How do I negotiate a settlement with a debt collector?
When negotiating with a debt collector, you should confirm whether you owe the debt, calculate a realistic payment plan, and make a repayment proposal to the debt collector.
How to negotiate a settlement with a debt collector
If you’re thinking about negotiating a settlement or repayment agreement with a debt collector, consider the following three steps:
1. Confirm that you owe the debt
When debt collectors contact you, they must give you certain information about the debt they say you owe or they should provide it within five days of first communicating with you. Generally, debt collectors must provide this information in writing, either in the mail or electronically.
This validation information can help you figure out if you owe the debt and will provide information on how to dispute it if you don’t. If you’re unsure who you owe money to or how much you owe, you can about the debt.
2. Calculate a realistic repayment plan
Once you confirm that you owe a debt, you can pay in full or propose a repayment plan to the debt collector. If you want to make a proposal to repay this debt, here are some questions you should ask yourself:
How much can I realistically afford to pay each month?
First, review your current financial obligations. , including the amount you want to repay each month. Try to allow some income left over to cover unexpected expenses and emergencies. Keep in mind that falling behind on other bills, even if you’re paying off this debt, could cause you more problems. If you’re struggling, a non-profit credit counselor can help you create a budget and work with the collectors.
What is the total amount I’m willing to pay to settle the entire debt?
This could be one payment or a series of smaller payments. Don’t pay more than you can afford. If you have more than one debt with a debt collector, you can direct the debt collector to apply your payments to a specific debt. Debt collectors are not allowed to apply a single payment for multiple debts that you’re disputing.
Avoid companies that charge money in advance to settle your debts for you
Dealing with debt settlement companies can be risky. Some debt settlement companies promise more than they can deliver. Certain creditors may also refuse to work with the debt settlement company you choose. In many cases, the debt settlement company won’t be able to settle the debt for you anyway.
3. Make a repayment proposal to the debt collector
Explain your plan
When you talk to the debt collector, explain your financial situation. You may have more room to negotiate with a debt collector than you did with the original creditor. It can also help to work through a credit counselor or attorney.
Record your agreement
If you agree to a repayment or settlement plan, get the plan and the debt collector’s promises in writing before you make a payment. Those promises may include stopping collection efforts and ending or forgiving the debt once you have completed the plan.
Know your rights
There are certain rules around how and when debt collectors can communicate with you. The FDCPA prohibits debt collectors from placing repeated or continuous telephone calls or conversations with the intent to harass, oppress, or abuse you.
If you’re having an issue with debt collection, you can submit a complaint with the CFPB.