If you are deep in debt you know that there are few things worse in the world. The constant worry and the hounding of creditors can ruin your life. If you are prepared to do what it takes to get out of debt and change your life permanently, you may be in the right frame of mind to renegotiate new terms for some of your debt.

This article would be especially helpful for people who have experienced a financial crisis such as a failed business, an illness or other financial shock. If you've simply accumulated too much debt over the years, you can use these steps, too, but you've got to be prepared to change your ways and convince your creditors of that.

Here are some tips to help you renegotiate what you owe:

Do it yourself

There are lots of people who will be willing to help you with this for a fee, including some non-profit agencies that can truly be a help in these situations. Save the money and do it yourself. You are likely to end up in a better place as you'll not be paying any fees, so more money can go to your creditors. If you fail on your own, you can always get help from a reputable non-profit agency later.

Explain your situation to each creditor

With each person to whom you owe money, make a personal phone call. Explain your situation. Help them understand why you cannot make the payments as scheduled. Be sure to explain how you'll avoid further problems and why, once you've straightened things out with everyone, you'll never be back in this situation again.

Propose a plan

With each creditor, give an honest and fair proposal for how you'll eventually pay what you owe. Generally, your proposal will be a function of two things: lower monthly payments and lower interest. In some cases - perhaps all - you'll have to propose complete interest forgiveness. In some cases, you may even need to propose that some of the principal be forgiven.

Expect to be rejected

Your proposals will often be rejected. Remember, this is a negotiation. You owe the money and the creditor is entitled to collect it. If there is no possible way for all of your creditors to collect what is owed, eventually you should be able to convince them that they will have to accept less than the scheduled payments - at least for now.

Be persistent

You may have to call some creditors over and over again to find the right person and work out an acceptable plan.

Be complete

As you negotiate with each creditor, be honest with yourself and the creditor. If you can't make the payments they propose when you look at the sum of all your payments, tell them so. Keep pushing for something that will work - remembering the entire picture.


Your creditors aren't all in the same position. If you have a mortgage, that lender is in pretty good shape and may not have much reason to renegotiate with you. If you owe as much (or more) than the house is worth, you may want to offer to give them the house in satisfaction of the loan and move to a more affordable rental situation. If you owe more on a car than it is worth, offer to give it back while it is in good shape and marketable, allowing them to avoid the cost of repossessing it. They are unlikely to let you keep it if you can't make the full payments. Sell the car if it is worth more than the loan, using the extra cash to pay off other creditors or to buy a clunker. Your unsecured creditors, such as companies holding your credit card debt or hospital bills, will ultimately have to accept what you give them. While they may be due $10,000 from you, you can only give them what you have and what you'll earn.

Ultimately, if you cannot negotiate plans with all of your creditors that will allow you to meet the obligations to each and every one of them on adjusted terms, you may be a candidate for bankruptcy. Talk to an attorney.

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