Debt Collection Negotiation Tips

Debt collection calls and letters can provoke extraordinary levels of anxiety in debtors. In most states, debt collectors have the power to freeze bank accounts, sue debtors and garnish wages. Educate yourself about your rights as a debtor and learn how to negotiate down your debts without turning to a credit consolidation agency.

Gather Information

The more data that you gather about your debt situation, the stronger your negotiating position. Get a credit report from one of the major credit monitoring agencies such as FICO or Equifax. Ensure that all of the information on these reports is correct. Identify which debts are the highest priority to settle. Contact creditors or collection agencies directly and request that they send you written material detailing how much you owe. Research the statute of limitations on each debt owed. Most debts expire after five to seven years of nonpayment.

Negotiating

Collection agencies purchase debts from creditors usually for less than 10% of the original value. This makes your negotiating position much stronger than it might initially appear. Keeping this in mind, make an initial settlement offer of no more than 25% of the amount of the original debt. Even though it's a settlement, you can request that the collection agency mark it down as paid in full on your credit report. Keep negotiations to letters and faxes. Never agree to a transaction over the phone. Demand all agreements in writing and save all correspondence.

Brinksmanship

The longer that a debt remains unpaid, the easier it becomes to settle for lower amounts. This harms your credit rating further than it would otherwise, but it results in lower debt payments. Wait until the end of each month to negotiate debts. Threatening bankruptcy is a good tactic, but keep in mind that the agencies can read your credit report. It's not credible to say that you are about to go bankrupt if you are taking on new debts. Check your credit report after negotiating a settlement to make sure that the terms of the agreement have been kept.