Negotiating with Debt Collectors

Most people who are contacted by debt collectors eventually negotiate some kind of payment agreement — even if they can’t afford it.  This page provides information to help you decide whether you should negotiate a payment agreement at all and, if so, how to get an agreement you can afford.

When should I negotiate a payment agreement with a debt collector?

If the debt is fairly recent, you are sure you owe it, and you can afford to make some payments, you should consider making a payment agreement with the debt collector.

When should I NOT negotiate a payment agreement with a debt collector?

It is probably not in your best interests to negotiate a payment agreement with a debt collector if:

  • You can’t afford to pay the debt collector because you have a limited income, and you need it all to pay higher priority debts.  For more information on prioritizing debt, look here.
  • The debt is so old that the statute of limitations has expired or is about to expire.  If you make even a single payment, you will reset the statute of limitations, and the creditor will have an additional three to six years to file a lawsuit against you.
  • You are the victim of identity theft, or you don’t owe the debt for some other reason.
  • Your income is exempt from collection because it comes from a protected source, such as Social Security, Public Assistance, the Veterans Administration, child support, or a pension.

If I am considering negotiating a payment agreement with a debt collector, what are the first things I should do?

  • Prioritize your debts.  Make a realistic assessment of whether you can afford to pay the debt and, if so, how much you can afford to pay.  For most people, paying for necessities like shelter and food is more important than paying credit card debts.
  • Learn about your rights.  The information and links on this site are a good place to start.

If I can afford to make payments, how do I get the best deal?

  • Decide how much you can afford to pay, and offer less.  That way, you’ll have some room to bargain.  Be firm, and never agree to pay more than you can afford.
  • If you can afford it, offer a lump sum.  Debt collectors will often agree to give you a substantial discount in exchange for a larger payment.
  • Stay calm and in control, no matter what the debt collector says.
  • Take good notes.  If you can, record the conversation.
  • Address your credit report.  Insist that the debt collector remove the entry from your credit report.  At the very least, try to get the debt collector to list your account as “paid in full” rather than “paid in settlement.”
  • Get the payment agreement in writing, including agreements to change your credit report.
  • Negotiate at the end of the month.  Debt collectors are paid based on how much they bring in each month, so you are more likely to get a good deal if you wait until the end of the month.

When negotiating with debt collectors, what should I NOT do?

  • Do not agree to pay more than you can afford.
  • Do not try to explain your personal circumstances to the debt collector.  The debt collector hears these stories every day and will not cut you a better deal out of sympathy.
  • Do not give a debt collector personal information, such as your bank account information.
  • Do not allow a debt collector to take automatic deductions from your checking account.
  • Do not pay a debt collector with a postdated check.
  • Do not pay until you have proof of your payment agreement in writing.

If I can’t afford to make payments, what should I do?

Write a letter to the debt collector stating that you cannot afford to make payments at this time and that you would like the debt collector to stop contacting you.  This kind of letter is called a “cease letter,” and you can use this sample cease letter as a model.  Keep an eye out for court papers.  You may not receive any, but if you do, you should respond promptly in order to protect your rights.

If the statute of limitations has expired, but I want to repay my debt, is there a way to pay without resetting the statute of limitations?

Yes.  Set aside money in a savings account until you have enough to repay the debt.  Contact the creditor, debt collector, or debt buyer that currently owns the debt, and make an offer to repay the debt in one lump sum in exchange for a complete release of your obligation on the debt.  Get the release in writing before you make a payment.  Pay by check or cashier’s check and write “cashing this check constitutes payment in full” on the check.  Make a copy of the check before you send it, and make sure you keep a copy of the release as well.

More Information

Debt Collection Basics

Your Rights Under the Fair Debt Collection Practices Act (FDCPA)

Disputing the Debt

Recognizing Debt Collection Abuse

What is Exempt from Debt Collection?

Disclaimer:  This site provides general information for consumers and links to other sources of information.  This site does not provide legal advice, which you can only get from an attorney.  New Economy Project has no control over the information on linked sites.

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