The process of working with creditors to see if more favorable payment arrangements can be made between the lender (or creditor) and borrower (or debtor) is called debt negotiation. Typical claims by debt negotiation service providers include the ability to reduce unsecured debt, such as credit card debt, by 10 to 50%.
Debt negotiation is made possible due to the creditor's desire to avoid the debtor filing for bankruptcy. A creditor is often willing to forgive a portion of the debt obligation, if they believe it will help them to recover some of the amount owed.
Debt negotiation is an alternative to other debt reduction, or elimination, choices such as budgeting, bankruptcy, debt consolidation, or seeking the help of a debt counselor.
Individuals should understand the negotiation process can take six months or longer to complete. The aggressiveness of credit and collections efforts may become more aggressive during that same timeframe. Negotiation of debt can also lead to a decrease in credit scores for the individual involved, making future borrowing, or access to additional credit, more difficult.