First things first. You have a right to request specific information on the debt that a collector says you owe. You want to make sure that the debt is still within the statute of limitations before making any payment on it. If the debt is still valid (ie: not zombie debt) then you can begin the process of either repaying it in full or negotiating a settlement. In this article, we’ll discuss how to negotiate a settlement with a debt collector.
Verifying the Debt
The first thing that you want to do is verify that the debt is both yours and within the statute of limitations. Not all debt collectors are reputable and some of them are outright scammers. You’ll want to make sure that the company that is attempting to recover the debt is legitimate. Legitimate collections agencies will send you a validation letter within five days of contacting you.
If a debt collector has a legitimate claim against you, you should see the information in your credit report. You can also request specific details of the debt be mailed to you. If the debt checks out, then you have several options as to what you should do next.
If the debt collector is not legitimate, you can send them a cease and desist letter and threaten a lawsuit. Send the cease and desist letter via certified mail so that they cannot claim that they never received it. If they continue to harass you, contact a debt harassment attorney immediately
Know Your Rights
All consumers are protected by the Fair Debt Collections Practices Act (FDCPA). You should familiarize yourself with the finer points of the law regarding legal collections practices. Debt collectors cannot harass you, use profane language, or threaten you if they don’t have the ability to carry out the threat. Legally, the only threat that they can make is that they will file a lawsuit against you.
What Type of Debt Do You Owe?
Your options for settlement will differ depending on what type of debt you owe. Typically,
collections agencies specialize in certain kinds of debt. These can be car loans, mortgages, credit card debt, medical debt, student loans, bank debt, and more.
Federal student loans generally offer a variety of repayment plans that work within your budget. Car loans and mortgages typically leave less wiggle room, but you may be able to renegotiate the terms of the loan to avoid foreclosure or repossession. In the case of unsecured debt, such as medical debt or credit card debt, you may be able to negotiate a payment plan that is within your budget or alternatively offer a lump sum payment for less than what you owe
Negotiating a Debt Settlement
One of the best resources for debtors is bankruptcy. While some look down on those who file for bankruptcy, predatory lending and other types of unethical lending practices have created serious problems for the U.S. economy which is why the federal bankruptcy code exists in the first place. And of course, creditors or collections agencies typically will respond positively when you mention the fact that you are considering bankruptcy. Since bankruptcy discharges the entire sum owed of unsecured debts, they will be much more likely to negotiate a favorable settlement if you mention bankruptcy during negotiations.
After dropping bankruptcy on them, you can offer to make a single lump-sum payment for some of the debt owed. The debt would be resolved after the payment is made and you may not be required to pay off the remaining debt. Since collections agencies typically have large profit margins, they may be willing to settle for as little as 50% of the debt, so long as it is a single lump-sum payment.
You can also negotiate how the debt is reported to credit agencies. You don’t want to pay the debt only to have it negatively impact your credit score. Get your agreement in writing and ensure that your credit report says the debt is paid in full.
Talk to a Eugene, OR Bankruptcy Attorney
Once a creditor has gained a judgment against you after filing a lawsuit, they can begin digging into your finances and disrupting your cash flow. If you’re concerned about wage garnishments, lawsuits, and more, then bankruptcy may be the best option. Talk to Tom today at Butcher Law Office, LLC for more information on how we can help.