You are entitled to negotiate without waiting. If a debt has a long standing delinquency, I find that it can ofen be settled for 50% or even much less. However, they usually want cash on the barrelhead, and it is unlikely that they will take time payments. Also, it is possible that you might have to pay some income taxes on the anount of any forgiven debt.
Finally, depending on how much money is involved, you might be better off to file bankruptcy? Debt settlement will not improve your credit. If your credit is going to stay bad anyway, why pay anything?
You want to try to settle before you are sued. The problem is if you wait to be sued, then you will only have 20 days to resolve the matter, before you will either have a judgment against you or be forced to defend the law suit. Once this happens, settling the debt becomes a lot more difficult, especially if you have wages to garnish, or real estate to attach. Often times, a creditor will be willing to settle for a lump some of much less then the full balance, if you can avoid incurring legal fees of a law suit.
You can always try to settle, but the creditor has no incentive to negotiate a settlement if you're current, so you generally have to be in default to settle. If you can work a settlement before a lawsuit, that would be preferable because if you are forced to defend a lawsuit you will also have to incur litigation costs
This answer is intended to provide general information only. It does not create an attorney client relationship nor should it be construed as legal advice or an opinion on specific situations. Donald A. Green is only licensed to practice law in California and Oregon.
While acquiring information about my potential client's situation I always ask where their debts are currently located; meaning are they with the original creditor, collection agency, or a law firm? Also, I inquire about whether there has been a lawsuit filed or if a judgment was obtained. This makes all the difference in working settlements and renegotiating upon a debt. Typically, the better settlements are obtained when a debt is still with the original creditor or a collections agency that purchased the debt.
Once a lawsuit is filed a creditor has more leverage and will often use that leverage to force an individual to pay more to settle and resolve the debt. If you are individual that is currently working and could be harmed by a judgment by way of a garnishment this is especially concerning to wait until a lawsuit is filed to negotiate. If you are not able to do a lumpsum settlement you are atleast in a better position to work towards a payment resolution with the original creditor or collection agency. At the end of the day, recovery of money is their bottom dollar.