You've made bad financial decisions in your past, and now you have the debt to show for it.

You've maxed out your credit cards and can no longer afford your minimum monthly payments. Alternatively, maybe you've financed a car that you could not afford, and you've fallen behind on your car loan payments.

Large amounts of debt can easily overwhelm you. Fortunately, you do have some options. You might be able to work with your creditors to reduce the amount of money you owe. Alternatively, you might be able to persuade your creditors to give you more time to pay back the money you've borrowed.

Before negotiating

Before starting negotiations with your creditors, take a honest look at your financial situation and your debts. You need to know before you begin talking with your creditors exactly how much money you can afford to pay each month to reduce your debt.

To do this, create a household budget. Determine how much money comes into your household each month. Then total the amount of money you need to spend on expenses each month. This can include mortgage payments, utility bills, groceries, car payments, insurance and other items that you must pay each month.

Once you compare your monthly debt obligations to your monthly income, you'll see how much you have left over. You can then decide how much of this money you can dedicate to paying back your creditors. Don't enter into negotiations with creditors until you know this number.

What to negotiate

Once you are ready to talk with your creditors, you can ask for several concessions to help you repay your debt.

For instance, you might be able to negotiate a lower interest rate with your credit card company; something that will reduce the amount of money you must pay them each month. You might be able to negotiate new terms with the lender who provided you with your car loan, maybe persuading this lender to extend your payback period, lowering your monthly payments in the process. Maybe a creditor would be willing to allow you to skip two payments without penalty to help you catch up on what you owe.

You might even be able to negotiate bigger-impact solutions. Many lenders might agree to a settlement that would allow you to pay 50 percent of what you owe them. Others might decide to set up a repayment plan that allows you to pay what you owe over a timeframe that works for you and without any added interest or fees.

Don't, though, expect to get off without having to pay anything back. Your creditors remember, don't have to negotiate with you at all. Don't ask for everything; if you do the odds are higher that you will not get anything.

Tips

There are certain tips you should remember while negotiating with creditors. The first is that federal law protects you from harassment from your creditors and collection agencies. Your creditors are not allowed to call you several times a day or at odd hours. They also are not permitted to threaten you.

You also can't be jailed for failing to pay back your debt. The United States does not have debtors' prisons.

Don't be impatient. Negotiating with creditors is a complicated process. These negotiations can last for weeks and include several rounds of offers and counter-offers.

Finally, always remember what you can afford to pay back each month. Never agree to a settlement that requires you to pay more each month than you can afford. This will just get you in more financial trouble.