Debt Negotiation

How to negotiate with creditors the right way

Although you can negotiate directly with your creditors, a debt management tactic that works especially well for medical  we’ll focus on negotiating down your debt once it’s been sent to collections. If you follow these steps, you should be able to negotiate your debt to an amount that works best for you.

Understand how debt collection agencies work

If you understand how debt collection agencies work, you’ll be empowered to negotiate the best arrangement possible. Original creditors — say, a credit card company — sell their delinquent accounts to debt collection agencies to get “bad debt” off their books and access the related tax benefits of this type of expense.

Many agencies specialize in the type of debt they collect, usually by amount and age. Reputable ones will also only collect debt within their state’s statute of limitations. Delinquent debt can include credit card debt, student loans (or other kinds of loans), and utility or cell phone bills.

Debt collection agencies must rely on the debtor to settle their debt, and as such, they can’t go into your bank account, even if they have the account information and routing number.

Knowing that collection agencies buy debt for pennies on the dollar helps you understand the bill collectors’ motivations. If your original debt was $700 and they purchased it for $200, you know there could be some wiggle room to negotiate a settlement to pay less than the original $700 amount.

The debt collection agency wants to, at a minimum, recoup their original investment plus a profit, often between 25% to 50%. No matter what they want out of the situation, you should still do your best to get the most favorable settlement possible.

Fully comprehend the extent of the debt

Although it might be tempting to comply with a debt collector’s request for money right away, take some time to figure out what’s going on. Get the correct information regarding:

1. The amount of the original debt
2. The name and address of the original creditor
3. The date the debt became delinquent

By law, creditors have to supply this information within 5 days of contacting you.

If you know how to get a report, then you can also get information about this debt from there. Make sure everything matches up both on your credit report, as reported by all three credit bureaus along with the information from the debt collector. Now, you can get free credit reports weekly to stay on top of all the updates that hit your credit report.   Freeannualcreditreort.com

Summary of Money’s guide for negotiating with debt collectors

1. Understand how debt collection agencies work
2. Fully comprehend the extent of the debt (and learn how to read your report) 
3. Know your rights under the Fair Debt Credit Collections Practices Act
4. Ask the debt collection agency to validate your debt
5. Come up with a reasonable repayment or settlement proposal
6. Negotiate with the collection agency using your proposal
7. Make sure all agreements are set in writing
8. Keep calm, be patient and be careful about what you say