How to Negotiate a Settlement With a Collection Agency on a Repossessed Car

A car repossession occurs when the owner of the vehicle, often the bank or lender, takes possession of the car from the borrower. The bank then sells the vehicle at auction in order to recoup some of the monies owed. The borrower is responsible for the difference between the outstanding amount of the loan and the amount the bank received for the car at auction. This amount is called a deficiency. The bank will either sell this debt to a collection agency or hire the agency to collect it on its behalf. The good news is that you may be able to negotiate a settlement of that debt with the collection agency.

Instructions

1

Send a debt validation letter to the collection agency. The agency will send you written proof that they're authorized to collect the debt, that the debt is yours and how much you owe.

2

Read the information received from the collection agency and ascertain the outstanding balance. Collection agencies add interest charges to debts so the amount due may be more than it was at the initial time of repossession.

3

Calculate how much you can afford to pay toward the debt. Determine if you can make that payment in one lump sum or in a series of installments.

4

Call the collection agency and inform it that you would like to settle the debt. Ask to speak with a manager or supervisor, or someone in authority who has the ability to negotiate a settlement offer over the phone.

5

Make an initial offer to the manager that is lower than the amount that you are able to pay. For instance, if you can pay $1,000 of a $2,000 debt, then offer $500. The agency may or may not accept your initial offer, so you have to leave room to negotiate.

6

Request the agreement in writing, once you and the manager have agreed upon a payoff amount. Get it in writing that the agency will not sell the forgiven debt amount to another collection agency, and that your payment to the agency settles the debt with no further liability or obligation remaining on your behalf. Do not make any payments over the phone during this call, and do not make any payments at all until you receive this written confirmation. Never give a collection agency access to your bank accounts.

7

Send a cashier's check or U.S. Postal money order to the collection agency via certified mail, return receipt requested, once you receive the written agreement. Keep all receipts from the certified mailings. If the arrangement was for a lump sum, then send that amount. If the agreement was for installments, send the amount of the first payment and continue to send the payments by certified mail, return receipt requested, until the debt is paid according to the terms of the agreement.

8

Order a copy of your credit report, once the debt is paid. Ensure that the agency has reported the debt with a zero balance. If not, file a dispute online at the credit bureau's website. The bureau has up to 30 days to investigate and correct the error.