Negotiating With Creditors and Collectors

Negotiating With Creditors and Debt Collectors

Dealing with debt can be super stressful. Creditors and debt collectors can make it seem like your trapped or that there’s no way out. But there are things you can do to take control of the situation. With some preparation and know-how, you can negotiate with creditors and debt collectors to settle your debts for less than you owe.

This article will give you tips and strategies for negotiating with creditors yourself. We’ll walk through the steps so you can get the best possible deal. We’ll also talk about your rights and protections under the law. Let’s get started!

Should You Negotiate or Not?

Before reaching out to creditors, think about whether negotiation is the right move for your situation. Here are some things to consider:

• What is your financial situation? Look at your income, expenses, assets and other debts. This will help you come up with a realistic repayment offer.
• Are you facing legal action? If a creditor has sued you or is threatening to, negotiating a settlement could stop the lawsuit.
• Is your debt very old? Creditors may be willing to settle for a lower amount when debt is past the statute of limitations.
• Are there alternatives? Bankruptcy or credit counseling may be better options in some cases.

If negotiation seems like the way to go, get ready by following the steps below.

Confirm the Debt is Yours

Before you negotiate, make sure the debt is really yours. Debt collectors often pursue the wrong person or try to collect fake debts. Here’s how to confirm a debt:

• Ask the collector to verify the debt in writing. They have to prove you owe it.
• Review your credit reports. Unfamiliar debts could be a sign of identity theft.
• Request information like the original creditor and amount owed. If they can’t provide details, it may not be a valid debt.

You have the right to written verification of debts under the Fair Debt Collection Practices Act. Collectors have to provide this if you request it.

Know What You Can Afford

Before talking to collectors, figure out what you realistically can afford to pay. Look at your budget to see how much you can put towards settling debts each month. Some things that can help:

• Cut expenses where you can – lower cell phone plan, drop cable TV etc.
• Find ways to increase your income – overtime, part-time job, sell stuff.
• Consider borrowing from family/friends if possible.

Come up with a specific dollar amount you can pay each month. This will let you make a solid repayment offer.

Know Your Rights

It helps to know your rights when negotiating with creditors and collectors. The Fair Debt Collection Practices Act (FDCPA) prohibits certain abusive practices. Collectors can’t:

• Use threats of violence or harm.
• Publish lists of people who refuse to pay debts.
• Use obscene or profane language.
• Repeatedly use the phone to annoy someone.
• Misrepresent the amount you owe.
• Falsely claim to be attorneys or government reps.
• Falsely claim you’ll be arrested if you don’t pay.

You can sue for damages if collectors violate the FDCPA. Knowing your rights helps you end harassment.

Gather Info About the Debt

Before contacting the creditor or collector, gather details about the debt:

• Original creditor name
• Account number
• Date of first delinquency
• Total amount owed
• Interest rate and fees

Save statements, notices, and anything else related to the debt. This info will help when you negotiate.

Work With Creditors First If Possible

It’s often better to negotiate with original creditors than collection agencies. Here’s why:

• Creditors have more flexibility to settle debt.
• Collectors pay pennies on the dollar for debts and want larger profits.
• Creditors can recall debts from collectors if you negotiate.

So reach out to the original creditor first if you can. But if the debt is with collectors, don’t worry – you can still negotiate.

Decide What to Offer

Now it’s time to make a settlement offer. Consider proposing:

• Lump sum payment – Offer a one-time lower payment to settle the debt. Often creditors will accept 20-50% of the balance.
• Payment plan – Propose smaller monthly payments over 6-12 months until debt is paid.
• Lower interest rate – Ask creditors to reduce interest rates to help you repay.

Come up with an offer that works for your budget. Be ready to negotiate if your first proposal is rejected.

Negotiate with Collectors Carefully

If negotiating with debt collectors, be extra careful in conversations. Some tips:

• Record calls if allowed in your state.
• Get names of people you speak with.
• Keep talk focused on resolving the debt.
• Don’t give personal or financial details.
• End chatty conversations – they may use it against you.

Avoid getting into arguments. Stay calm and firm about what you can pay.

Send a Dispute Letter

Before agreeing to anything, send collectors a dispute letter by certified mail. This requires them to verify the debt before continuing collection. Stopping collections even temporarily gives you leverage to negotiate.

The letter doesn’t have to give a reason for disputing the debt. Simply state that you dispute owing the amount and want written verification. See a sample dispute letter.

Follow Up in Writing

After reaching an agreement, follow up in writing to confirm terms. Send a letter or email that outlines:

• Settlement amount
• Monthly payment amount
• Due dates
• How the payment will be applied
• Who to contact with questions

Get written confirmation from the creditor too. Having everything in writing protects you if disagreements come up later.

Don’t Pay Upfront Fees

Some debt settlement companies promise to negotiate your debt, but charge large upfront fees. Avoid these scams! It’s illegal for companies to charge fees before settling debts.

Watch Out for Scams

Scammers often pose as creditors or collectors. Be wary if asked to:

• Pay using gift cards or wire transfers.
• Provide bank account or Social Security numbers.
• Pay a company you’ve never heard of.
• Put debt payments into a third party account.

Legitimate creditors will allow checks or electronic payments. Don’t fall for demands to pay in unusual ways.

Get Help if You Need It

Negotiating yourself can be complicated. If you’re struggling, consider:

• Credit counseling – Get help managing debt through a reputable agency.
• Debt settlement firms – Hire a trusted company to negotiate for you.
• Bankruptcy – For severe debt, bankruptcy may be the best solution.

Just don’t pay anyone who promises fast debt relief or guarantees results. Make sure you understand any services before signing up.

Stay Persistent

Negotiating debt takes time and effort. Be prepared to make multiple calls and write letters. Don’t get discouraged if creditors reject initial offers. Politely follow up and make revised proposals if needed. Keep records of all communication. With patience and persistence, you can settle your debts at amounts you can afford.