If you can withstand the pressures from creditors long enough you will find that their collection efforts subside in due time. Eventually the debt is written off as a loss and becomes a corporate tax write-off. Ironically, the longer the debt remains uncollected, the better your chances are of getting a favorable settlement.

Of course, that does not mean that you no longer owe the debt. The creditor can still attempt to collect the debt themselves, sell or assign the debt to a collection agency, or press for a judgment and garnishment. What they do depends on the company and the size of the debt, and varies greatly from one creditor to the next.

When a creditor demands payment, individuals rarely have sufficient funds to cover the entire debt. Often interest fees and penalties put the debt well beyond the scope of the affordable for the consumer. It is therefore in the best interest for both parties to try and negotiate a reasonable settlement.

However, don't expect to negotiate a settlement as long as the creditor believes he has the upper hand. For example, if you tell a creditor that you need to resolve the matter in order to get into your dream home, you can forget any kind of settlement. The creditor will settle for nothing less than the full balance.

The creditor must believe you have virtually no money before they will consider negotiating a settlement. Get them to believe you are on the edge of bankruptcy. Your attorney should approach each creditor as though this is their last chance to recover any money from you before declaring bankruptcy, after which point they will not be able to recover the debt from you.

Bear in mind, time is on your side. Never look too eager to settle. Take all the time you need to reach a reasonable agreement. Don't accept the first settlement offer, nor the second. Make sure that they are the ones demonstrating an initiative to move the settlement forward.

You have the natural advantage in debt settlement because the creditor wants something from you. Hold out on settling until the creditor offers the terms you want. Once you send them a settlement check, you lose your advantage. So make sure you get your terms in writing before you write that check.