3 Types of Debt You Can Negotiate Beyond Credit Cards

In a country ravaged by credit card debt, people are looking for the next best solution to their troubles. For some, it’s as simple as creating and sticking to a budget while others may need to refinance a loan or leverage a repayment plan like the debt avalanche method. The more severe of circumstances might call for debt settlement or bankruptcy.


However, what many debtors don’t realize is that more types of debt can be negotiated than credit cards.

Here are three of them:

Medical Debt

With or without insurance, we’re typically unsure of how much an impending medical bill will cost. Per a Kaiser survey, 20 percent of insured Americans suffer severe financial issues because of medical debt along with 53 percent of uninsured people. Insured people that carry medical debt have $17,749 compared to those without insurance having balances of $26,971. People who are ultra-unfortunate to lose their insurance during their illness owe an average of $33,568.

Medical debt is notorious for ballooning out of nowhere, and a big reason for this is billing mistakes. Analyze your bill as closely as you can, then ask your insurer or the medical company for an explanation of charges. Simply broaching the issue could lower the debt.

What won’t get you anywhere is doing nothing. If you’re willing to offer a lump sum, it’s reasonable to get at least a quarter of your bill eliminated. If you don’t have access to those kinds of funds, then try to work out a payment plan. If all this sounds a bit overwhelming, companies that work to lower people’s credit debt like Freedom Debt Relief, also provide the same services for medical debt. At the least, you can call debt settlement companies and pick their brain about the process without having to commit to their service.

Student Loans

More than one million federal student loan borrowers go into default each year. This isn’t exactly what people envisioned when they embarked on their secondary education. Fortunately, student loans can be negotiated just like any other unsecured debt. However, if the loans are federal, the government can always garnish wages, withhold tax refunds, or send debts to collection agencies.

Your best bet is to approach your lender about settling your debt, being as transparent as possible about your inability to pay it back. Once you have their attention, give them an offer they’ll seriously consider. It’s important to note that federal student loans are typically harder to settle than private ones. For this reason, if you’re having trouble keeping pace with your federal payments, see if you qualify for forbearance or deferment due to hardship.

Tax Debt

Changes to withholdings stemming from the recent Tax Reform law left many people this year owing when they were expecting a refund. This was more of an annoyance than a financial dilemma for most people, but it doesn’t change the fact that tax bills have some wiggle room.

An offer in compromise (OIC) is the IRS’ way of letting people settle their tax debt for less than their original bill. However, to succeed with an offer in compromise, you’ll need to do more than be “caught off guard” by a tax bill. When deciding whether to approve OICs, the IRS considers the taxpayers ability to pay, their income, expenses, and asset equity. The IRS is likely to accept an OIC when “the amount offered represents the most we can expect to collect within a reasonable period of time.” Before you submit an OIC, though, make sure you’re caught up with any previous tax debt as that’ll disqualify your offer.

Unless you’re paying debt that’s tied to a physical thing, the odds are it can be negotiated. Keep the above information in mind should you run into complications related to medical, education or tax debt. With the right approach, you can reach financial freedom quicker and for less money.