Debt collectors are fully operational again, as President Biden announced on May 11 that the pandemic emergency provisions would no longer be in place, and as most states and corporations have already lifted their suspensions of debt collection.
If you’re one of the 64 million or so Americans whose accounts are in collections, you are familiar with the agony of receiving calls from debt collectors. Prepare yourself for unpleasant news if you are among the Americans who have recently fallen behind in paying off their personal debt, which has surpassed a record-breaking $17 trillion.
But regardless of your experience level with debt collection agencies, if you’re behind the eight ball and facing collection agencies, take a deep breath and realize that there are ways to handle debt collectors, including negotiating a reduction in the amount you owe.
In this comprehensive guide we’ll delve into the world of debt collection exploring the steps you can take to negotiate a settlement with debt collectors. We’ll answer your burning questions, including the all-important “Will debt collectors settle for 30%?”, and equip you with the knowledge and confidence to navigate this process successfully.
But before we dive in, let’s address the elephant in the room: yes, debt collectors will often settle for 30% of the debt. This is because they typically purchase your debt for a fraction of its original value, and even a 30% settlement can represent a significant profit for them.
However, the exact percentage you can negotiate will depend on several factors, including:
- The age of the debt: The closer the debt is to the statute of limitations (the time limit for legal action), the more likely the collector will be to settle for a lower amount.
- The amount of the debt: The larger the debt, the more room there is for negotiation.
- The collector’s practices: Some collectors are more willing to negotiate than others.
- Your financial situation: If you can demonstrate hardship, the collector may be more likely to accept a lower offer.
Now. let’s dive into the six steps you can take to negotiate a settlement with debt collectors:
1. Gather Information:
- Verify the debt: Before you even consider negotiating, it’s crucial to ensure the debt is legitimate and yours. Request a debt validation letter from the collector, which should include details like the original creditor, the amount owed, and the date of the last payment.
- Understand your financial situation: Create a budget to determine how much you can realistically afford to pay. This will help you set realistic expectations for the negotiation.
2. Negotiate with Confidence:
- Start low: Aim for a settlement of 30% or less. Remember, the collector expects you to negotiate, so don’t be afraid to start with a low offer.
- Be prepared to walk away: If the collector refuses to budge on their offer, be prepared to walk away. This might seem scary, but it can be a powerful negotiating tactic.
- Get everything in writing: Once you reach an agreement, make sure to get it in writing. This will protect you from any misunderstandings or disputes down the road.
3. Explore Payment Options:
- Lump sum payment: If you have the funds available, offering a lump sum payment can often result in a lower settlement amount.
- Payment plan: If you can’t afford a lump sum, negotiate a payment plan that fits your budget. Make sure the plan is affordable and realistic.
4. Protect Your Rights:
- Know your rights: Familiarize yourself with the Fair Debt Collection Practices Act (FDCPA), which protects consumers from abusive debt collection practices.
- Report any violations: If the collector violates your rights, report them to the Consumer Financial Protection Bureau (CFPB).
5. Seek Professional Help:
- Credit counseling: If you’re struggling to manage your debt, consider seeking help from a non-profit credit counseling agency. They can provide guidance and support throughout the negotiation process.
- Debt settlement: In some cases, debt settlement companies can help you negotiate lower settlements with your creditors. However, be cautious and choose a reputable company.
6. Improve Your Credit Score:
- Pay your debts on time: Once you’ve settled your debt, make sure to pay your bills on time to rebuild your credit score.
- Dispute errors on your credit report: Check your credit report regularly and dispute any errors you find.
Recall that while negotiating with debt collectors can be difficult, a successful resolution is unquestionably achievable. These steps will help you take charge of your debt and make progress toward a better financial future by keeping you informed and motivated.
Here are some additional resources that you may find helpful:
- Consumer Financial Protection Bureau (CFPB): https://www.consumerfinance.gov/ask-cfpb/what-is-the-best-way-to-negotiate-a-settlement-with-a-debt-collector-en-1447/
- National Foundation for Credit Counseling (NFCC): https://www.nfcc.org/
- American Consumer Credit Counseling (ACCC): https://www.consumercredit.com/
Don’t hesitate to reach out for help if you need it. There are many resources available to assist you in managing your debt and negotiating with creditors.
What Are Your Rights and Protections?
The federal Fair Debt Collection Practices Act shields consumers from unfair, abusive, and deceptive debt collection practices. Among the provisions of the FDCPA:
- Limitations on when debt collectors may call (8 a. m. -9 p. m. local time).
- You might not be allowed to be contacted by debt collectors at work.
- You can request in writing that debt collectors cease calling and use alternative means of communication.
- Debt collectors are not allowed to talk about your debt; instead, they may get in touch with friends, family, or your employer to get your phone number or address.
- Debt collectors are not allowed to harass customers by using derogatory, violent, or threatening language.
Establish Your Negotiation Terms
You can start formulating a negotiation strategy if your due diligence confirms that the debt is legitimate and has been reported truthfully.
Remember, we’re not ducking the debt collector. This does not mean you’ll simply dive in with high hopes and promises you cannot keep. Being honest with yourself about your available resources is the first step in negotiating the best debt settlement. Being honest with the debt collector will help if your well-laid settlement hits a snag down the road.
Michael Ryan, a former financial planner who is now a financial coach, stated that “proven strategies for negotiating with debt collectors include being well-prepared, staying calm and respectful, and being persistent in your efforts to find a mutually agreeable solution.”
Start this scenario of total integrity and decency by making a budget or rigorously reevaluating the one you already have.
Creating (or modifying) a budget and going over your household finances can occasionally turn up a stash of cash (that isn’t your emergency fund) that you could offer to settle the debt.
“You should always put your own interests first,” says Shai Goldstein, the chief of Boca Raton, Florida. -based A2Z Filings who also oversees a nonprofit foundation devoted to financial literacy. “What can I give you? Identify a number that feels right for you and tell them that’s all I can afford to give you,” end of story. They can take or leave it, it’s your choice and not theirs. ”.
Debt collectors frequently consent to accept a lump sum payment that represents a small portion of the entire debt as payment in full.
According to financial counselor Ryan, “offering a lump-sum payment can have advantages, such as potentially securing a larger discount on the total debt amount.” “It also allows you to settle the debt in one go, relieving you of future payment obligations. ”.
Furthermore, you are under no obligation to give the debt collector the full $5,000 up front or even to disclose to them how much money you have—just because you have $5,000 in a savings account and the outstanding debt is $6,500— Start low, offering perhaps 20%.
Goldstein also recommends asking for the agency’s manager, who will be in a better position to negotiate.
If customers can extract a few dollars from their budgets but don’t have any readily convertible assets or disposable savings, they might be able to convince the debt collector to offer an affordable payment plan.
But, your tactic will be to bargain for the entire amount that must be paid back without bringing up a payment schedule. Again, start low. Once the payoff figure is established, then ask about a paying by installments.
According to Goldstein, “you are in complete control of the terms, not the collector, and they have the right to accept or decline if you decide to choose a payment plan.” ”.
If your proposal is rejected and it’s really the best you can do, Goldstein advises you to end the call, give it some time, and try again later. “You may have better luck with a new person on the other end of the line,” he says.
Will a debt collector settle for 30%?
FAQ
What is the lowest a debt collector will settle for?
What percentage should I offer to settle debt?
How much will a collection agency settle for?
At what point do debt collectors give up?
How much should a debt collector settle?
Some will only settle for 75-80% of the total amount; others will settle for as a little as 33%. Looking for a place to set the bar? The American Fair Credit Counsel reports the average settlement amount is 48% of the balance. Again, start low, knowing the debt collector will start high.
Can a debt collector collect the full amount owed?
Most debt collectors don’t expect to be able to collect the full amount owed on a debt. Once you’ve confirmed that the debt is legitimate, you can start negotiating the best way to pay it off. That might mean a reduced upfront payment or a payment plan that works with your budget.
When should I talk to a debt collector?
But consider talking to the collector at least once, especially if you don’t think you owe the debt or can’t repay it immediately. That way, you might be able to confirm whether it’s really yours or find out more about the amount owed.
Should you negotiate with a debt collector?
Chances are that being cash strapped is how you fell behind in the first place. Negotiating with a debt collector happens at the discretion of the collection agency but most are open to a settlement for less than what is owed to avoid a long-drawn-out collection process.