Collection Agency Debt Settlements

If you find yourself in a situation where you need to negotiate or settle a debt with a collection agency, understanding the “how tos” is vitally important. By understanding how to go about this correctly, you can save yourself vast amounts of money and, in the process, begin to repair your credit.

If you find yourself in an increasingly tough financial situation, it is best to contact the creditor. Attempt to arrange a payment plan with them before things proceed further.

Being unable to arrange a payment plan with your creditor will ultimately cause increased anxiety as a collection agency will probably be assigned your debt. In addition to this, your credit score will spiral downward. It will be extremely helpful at this point if you understand the process of debt settlement.

It is important to know and understand that the collection agency probably purchased your debt at just a few cents on the dollar. Most often, collection agencies purchase debt at 8 cents to 12 cents on the dollar, so a debt of $500 might be purchased for as little as $40 or a debt of $6,000 may be purchased for as little as $480.

In spite of this, settling for a small amount will not be the collection agency’s idea. Getting as much as they can from you is, after all, how they make money. In order to scare you into agreeing to pay the full amount and quickly, they may even threaten a legal suit.

Having said this, collection agencies normally are reluctant to go to court over what to them is a small amount. It will cost them time, energy, and money to try to collect from you so they will try to avoid this recourse. This does not mean, however, that you should brush under the carpet any letters you receive from them or any phone calls they make to you. Rather, it is best to try to come to some agreement over the amount you will pay to settle the debt in full.

Collection agencies like lump sum payments so, if you have the funds, make an offer. A good beginning offer to the negotiation would be to settle the debt in full for twenty-five percent (25%) of the original amount owed. Then, you should wait for a response from the collection agency. It may come back with a counteroffer. The process may continue this way until an agreement is reached. It is vitally important that you keep copies of all documentation to and from the collection agency. Be sure to obtain the final agreement in writing.

Negotiating a payment plan with the collection agency is the next option if you don’t have cash on hand for a lump sum payment. A law suit is unlikely if the collection agency feels you are trying.

One thing you want to make sure of is that your debt will be “deleted in its entirety” from your credit history, whether you are paying a lump sum or are going to make payments. If you do not obtain this assurance “in writing” from the credit agency, this black mark may remain on your credit report for up to seven years.

So, in summary, if you decide to settle a debt with a collection agency, go confidently to the collection agency and make an offer. Do not give in to bullying tactics, stay firm, but realize that this is a debt that you owe and the collection agency is in the business of collecting debts. Therefore, also attempt to be fair. Do not in any way ignore letters or phone calls which warn of possible recourse against you. Attempt to obtain the best rate possible. By following the advice in this article, you may be able to come to an agreement with the collection agency and clean up that old debt.

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