Nobody likes calls from debt collectors. They are stressful, especially if you are overwhelmed by your debts. So, what’s the best way to deal with them?
The first thing to do is to remain calm and confident. To get yourself out of debt, you need to negotiate with the debt collection agency and regain control of your financial situation. Debt comes in many forms: credit card debt, medical bills, student loans, auto loans, or any other type of debt. What they have in common is that they can all seriously hurt your credit status.
If your debts are increasing and debt collectors have started calling you, you need to organize your negotiation tactic and reach debt relief. The better you are at negotiating, the more successful you will be in recovering from your debts.
Before you enter any negotiation with debt collectors, protect your rights and learn about them as described by the Fair Debt Collection Practices Act (FDCPA).
This federal law prohibits debt collectors from using abusive, unfair, or deceptive debt settlement practices when collecting debts. Debt collection agencies may not call you at inconvenient times, such as before 8 AM or after 9 PM, unless you agree. They also can’t harass you, make false statements, or threaten legal action they cannot or do not intend to take.
You want to know you are fairly treated and that debt collectors are following the federal rules.
The first step is to request debt validation. Within five days of first contacting you, debt collectors must send a written notice stating the amount of debt owed, the name of the original creditor, and your right to dispute the debt's validity.
You have 30 days to request debt verification in writing. This process verifies you are negotiating with the right party about a legitimate debt and provides important documentation about the debt's origins and current status. Never make a payment or admit you owe the debt until you have confirmed its validity.
If you want your negotiation to be successful, be prepared.
Review your financial situation to assess how much you can realistically afford to pay, either as a lump sum or through monthly payments.
Gather documentation about your income, expenses, and any hardships that affect your ability to pay each month. This information supports your case and shows to collectors that you are serious about resolving the debt within your means.
Keep detailed records of all communications with debt collectors. That includes dates, times, names of representatives, and what was discussed.
During negotiation, remain professional but firm.
Listen to the collector's initial position, then present your situation clearly and calmly. Be honest about your financial circumstances but avoid emotional appeals. It’s a professional negotiation.
Start with a lower offer than your maximum, perhaps 30% to 50% of the total debt if you are proposing a lump-sum payment. Remember that debt collectors will often purchase debts for pennies on the dollar, so they have a lot of financial room to negotiate.
Several settlement options can be beneficial, depending on your financial situation.
A lump-sum settlement gives you the most leverage against your debt collectors who usually prefer immediate payment rather than extended payment plans.
If you can’t afford a lump sum, try to get a payment plan with reduced interest rates or ask for a reduction in fees and penalties. Some collectors will agree to "payment for deletion," where they remove the account from your credit reports in exchange for payment, though this repayment plan is becoming less common.
Never rely on verbal agreements when negotiating a settlement with debt collectors.
Once you reach an agreement, insist on having the terms in writing before making any payments. This written agreement should detail the settlement amount, payment terms, and any promises regarding credit reporting.
The document should also specify that the settlement satisfies the debt in collections fully and that the debt collector will report the account as settled to credit bureaus. Keep this documentation indefinitely, as it secures your financial protection should questions about the debt arise in the future.
If you settle the debt and make payments to debt collectors, be careful with your payment method.
Don’t give collectors direct access to your bank account through ACH withdrawals or debit authorizations. Instead, agree to pay the debt via a secure payment method that provides a clear paper trail, such as a money order or a dedicated account for debt payments.
If you are setting up a debt management plan, use a bill-pay service through your bank for added security and documentation.
If you are facing multiple collection accounts, prioritize them based on factors such as the age of the debt, the amount you owe, and the collector's willingness to negotiate a payment.
Focus on resolving one debt at a time and maintain communication with other collectors. Let them know you are working through your debts systematically and will address their account as soon as possible.
This approach prevents you from feeling overwhelmed with multiple collectors and shows good faith.
Once you have settled a debt, monitor your credit report and verify the account is reported accurately. The settled account should show a zero balance and a status of "settled" or "paid as agreed," depending on your agreement terms. If you notice any discrepancies, dispute them with the financial credit bureau and maintain copies of your settlement documentation to support your case.
Stay calm, be organized, patient, and honest. That’s the best way to negotiate with your debt collectors and reach an agreement that fits your personal finance status.
If you need to negotiate a settlement with debt collectors, you must be patient and persistent. Don’t overlook details. The process can be challenging and sometimes stressful but remember that successful negotiation can help you resolve your debts for less than the full amount owed. If you keep your financial discipline, you could restore your credit history.
If you feel overwhelmed or uncertain about handling negotiations yourself, consult a credit counselor through a non-profit credit counseling agency, or seek legal advice from a consumer financial protection attorney who can provide guidance. They could also potentially negotiate on your behalf.
Of course, the best way to stop debt collectors from calling you is through debt relief. Contact ClearOne today and talk to one of our certified debt specialists. Together, we will explore the available debt relief programs, and help you choose the right solution for you.