During tight economic times, both individuals and businesses struggle to keep their heads above water financially. However, many people and companies alike do not know they can successfully negotiate with bill collectors and creditors to reduce payments and make arrangements that work for both parties. The following tips will give you successful negotiation strategies for a win-win solution.

Take Proactive Action

As soon as you know you will have problems making any payments, talk to the credit company to make a payment arrangement before they send the bill to collections. You will probably harm your credit by making late payments, but most companies hope to avoid sending the bill to collections as most charge a percentage of the amount collected. Collection accounts cause your credit score to drop even lower than if the original agency keeps working with you.

Pay What You Can

Look at your budget realistically and come up with a plan to pay your bills. Remember that a budget is a tool to serve you and help you stay on track financially. Only promise to pay what you can. Credit companies take a dim view of breaking payment agreements. It's almost always better to negotiate a lower amount and pay the company more if you are able to do so.

Tell Your Story

As you talk about your situation, remain calm. You need to share some details of your story without drawing out the explanation. Tell the truth about your difficulties and explain what you plan to do to work out your issues. If you start to become angry or overly emotional, tell the collector you will speak with them later. Let them know you will record the conversation if needed.

Document Everything

Collectors might threaten you with a lawsuit, property seizure or garnishments. Know your legal rights. While most collectors practice ethically, some do make illegal threats. Written notes and documentation help you remember what the collector said to you. Take the collector's name and identification number, if they has one, for further reference. Take notes, including times and dates. This will help you track what was said and focus on the conversation as you write. Sometimes companies promise you a reduced pay-off total. Ask to see it in writing before you pay anything. You don't want any old balances to come back to haunt you months or even years later. Keep track of mail from your creditors.

Seek Help

Sometimes, you need outside help. While credit counseling is commonly associated with individuals who require assistance with getting their finances back on track, many companies offer credit counseling for businesses in need of the same. Make sure the company has been approved by the Better Business Bureau. If you do not qualify for debt assistance, you may need to contact a bankruptcy lawyer. In any case, he will tell you if a creditor's actions are legal. If you do need to file bankruptcy, don't beat yourself up over the situation. Do what you can to move forward and prepare for the future. Work to rebuild the credit of your business as soon as you feel comfortable doing so.