How to negotiate with the collection agencies for settling debts?

Has a collection agency contacted you about an unpaid credit card debt? If yes, then the creditor has either sold or assigned the debt to a collection agency. In such a situation, at first check whether or not the Statute of Limitation (SOL) on the debt has expired. If the debt is older than the Statute of Limitation in your state, then a debt collector no longer possesses the right to sue your for the payment. However, you may negotiate for debt settlement if the SOL has not expired yet.

Debt settlement – What it means

Debt settlement is a process of negotiating with the creditors and collection agencies so that they accept less than what you owe. A successful negotiation can bring down the payable amount by 40-60% of the unpaid balance.

Tips to negotiate with a collection agency

Here are some tips that will help you to negotiate with the collection agencies for settling debts.

• Avoid taking over phone – You should avoid taking over phone with the collection agency as much as possible. Even if you have to communicate over phone, make sure you follow up by sending a certified mail with a return receipt request. In addition to this, take down the name, physical address of the collection agency along with the phone and fax numbers before you start the conversation. You should also maintain a record of when and who you spoke with.

• Get everything in writing – You should get everything in writing before you make any payment in order to settle the debt. Make sure you go through the agreement carefully and never rely on verbal promises made by the collection agency.

• Do not be too eager to settle – Do not show your eagerness to settle the debt fast even if you are planning to buy a car or a new home. It is advisable that you take plenty of time to reach a debt settlement agreement. It will be difficult for you to negotiate on a reduced payoff amount if the collection agency comes to know that you are eager to settle the debt quickly.

• Keep records of all communication – Keep each and every record of negotiation by sending everything by certified mails with return receipt requests. It may help you for future reference if required.

• May use threat of bankruptcy – If necessary, tell the agency that you are about to file a bankruptcy. Therefore, it is better for the agency to agree to your proposal than getting nothing once you file a bankruptcy.

• Negotiate for removal of negative statements – Make sure you also negotiate for the removal of negative statements from your report. You can remind the creditor that the SOL on the debt is approaching and insist that the removal of negative statements to be a part of the debt settlement process. You should negotiate with the agency that the account status should get updated as “Paid in full” as compared to a “Paid as settled” or “Paid as agreed” status when you settle the debt.

If required, negotiate with the original creditor for a good credit report rating. Make sure you do not pay anything for the debt unless you get in writing that the creditor has agreed to your proposal.

Related resources:

Help with debt – Help with Debt Now – Help Advice Recommendations for debt problems: money, mortgages, credit cards.

Stop Bill Collectors – The Smart People’s Guide to Outwitting Bill Collectors