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Debt Settlements:  Negotiating with Debt Collectors

Although it is almost always better to avoid debt collectors in the first place by working out some sort of agreement with the original creditor, you have a negotiation advantage once the debt has been turned over to a collection agency.

Of course, this doesn't mean that a debt collector will not threaten to sue you.  Many debt collectors will say anything to get you to pay your debt, even if it is illegal.  They don't care if you borrow it from a relative, pay them instead of your mortgage, or pawn your wedding ring. They know that the odds are very high that they won't collect anything, so they try to intimidate you with threats and bullying in order to try and scare you into paying the debt as quickly as possible.  But consider the following before letting a debt collector intimidate you:

(1)  If the creditor is willing and able to sue you they will turn your account directly over to a collection attorney and bypass the collection agency altogether.  Turning an account over to an attorney does not mean that they will sue you; it only means that your risk of being sued is higher;

(2)  The fact that the debt was turned over to a debt collector means that there is a good chance you will never be sued over it.  This is particularly true if the amount in question is less than $1,000.  

(3)  Creditors do not sue debtors when they don't think that they can recover what are due them, all collection costs and attorneys fees.

Consider the above when deciding how to negotiate with a debt collector.  Do you have assets that can be seized?  Can your wages be garnished?  If you were the creditor in this situation, would you sue you?


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Debt Negotiation -- Table of Contents
In most situations, when a debt is turned over to a collection agency, you will begin to receive phone calls and collection letters for a two or three month period.  If you haven't persuaded you to pay or work out some sort of agreement by then, a decision will be made as to what to do with your account.  It will either be turned over to a collection attorney or it will be written off by the original creditor as uncollectible.

The best indication that they are about to give up collecting the debt is when you receive a letter offering   to accept 70% of what you owe as payment in full.  This is, by far, your best opportunity to negotiate the debt down to 50% or even as low as 25% since you know that they've given up on collecting the debt and are about to write it off as a complete loss.  At this point, if you offer them 20%, they would likely accept it.

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