How to Negotiate With Debt Collectors

Having debt can happen to almost anyone at some point in their life. One of the most embarrassing things about having debts is falling behind on your payments. Have you ever had to negotiate with debt collectors? When one falls behind on those debts, it is natural to feel embarrassed and frustrated. If you are dealing with calls from debt collectors, getting notices for overdue bills, or have old debts you’d like to settle to clean up your credit report, you may be able to take action.

What is a Debt Collector

Debt collectors include collection agencies or lawyers who collect debts as part of their business. There are also companies that buy past-due debts from creditors or other businesses and then try to collect them. These debt collectors are also called debt collection agencies, debt collection companies, or debt buyers. Regardless of the title, you’ll have to negotiate with debt collectors to work out a plan. When you owe money and miss your payments, you’ll be contacted about it. This is the first stage of debt collection. Some companies will get their own internal debt collection department to contact you, and they must follow federal laws regarding debt collections.

When Should you Try to Negotiate

Negotiating with a creditor usually involves trying to get them to accept a debt settlement. This means that you agree to pay a portion of the debt instead of the full amount, and the creditor accepts this. Creditors are sometimes willing to agree to these arrangements because they know that an account already in collections is less likely to be paid, and they would rather have some money than none at all.

Below are 8 tips on how to negotiate with debt collectors and collection agencies.

Create a Debt List

Start by creating a list of your past-due accounts with each creditor, outlining how much you owe, and how far behind you are on payments. This list will form the basis for your plan and determine which accounts to tackle first. If you think you can afford to make minimum payments or might be able to stay current on your accounts with a hardship payment plan, that might be a better option. You’ll also need to have a plan for when you’ll be able to make payments.

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Know Your Rights

Before you speak with a debt collector, get familiar with your rights. Otherwise, debt collectors who are savvier and more experienced than you can easily take advantage of you.

Here are a few things you should know:
  • Debt collectors can only call you between 8 a.m. and 9 p.m.
  • They can’t harass you or use profane language when speaking to you.
  • They can’t threaten to take action that’s illegal or that they don’t intend to follow through with.
  • Debt collectors can only contact your employer, family members, and friends to contact information about you.

Do Your Research

Creditors often time have different policies for when they’ll accept a settlement offer and how much (or little) they’ll accept. Some creditors will only settle if you are at least 90 days late on an account. Or, some creditors might not settle at all, and you’ll have to wait until the debt is sold to another company.

Do your research to learn about others’ experiences, keeping in mind that other people’s outcomes might not reflect a company’s current practices.

Ask Questions

If a collector says you’ll be sued, or that you’ll lose the property if you don’t pay, just calmly ask for specifics: “When can I expect to be notified of this lawsuit?” Or “When will you take the money from my bank account? Some of these threats may be illegal, and the more information you have, the better.

Make an Offer to Your Creditor

Once you think you have enough money saved up to settle an account, you can call your creditor and make an offer. In some cases, the creditor may have already sent you a settlement offer. You could accept the offer, or respond with a lower counteroffer.

Whether you’ve lost your job or are dealing with medical bills, share why you can only afford the settlement amount you’re offering. To avoid confusion, make sure the offer is for a specific dollar amount rather than a percentage of your balance.

Get it in Writing

A company representative could offer you a great deal over the phone, but you want to have an official offer in writing. The proposal should have your name, the creditor or debt collector’s name, and the account number. It should also have the terms of the settlement, such as the amount being paid, whether it’s paid in a lump sum or over time, and the payment due dates. Make sure the letter clearly states that your payment will satisfy your obligation. It may say the account will be settled, paid in full, accepted as settlement in full, or something similar. Keep a copy of the letter, and any payment confirmations, in case a collection company contacts you about the debt again in the future.

Make Your Payment

It’s important to follow through on the terms of the debt settlement and make your payment by the agreed-upon date. Make sure you understand exactly how to deliver the funds to avoid any issues. It’s advisable to mail the payment by check or money order or call to process a direct debit from your bank account.

Check Your Credit Reports

It’s always important to check your credit score especially after you’ve finished paying off a settled debt. It can take anywhere from 30 to 180 days for the zero balance to reflect on your credit report, so be sure to keep checking until the information is accurate, and if it never updates, you can file a dispute with the credit bureaus. A good debt settlement firm will make sure you have what you need.

RELATED: 5 Ways to Fix Bad Credit

The Bottom Line

Deciding to negotiate with debt collectors and starting the process can be frustrating, stressful, and time-consuming. If you’re not careful, you may end up with more debt than when you started and not be sure it was actually resolved properly. Whether you choose to negotiate debt payoff yourself or work with a professional such as a lawyer, it’s important to carefully weigh your choices and come prepared when it’s time to call your credit card company.

If you want some help, consider reaching out to a professional credit counselor, but remember there’s nothing they can do for you that you can’t do for yourself.