Debt negotiation is a process wherein an individual or entity suffering from severe debt issues negotiates with their lender, with the end goal of settling their debt for less than the original amount. Debt settlement can be an excellent means of climbing out of bad debt, but the process can be difficult.

If you try to follow these tips, and proceed cautiously, you can get a positive outcome from your debt negotiations. In some cases, if you can prove substantial financial hardship, the lender may even let you pay off your debt for less than the original amount, or forgive it entirely, in some cases.

Create a Budget and Document Carefully

The key to a successful debt negotiation is to be able to prove conclusively that your financial situation will not, under any circumstances, permit you to make your mortgage payments. The best way to prove this is to document extensively. First, it is often helpful to create a monthly budget with a detailed breakdown of how your money is spent. Receipts, tax returns, and other forms of documentation can be helpful as well. In essence, you want to bring enough documentation that the lender can see clearly, without question, that your money is being spent on legitimate expenses—such as food or medical bills—and not in more frivolous areas.

Determine How Much You Can Afford

Before you enter into any negotiations, know how much you can afford to pay. If your budget permits you to pay at least a fraction of the amount owed each month, enter negotiations with that number. The lender will learn if you can pay more than you offer and, ultimately, you will end up paying tax on any forgiven debt, so it can be fiscally prudent as well to pay as much as you can.

Be Polite

Be polite and courteous to the creditors. Under no circumstances should you ever get emotional or lose your temper during negotiations. Showing you are level-headed and responsible will make your creditors more likely to take you seriously and therefore offer you a deal.

If at first you do not succeed…

If your lender does not agree to any kind of debt settlement, do not give up. In such situations, you have the right to wait a month and try again. However, if you choose this path, think carefully about why your bid did not succeed the first time, and aim to be better prepared in future attempts.