The Art of Negotiating with Debt Collectors

Consumer debt is a big problem in America. It can be anything from medical bills to student loans and credit cards, but the best way to tackle this issue would...
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Debt collection can be a challenging situation. However, there are some ways you may negotiate with your creditor to have the debt reported as paid in full or for calls to cease altogether.

Here’s what we call the ingredients of negotiation:

Check if the Debt is Yours

Suppose you have taken out a loan, one of the first things to determine whether the creditor has the right to collect the amount owed. Creditors can sometimes make mistakes when they report your debt to credit bureaus, and these mistakes are more common if creditors buy and sell debt.

If the creditor has made a mistake, you can dispute the error with the credit bureau. Once it verifies that it is indeed a mistake, your lousy record will be removed, and your report will look better.


Consider what kind of debt you have.

Consumer debt is a big problem in America. It can be anything from medical bills to student loans and credit cards, but the best way to tackle this issue would have something for each type of consumer who owes money.


With credit card debt, you can try to negotiate it with the creditor. Sometimes creditors will agree to lower your monthly payments if you pay them in full for six months or a year.

Even if it doesn’t work, don’t make the mistake of thinking that paying interest is better than avoiding default, and this would only lead to further financial problems.

You can also negotiate with collectors, but this is more difficult. Debt collectors are working on getting their money back, which means you are playing the role of the creditor who doesn’t want to pay.

Although they might be willing to work out a deal, the chances are slim because debt collectors buy your debt for very low prices.


Check the statute of limitations.

If a collector is after an old debt, the statute of collecting it may have expired. Before confessing to owing or making even a modest payment on a debt that’s beyond the statute of limitations, be cautious since doing so may restart the payment clock.

Nolo provides a general overview of the statute of limitations in all 50 states.

Consider hardship programs

The government has taken many steps to help people during the reign of coronavirus. One way they could do this is by exempting you from debt collection because your only sources for income are benefits given through state or federal programs, which makes them protected against certain types of garnishment remedies like being contacted about their debts while relying on assistance from these agencies due to circumstances such as those caused by pandemics and economic hardship alike.


Offer a lump sum.

There are times when you can get collectors to agree to accept a lump sum that is less than what you owe. This can be effective if your income is temporarily low (because of illness, for example), and the collector doesn’t expect it to continue over the long term.

However, you should make sure that they will remove the negative entry from your credit report and stop calling you if the agreement is made.


What about bankruptcy?

Mention that you’re thinking about filing bankruptcy if you have unsecured debt, which is defined as debt not linked to an asset such as your automobile or house.

Don’t use bankruptcy as a negotiating tactic unless it’s truly a feasible choice for your situation. It would eliminate liability for the debt, and the creditor is aware of this.


Determine how you’ll report the debt to credit bureaus.

If you accept a debt settlement, try to negotiate how the creditor will report the debt to the credit bureaus: Equifax, Experian, and TransUnion. Even if you’re paying a lower amount than what was owing, request that they delete the bad information and record the transaction as paid in full.

Don’t rely on a verbal agreement, so ask the debt collector to put it in writing when you’ve finished your settlement.


Get the settlement agreement in writing.

Have your agreement, repayment terms, and other relevant information with you when you speak to the debt collector. If they request a written confirmation of your agreement, send it via certified mail with the return receipt requested.

This will provide proof in case the creditor doesn’t follow through on their end of the deal.

What happens after you pay off your debt?

A settlement is reported to the major credit bureaus, and it remains on your report for seven years and appears on your credit report just like a collection account does for seven years.

The seven-year statute of limitations for accounts that have never been late begins on the day you settle the account, regardless of whether it was paid in full. If an account was past due or in default and had a track record of missed payments, the date it first became delinquent would be considered the start date.

If you can settle a debt only by paying it off rather than having it enter or remain in default, this is ideal for your credit. On the other hand, a settled account has a less harmful effect on your credit score than an unpaid one.

The Takeaway

Negotiating debt payments is an art that needs to be mastered. Not everyone can do this, though. Most of the time, you’ll benefit from a professional team helping you settle your debts, so your credit score can eventually improve.

Once you’ve settled what you owe, you can slowly start the process of building a good credit score. It may take some time and a lot of patience, but you’ll get there eventually.

If you want to learn how to improve your credit score and repair your credit, reach out to The Oasis Firm today. We’re ready to listen to your problems and offer an honest assessment of your situation.


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