How to Negotiate Original Debt With Collectors

You know you've landed in a financial mess when the creditor of your original debt has sold your debt or contracted with a collection agency to collect it. Once you begin receiving phone calls and letters from a debt collector, the best financial course is to negotiate payment if you can afford to pay and the debt is recent. Collectors can be relentless and if you value your peace of mind and credit score, you should pay the debt. However, you may find some relief by negotiating the settlement and payment terms.

Instructions

1

Amass any documentation received from the collector and your original creditor showing how much you owe, when it was due, interest and penalty fees. Review the date of the original debt as it may be passed your state's statute of limitations. For instance, in Maryland, if credit card debt is more than three years old, the court will dismiss any lawsuits the debt collector files. If the collection agency is offering you a deal to settle the debt for less than the original amount owed, the collector may put a settlement amount in your collection notice.

2

Answer the telephone when the collector calls. If the collector has your telephone number, he will call, repeatedly. Explain your financial circumstance to the collector, including why you cannot pay the original debt. He may ask you questions about your finances and income that you do not have to answer. Do not divulge details to the collector about your income, your spouse's income or how much you have in your bank accounts.

3

Listen carefully to the settlement offer the collector verbally makes. The settlement amount will be less than the original debt, but not much less. Ask about payment options, as you may not have to pay the entire settlement at once. Many collectors will allow you to pay in installments, each with a specific due date. Inquire about interest and penalty fees.

4

Decline the collector's first settlement offer and counteroffer with a lower number. The collector's goal is to get the highest amount possible but some money is better than nothing. End the phone call if your offer is not accepted. Write down the name of who you spoke with and the date. The representative may not have the authority to approve your counteroffer on the spot.

5

Negotiate the settlement amount on successive phone calls with the collector. Decline each settlement offer until the collector names an amount you believe you can pay. Once you agree on a total, negotiate the terms of payment. Ask if offering a lump payment will further reduce the balance, if you can afford this option. Tell the collector you will not send payment until you receive a written confirmation of the settlement terms.

6

Make payments on the original debt as agreed with the collector. Upon receipt of final payment, request a letter from the collector or your original creditor that states the debt is "paid as agreed." This may take several months if the debt is credit card related. Ask the creditor to report the debt as "paid as agreed" to the credit reporting agencies because this is a more favorable debt status.