your lifesavers in this endeavor.

Finally, take a moment to consider that you will need to develop a lot of patience. There will be many hours spent on the phone. Most of this time might be on hold, so perseverance and determination will play a vital role. Also, a sense of understanding and discipline will be required. You will speak to agents, managers, and sometimes maybe even to a third party. While this might at times seem deliberate, consider how many people at your work must participate on one single project. These companies are paid to get money from you, not to be nice.

In time of peace, prepare for war. Good luck.



  1. By Tony, February 23, 2019

    On May 17th, 2011 I read this great article with simple yet profound advice.
    John dough assured me a great way to keep track of my bills and debts!


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