Did you know it is possible to negotiate your debt? The key is to know HOW to do this when collection agencies come calling.
Before you hand them one penny, this is the time to put collections to work for you. Sometimes, you can actually cut the amount you owe by at least HALF just by offering a lump-sum payment.
If that doesn’t work for you, consider negotiating a payment amount you can actually afford. Of course, you need to make sure that the payment does not negatively affect your budget.
The one thing you must remember is that their debt is not your top priority. No matter what they say.
- Why Your Credit Score Matters & How to Increase Yours
- How to Create a Budget That Works
- Using Cash to Negotiate a Better Deal
KNOW YOUR RIGHTS
There is a law called the Fair Debt Collection Practices Act (FDCPA). This law provides rights to consumers regarding debt collection. The law also advises consumers as to the things which creditors and/or debt collection companies can and can not do.
Understanding and knowing these rights helps keep you in control and not falling victim to illegal practices. Things you need to know include:
- Debt collectors can not use the phone to annoy you. This means that they can not call you several times a day, all week long to try to collect the debt.
- They can not use vulgar language nor threaten you in any way. While they may get forceful, they can not they threaten to have you arrested, swear at you nor bully you. They also can not threaten you with violence. If they start to act this way, let them know that the way they are treating you is illegal. Advise them that you will hang up and not speak with them until they can do so with respect.
- *They must call during decent hours. Collection agencies are not allowed to contact you at inconvenient hours (such as before 8 am or after 9 pm or even on weekends). In addition, they can not call you at your employer if you tell them that is not acceptable. If you have hired an attorney, then all calls must be go through him or her. They are not longer allowed to contact you directly.
- They must disclose all of the details about the debt. When you receive a call, the company must let you know the name of the creditor. They must also advise you of the amount of the debt. Finally, they need to disclose the manner in which you can verify the outstanding balance. If they do not do so on the phone, you must be notified in writing within 5 days of the initial call.
- They can’t threaten legal action (without permission). Your creditor MUST give permission to the collection company in order to threaten legal action. Truth be told, most creditors do not want to even go that route due to the added expense in entails.
- Debt collectors can not falsely represent themselves. When contacted, collectors are not allowed to misrepresent themselves to get you to pay the debt. This can include claiming to be an attorney, government agency or even credit reporting agency.
- They can not publish your name and debts. While they may threaten that this information will be made public, but it will not. They can only report the details to the credit agencies.
- Your property can not be seized nor wages garnished. They can not make a claim that this will happen to you. It can, of course, but only in the instance of actual legal action. This is actually something most creditors do not even want to pursue.
- Contact you once you have asked them not to. You can write to a debt collector advising them that they are no longer allowed to contact you. They are allowed to send a final letter confirming this. Then, they can not contact you in any way, unless it involves legal action.
If you have an instance of any of these situations, you need to report the company immediately for unfair practices, which go against the law.
BE IN CONTROL
When you get a call from a debt collector, they are often pushy and demanding. Why? Well, they get a commission on the debt they collect. So, of course, they want to try to scare you into paying it all in full. Not only that, since they do not get any money until such time as you pay, they will keep going on and on.
Also keep in mind and know your rights (above) so that you can voice that to the agency if they start to push the limits. That alone shows them that you know what they can and can not do and that you will not be a victim.
Make sure that you inform them that you can not make the payment in full and there is no way that you can. This will open the door to allowing you to negotiate your debt.
NEGOTIATE LIKE A PRO
When you negotiate your debt, it is a great way pay less than what you owe! Once you know that the company is willing to negotiate the balance due, begin by making an offer well below what you can afford. This allows you room to increase what you will pay – without paying more than you need to. Then, do nothing.
YOU: “I will pay you $0.30 on the dollar?”
THEM: “We want $0.75 on the dollar.”
YOU: Silence. Say nothing. Wait.
Make them budge first. Once they come back with another lower offer, you now have the upper hand and are more likely to get a great payment amount (perhaps even less than you want).
Why does this work? Debt collectors pay PENNIES on the dollar for debts. That means that they will make a profit on any payment made – even if it is 50% or less than the original amount owed.
GET EVERYTHING IN WRITING
Once you’ve agreed to an amount, it is important that you get it all in writing. Keep detailed records of the call and the amount. Some of the information you should write down includes:
- Name of person (and badge number if applicable).
- Original debt owed.
- New agreed to terms.
The thing to keep in mind is that most debt collectors are not going to be in a hurry to get this to you. That means you may need to draft your own agreement and mail it to them.
What do you include in an agreement? You need to include all of the above details. It should also include wording advising that once the debt is paid that they agree to report that to all of the three credit reporting agencies. The agreement should also provide a time in which they must respond to dispute the terms and that failure to respond at all, means they agree to what you have sent to them.
Make sure you retain copies of any and all letters between you and the company. You need to have proof of the discussions should the need arise.
PAY AS AGREED
Once you have agreed to the terms it is very important that you either pay the lump sum as soon as possible. If the terms included a new monthly payment, make sure you pay on time.
If you do not pay on time or by the agreed upon date, you have instantly broken the terms of the agreement and it can be considered null and void. Many times, you will not get the same deal if you try to negotiate again. In fact, they may not even agree to any lowered rate.
It is not fun to deal with collections, but you can do it. Just know your rights and how to negotiate your debt and you’ll be in control of eliminating that debt once and for all.