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What is the best way to negotiate a settlement with a debt collector?

Before negotiating a settlement with a debt collector, learn about the debt and plan for making a realistic proposal.

The CFPB’s Debt Collection Rule clarifying certain provisions of the Fair Debt Collection Practices Act (FDCPA) became effective on November 30, 2021.

How to negotiate a settlement with a debt collector

To get ready to negotiate a settlement or repayment agreement with a debt collector, consider this three-step approach:

Learn about the debt

Any debt collector who contacts you to collect a debt must give you certain information when it first contacts you, or in writing within 5 days after contacting you, including:

  • The name of the creditor
  • The amount owed
  • That you can dispute the debt or request the name and address of the original creditor, if different from the current creditor.

You can dispute the debt or ask for more information from the debt collector. If you are unsure who you owe money to, or how much you owe, it’s usually a good idea to learn more . If you dispute a debt or part of a debt with the debt collector, in writing, within 30 days of receiving the validation notice, the debt collector is not allowed to contact you again until it sends you written verification of the debt.

The CFPB has prepared sample letters that you can use to respond to a debt collector who is trying to collect a debt. The letters include tips on how to use them. The sample letters may help you to get information, set limits or stop any further communication, or exercise some of your rights.

If you don’t recognize the name of the creditor, you can ask what the original debt was for (credit card, mortgage foreclosure deficiency, etc.) and request the name of the original creditor. After you receive the debt collector’s response, compare it to your own records.

Plan for making a realistic repayment or settlement proposal

If you want to make a proposal to repay this debt, here are some considerations:

  • Be honest with yourself about how much you can pay each month. Review your debt priorities first, as falling behind on other bills because you are paying off this debt could cause you more problems.
  • Write down a summary of your monthly take-home pay and all your monthly expenses (including the amount you want to repay each month and other debt payments). Try to allow some income left over to cover unexpected expenses and emergencies. A credit counselor can help, and they often provide services through nonprofit organizations for free. Be wary of companies that claim they can renegotiate, settle, or change the terms of your debt.
  • Decide on the total amount you are willing to pay to settle the entire debt. This could be a lump sum or a number of payments. Don’t pay more than you can afford.

The statute of limitations is the period when you can be sued. Most statutes of limitations fall in the three to six years range, although in some jurisdictions they may extend for longer. In some states, a partial payment can restart the statute of limitations on a debt. It can also restart the time period for how long the negative information continues on your credit report. If the statute of limitations is close to expiring, a debt collector may be willing to negotiate with you on more favorable terms. If the statute of limitations has passed, then your defense to the lawsuit could stop the creditor or debt collector from obtaining a judgment. You may want to find an attorney in your state to ask about the statute of limitations on your debt. Low income consumers may qualify for free legal help.

Negotiate with the debt collector using your proposed repayment plan

  • 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. Sometimes, debt collectors and consumers don’t remember their conversations the same way. If you agree to a repayment or settlement plan, record the plan and the debt collector’s promises. Those promises may include stopping collection efforts and ending or forgiving the debt once you have completed these payments. Get it in writing before you make a payment.

Be wary of 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 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. Learn more about debt settlement companies.

Still having trouble with debt collection?

Companies can usually answer questions unique to your situation and more specific to the products and services they offer. If you have a complaint, tell us about your issue—we’ll forward your issue to the company, give you a tracking number, and keep you updated on the status of your complaint.

Learn how the complaint process works