Debt collectors can be very intimidating to the average consumer. Review the Fair Debt Collection Practices Act (see Resources) before discussing the debt with a representative. Know that debt collectors cannot discuss your account with third parties, so if they are harassing your family members they are breaking the law.
The best thing you can do is remain calm. Remember there is no such thing as a debtor's prison and although debt collectors may try to play hardball, you often have more options than initially offered. Be polite but firm; you can always ask to speak to a different representative.
Get Everything in Writing
When negotiating with debt collectors make sure you get your agreement in writing before making any payments. If you settle your debt for a certain percentage make sure you send the agreement in writing to the debt collection agency by certified mail with return receipt requested. The letter should detail the terms that you agreed to over the phone. Also, if you are paying your debt in full with one check be sure to write the following statement on your check, "Cashing this check constitutes payment in full."
Note that by settling your debt, a debt collector can report the remaining balance that was "forgiven" as income to the IRS.
Record the Conversation
Advise the debt collector that you are recording the conversation, as long as this is permitted by your state's laws. If a debt collector knows you are recording the conversation he will be less likely to use harassing and unlawful tactics to get you to pay your bill. While you have the collector on the phone ask if the company will take 40 percent of the total owed, payable either in one check or several scheduled payments. Remember, debt collectors simply want money, which they won't get if they don't work with you. You actually have the power in the negotiation, so remain calm and level-headed. Agree only to a settlement or a payment plan you can afford. By recording these negotiations, you will have evidence of what the collector has agreed to in case the company attempts to back out of the deal.
Request Removal of Negative Information
Remember an account in collections shows up negatively on your credit report and can be seen by potential lenders and some potential employers. Be sure in your negotiations that you state that by paying this account you want the negative information from the debt collection agency removed from your credit report. This is referred to as Pay for Delete. If you cannot get a Pay for Delete, at the very least you should get them to report it as "Paid in Full" instead of the standard "Paid in Settlement." Paid in Settlement reveals to potential lenders and employers that you did not pay your debt in full and a creditor had to negotiate a settlement to get you to pay up.
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