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If you have too much debt and cannot make payments on all your accounts, it's better to settle your debt and reduce your burden. When you go for do-it-yourself debt settlement, that is, settle debts on your own, you can negotiate with creditors or collection agency in order to reduce your debt by 40-60% of what you're expected to pay.

The very first thing you need to do is, ask your creditor whether he holds the debt or he has sold it off to a collection agency. If your debt is held by a collection agency, don't be afraid to talk to them about debt settlement. In fact, the collection agency may itself contact you for the payments. In such a case, there are 5 steps you need to take for a successful do-it-yourself debt settlement.

1. Debt verification: Request the collection agency (CA) to verify your debt. As per FDCPA, if you request for debt verification within 30 days of the CA's initial contact, then the CA cannot collect payments unless it validates your debt.

2. Communicate in writing: Do not communicate with the collection agency just by phone. Instead, use letters for correspondence. Also, keep a copy of each letter you send out to the CA. Make sure you send letters by registered mail and keep the receipts as well.

3. Negotiate settlement: Try to negotiate a debt settlement with the CA for less than what you actually owe. Avoid telling the CA that you're going for debt settlement so that you can free up cash in order to buy a new house or car, if that may be the case. Doing so will spoil all your efforts of negotiation for debt settlement and you may get stuck in debt for quite a long time.

4. Negotiate to remove collection: Prior to making the payment, request the CA to remove the "collection" from your credit report right after you pay off the debt. Also, make sure that the CA agrees to remove the "collection" in writing.

5. The older your debt, the easier it is to settle: If your debt is quite older, chances are that the collection agency will agree to settle your debts for far less than what you owe. Even the creditor may simply write off your debt as "bad expense" in order to receive tax write-off. He may not even sell off your debt to a collection agency. But this doesn't mean you don't owe it. The creditor may take legal action in order to have your wages garnished.

There is no doubt that you can settle debts on your own if you negotiate wisely and follow the simple steps given above. However, if you have multiple debts and don't feel comfortable negotiating with the CAs, you may contact a debt consolidation company or consumer law attorney for professional help and guidance.