Debt Consolidation

A Practical Guide To Negotiating Debt With Collection Agencies

When it comes to negotiating debt with collection agencies, your awareness about your legal rights and how to use the same play a very important role. Debt collectors are often willing to negotiate a deal, but the process is not at all an easy one because they are very tough, professional negotiators. Unless you have some great negotiation skills, you may not be able to convince them for a deal that is highly favorable for you. Having said that, bargaining with them can become much easier if you follow these steps thoroughly.

There’s No Need To Hurry

Don’t be rushed. Start making the payment only after a written agreement has been finalized. The debt collectors may ask you to make a certain amount of payment and then negotiate a plan for the remaining debt; do not agree to any such proposal. If both of you are ready to negotiate, why not do it for the entire debt? Likewise, never go for quick offers to settle the debts overnight. Take your time to do your review on whether a specific agreement can really work for you before you sign it.

The Best Time For Negotiation

Before you start negotiating debt, you must first wipe your credit clean. Obtain your credit report from the three major credit bureaus and review the details on it thoroughly in order to find out if the entries over there are accurate and complete. If you notice certain errors on it, get them rectified. It is also important for you to understand that debt collectors often have a target to achieve every month. So, the best time to contact them for any such negotiations is the end of the month because they are often under pressure at this point of time to meet their targets. You are very much likely to land a really great deal.

Know Your Rights

The greatest concern that you are likely to have is that the debt collector may not play fair. It is very important for you to keep in mind that collection agencies are strictly prohibited from harassing you for the debt repayment. They must not mislead you by presenting false or manipulated information. When it comes to negotiating debt with them, you can find yourself in a strong position when you demonstrate to them that you are very well aware of your legal rights. You can obtain a free consumer brochure on Fair Debt Collection Practices Act by calling at (617) 542-9595 to the publications department of NLCC (National Consumer Law Center). Your awareness about your legal rights will discourage the debt collectors from trying aggressive tactics. So, make sure you educate yourself thoroughly about it before you proceed.

Prepare A List Of The Necessary Bills That You Must Pay Every Month

You cannot stop living just because you have to pay off certain outstanding debts. Therefore, you must first prepare a list of necessary expenses for you and your family that you must pay every month. This will get you a better picture on how much money you can actually afford to offer per month as part of your proposed repayment plan. Always remember, a repayment plan that makes it difficult for you to meet even your necessities is never going to work successfully.

Always Offer Less Than What You Can Afford To Pay

This is particularly more important if you are someone who lives paycheck to paycheck. Financial emergencies may occur anytime. Therefore, you cannot even ignore your savings plans also. Deduct the essential monthly expenses from your regular monthly income to find out how much money you have in balance. But, while you are negotiating debt, you should never offer the entire balance amount toward debt repayment; if you do, it can turn out to be very risky. Always offer a little less than what you can afford. This way, you will have some flexibility in your plan; for example, you will be able to meet financial emergencies without getting into further debts and without the risk of making defaults on the repayment plan. NEVER agree to automatic withdrawals from your checking account. NEVER send post-dated checks. ALWAYS agree to pay in cash or current check. This way, you will be on a safer side. But again, you will have to show some great financial discipline to let things really work in your favor.

There Is No Need For Any Lengthy Explanation

While you are negotiating debt, it does not make any sense to expect sympathy from debt collectors; they usually don’t have it. Debt collection is their job; they do it for their living. They are very much likely not to be interested in listening to your life story. Debtors often have such stories and debt collectors hear it day in and day out. Therefore, it is going to be a waste of time if you start giving them a lengthy explanation of why you are behind the payments. Focus on telling them what you can do to get current with your payments or to settle the debt. Stick to the facts and say as much as is needed.

NEVER Share Personal Information With Them

You should NEVER share your personal information with them, such as your checking account number, which bank you have your account in, where you work, and other such things.

Keep Your Cool

During the process of negotiation, you must keep your cool. Even if the debt collectors tell or ask something that frustrates you, this is not the right place to take out your frustration or get into an aggressive argument. If you think that they are violating the laws as defined under Fair Debt Collection Practices Act, you just have to repeat to them that you know what your legal rights are and request them to focus on finalizing a fair deal that should be beneficial for both the parties. You just have to stay focused. When you demonstrate this attitude, the collectors will be on back foot and you will have better chances of getting what you want from the negotiations.

Keep Detailed Notes

You are also recommended to note down all necessary details about any collection calls or letters you receive. Note down the important points of the conversation, the name of the caller, the name of the agency he/she is calling from, and the time and day of the call. Keep a record of everything, as it will keep things in control. You can use these notes when something goes wrong.

Keep A Record Of The Communication, Wherever Possible

In order to be on a safer side while you are negotiating debt, you must also try to keep a record of any communication with the debt collectors. For example, it will be great if you can manage to record the phone calls. You can do this secretly. There are 35 states where it is quite legal to tape phone conversations secretly. These states include Wyoming, Wisconsin, West Virginia, Virginia, Utah, Texas, Tennessee, South Carolina, Rhode Island, Oklahoma, Ohio, North Dakota, North Carolina, New York, New Mexico, New Jersey, Nevada, Nebraska, Missouri, Mississippi, Minnesota, Maine, Louisiana, Kentucky, Kansas, Iowa, Indiana, Idaho, Hawaii, Georgia, Colorado, Arkansas, Arizona, Alaska and Alabama. Besides these states, such things are also legal in the District of Columbia. In the remaining fifteen states, you must first get permission from the debt collectors for this. This permission may not always be in writing. You can just start taping and tell them that now you are recording the conversation; if they do not object and keep talking, it will be considered as their permission. Recording conversation is a crucial step, as it will keep the debt collectors on their best behavior.

ALWAYS Get The Final Agreement In Writing

All your efforts and strategies for negotiating debt may go in vain if you do not have the agreement (any repayment plan or settlement they agree to) in writing. Verbal commitments have no legal value. You need proof, and the best way to do this is to have it in writing. When you have to propose something, do it by sending a letter via certified mail. This way, once the letter is delivered, you will get a receipt. File this receipt along with other records. If you agree to settle the entire debt by making a lump-sum one-time payment through a check, you must write down on the check a disclaimer, “in settlement with the entire debt” or any other such phrase.

How They Are Going To Report The Payment?

An important part of the agreement should be the way the payments are going to be reported on your credit report. You are recommended to sign a payment agreement only if they agree to report your account as “paid in full”, not “paid in settlement”.

Overall, following the above steps thoroughly will definitely maximize your chances of winning a fair, more favorable deal through negotiating debt.


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Posted in Debt Consolidation, Debt Settlement | 1 Comment »

One Response to “A Practical Guide To Negotiating Debt With Collection Agencies”

  1. Richard says:

    Wonderful and informative tips. Negotiations with professional negotiators may be a tough task to handle but after reading this article, it does not feel like it is impossible to talk the creditors. First of all any individual talking to the agencies should be very well aware of his/her legal rights. It should be very clear in your mind that the problem is not going to be sorted in a day or a week. The debt accumulation has taken time same as with the settlement. Don’t be panic and keep yourself cool. One point mentioned in the article is very important, “Never share personal information with them”. It should be followed very strictly. You can hire a settlement company also. The selection of company should be done carefully. One can select the best company after screening two to three companies. Don’t do the blind faith on the company. You should also actively involve in the deal and never go for the final agreement in haste. Keep every thing done in writing. Do a thorough study of the agreement only and then decide finally. Debt Settlement might prove to change your life if done with caution.

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