If you have debt that has been sent to a collection agency, you may have been dealing with the debt by avoiding creditors' calls. Unfortunately, avoiding your debts will not make them go away. The best way to handle old debts is to negotiate with the collection agency. Once debts are sent to collections, agents are likely to make you a deal so that you can pay less than the full debt, but you need to know your rights and understand how to negotiate.
Know Your Consumer Rights
Research your rights as a consumer. Visit your state attorney general's office online or by phone and ask the organization to send you your state's debt-collection laws. Read the information carefully and make sure you understand what creditors in your state can and cannot legally do during negotiations.
Decide on a Lump Sum Payment
Determine how much you are able to pay. Make a list of your monthly bills, and put them in order of priority. Plan to pay all of your most necessary bills such as gas and electric before you pay outstanding credit debt. Prepare to offer creditors an amount that you can afford and no more than that. Avoid creating payment plans with collection agencies. Start negotiations at one-third of your outstanding debt, or less if you cannot afford to pay one-third.
Record the Conversation
Prepare to record the conversation if possible. This will ensure that you have a record of any agreements you come to and protect you in case the collector does something illegal during negotiations. Make sure that privately recording telephone conversations is legal in your state; ask the collector's permission if you live in a state where permission is required.
Make an Offer
Call the collections agent. It's a good idea to call at the end of the month; you may be able to get a better deal, because agents often receive commissions based on the total amount of settlements made each month. During the conversation, focus on the debt itself. Avoid giving the collector any personal information about your workplace or bank, and don't explain why the debt is unpaid. Offer the lump sum you have determined as a settlement for your debt. Ask the collections agent if she will accept your offer as payment in full for the account. Request that the agent also remove any negative information that the agency has placed on your credit report.
Handling Rejections
Ask what the agent will accept as payment in full if he rejects your initial offer. Consider any counteroffers, but do not accept them unless you can honestly afford the payment. Politely end the call if the agent is not willing to negotiate. Call back right away; often you will reach a different agent who will be more open to negotiating. Offer to pay the account in full only as a last resort.
Get It in Writing
Ask for the settlement in writing. Avoid making deals that require you to pay the agency quickly, and do not pay with a debit card over the phone. Wait to pay the collection agency until you have the offer you discussed on the phone in writing. Write a note in the memo line of your check that notes that if the check is cashed, it is considered payment in full. Require a receipt once you have made payment.
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