How Can I Ease My Debt Through a Collection Agency?

Receiving a phone call or letter from a debt collection agency can be an unnerving experience. However, you don't have to feel intimidated or think that there is nothing you can do to resolve the issue. In many cases, you can work with the agency to set up a payment plan and end up paying less than what you owe. It's even possible that you might not be legally obligated to repay the debt at all.

Determine Validity

Just because a debt collector says you owe money, it doesn't necessarily mean it's true. Be sure to ask the debt collector to send the specifics of the debt to you in writing. It's always possible that the debt on your credit report was placed there in error, or an unscrupulous collection agency could have invented it out of thin air. Each state also has a statute of limitations dictating the period in which agencies can legally attempt to collect a debt.

Know Your Rights

You don't have to deal with collection agency harassment. The Fair Debt Collection Practices Act places limitations on when collection agencies can contact you, and they cannot threaten or intimidate you or talk to anyone but you or your attorney about your debt. To stop a collection agency from contacting you in the future, you can send it a "cease and desist" letter by certified mail, indicating that you want no more phone calls or letters.

Negotiate

Creditors typically authorize the collection agencies they hire to settle a debt for less than what you owe, with the idea that receiving some payment is better than no payment at all. For you, this means there is room to negotiate. Use a baseline figure of 50 to 60 percent of the amount you owe and negotiate from there. When you settle on an acceptable figure, work with the agency to set up a payment plan so you don't have to pay it all at once.

Creditor Involvement

If you agree to a settlement for less than what you owe, be sure the original creditor signs off on the deal in writing. If you don't, you have no protection in the event the creditor decides it wants to pursue collections on the remaining balance at a later date. Also, be sure to get any payment arrangement you make with the collection agency in writing to prevent it from reneging on the agreement.