Negotiating With Debt Collectors Successfully

Receiving a call from a debt collector can leave you shaken and unsure of how to proceed. Of course, that is what they want. Learning to negotiate with debt collectors will help you know your rights, and gain confidence.

Many people who are struggling with overwhelming debt don’t realize that negotiating with debt collectors is an option for them. However, if you let them know that you will not be bullied by their tactics, you can reset the ground rules.

Their first attempt will likely be to bully you into repaying your debt, regardless of whether you can afford it or not. Once you show that you know your rights and you won’t be bullied by their tactics, it is in their best interest to negotiate with you to ensure they get at least some of the money you owe them.

The rest is mostly just a question of following some negotiation rules, which will make negotiating with debt collectors a lot easier.

Understanding Your Debt and Debt Collection Rights

In most cases, negotiating with debt collectors is the best way to resolve the situation you are in.

After all, if you had the money to pay off the entire debt, you wouldn’t be receiving the call from the debt collecting agencies.

As you start the process of negotiating with them, it is absolutely critical that you are one hundred clear about several things:

  • You must know:
    • What you owe
    • What your options are
    • What can and cannot happen to you
  • You have rights and debt collectors have limitations
  • You must use these rights and limitations to your advantage
  • These rules vary from one US state to another
  • The debt collector will likely try to pressure you

The best place to find out your rights is by checking with your state’s attorney general office. They will help you get in touch with the consumer protection agency.

These two institutions usually work together very closely to help make sure consumer’s rights are protected. However, don’t contact them hoping to find a way out of paying your debt. They are just there to protect you and make sure you are treated fairly.

Here is a government list of all the State Attorney Generals, state by state. Also, here’s the directory of all the State Consumer Protection Offices, again state by state. Both these resources can be very useful when having to deal with debt collection.

Asking For a Notice of the Debt

Dealing with debt collectors in the best possible way means that you have to get off to a good start.

You should ask the debt collector to send you a written notice of the debt within five working days of contacting you. The notice, as with all other communication they may send you, must include a warning, letting you know that any information that you provide them with may be used in the debt recovery process.

Debt collectors specialize in using their negotiation and coercion skills to try to get you to pay them as much money as possible, whether you can afford it or not.

Because of this, keep your communication to written forms as much as possible. In addition to not being coerced into something above your means, this will also provide you with a full written record, which is essential.

After receiving the Notice of Debt, if you wish to dispute the claim, make sure that you do so as soon as possible. There are different limitations depending on your state, so you should check with your State Attorney General.

Negotiating With Debt Collectors

When dealing with a debt collector, it is important to be aware of what you and the debt collection agencies, can and cannot do. Debt collectors will often try to push and bend the regulations, especially if you are unable to defend your legal rights.

Know the Worst Case Scenario

If you have a clear understanding of the worst thing that can happen, it will be much easier to negotiate with the debt collector.

Some people seek out some form of legal representation at this point because of this. However, if you do some research and hold your ground, your ground, you can negotiate your own way through the process.

Don’t Lie

Although it can be tempting, you should avoid lying during the negotiation process. If it comes out later, it will complicate your negotiation. The person you are dealing with will likely no longer negotiate, because they don’t believe you can be trusted. It could also give the debt collector’s grounds to sue you, which makes with debt collection process much more difficult.


When you start negotiating with the debt collector, you will have to honestly and realistically calculate how much you can repay each month. When working out the amount, remember to account for all your needs, your family’s needs and all other basic expenses.

The important part of this is that YOU prioritize the amount you can repay each month, do not allow the debt collector to do this. They are trying to get the best deal for them, however you are still responsible for your regular living expenses for yourself and your family.

Lump Sum Payment

Sometimes, the debt collector will be willing to settle for a one time, lump sum payment for a reduced amount. Of course, this is assuming you have a way to access the funds to make this payment.

You could get up to a fifty percent reduction in your debt if they are willing to agree on this quick return. There are, however, positive and negative sides to settlements, which must be considered (see below) in each particular case to decide if settling is right for you.

Debt Settlements

By settling, you will clear that particular debt and successfully stop the debt collection efforts, however there may be other negative effects that must also be considered.

Negative effects include having to pay tax on the “forgiven” part of the debt, which will be considered income by the IRS.

Your credit report will also likely show “settled” instead of “paid in full”. This will harm your credit score and future creditors will know that you have had previous debts that you did not fully repay.

So if you intend to use credit in the future, you must either find a different way of paying off the debt, or ask the creditor or debt collection agency to show your debt as “Paid In Full” on your credit report (if they will do this).

These down sides make it critical to put some thought into taking this step before you make the decision.

Get it in Writing

If both you and your creditors agree on a partial settlement to pay off the debt, you will have to make sure that you get a written acknowledgment from your creditor. This basically involves asking them to sign a settlement proposal, in which they promise to accept the agreed settlement as payment for the FULL AMOUNT of the debt.

This is very important, as it will be legal proof of your debt payment, and you will need it if they try to recover the rest of the debt at a later date. Ask for written confirmation that your account has been closed, and look at your credit report around two months later to check that it shows as “closed,” “settled” or “paid as agreed”.

If you are negotiating the settlement yourself, you may wish to use a debt settlement agreement template, to avoid leaving loopholes. A couple of companies that offer these templates are, USLegalForms and LegalZoom.

Precautions When Negotiating With Debt Collectors

Never give a debt collector your account details to make a payment, there are simply too many stories about debt collection agencies withdrawing more than what has been agreed. To avoid this possibility, you should always make payments by money order or check.

Dealing With Property

Do not sell any property. In many states, it is illegal to seize property which means you can protect it much easier than you can protect your cash. If you do sell, it could make things easier for the debt collection agency. Check with your State Attorney Generals office to see if your property can be seized due to an unpaid debt.

The Final Word On Negotiating With Debt Collectors

There are three standard rules to follow when negotiating with debt collectors:

  1. Do your homework so you understand exactly what you owe and what your legal rights are.
  2. Negotiate according to your needs and possibilities, and be as methodical as you can when dealing with your creditors.
  3. Put everything in writing to protect yourself in the future.

Follow these guidelines and you will be able to control your debt situation much more effectively and to your advantage. Hopefully now you know how to negotiate with debt collectors more effectively.What Do You Think?

Do you have any other tips on negotiating with debt collectors? Any success stories you can share?

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