|How to strike a deal with a debt collector
|By Lucy Lazarony Bankrate.com
A debt collector is calling and you finally have
a little money to offer.
Before you pay a cent, why not try negotiating
a better deal? By offering a lump-sum payment, you could easily
cut your debt in half.
Can't swing a big payout? Insist on a monthly
payment amount that won't strain your budget or take money away
from more vital expenses such as food, utilities and rent.
"Bargain with them," says Mary Fons,
a consumer protection attorney in Stoughton, Wis. "Don't let
them convince you that their debt is the most important one."
Believe it or not, you do have some leverage here. Debt collectors
want your money. And they can't get a cent until you give it to
"Negotiation is key," says Michael
Flannagan, a former debt-collection supervisor in Tacoma, Wash.
"Every bill collector in the world will ask for the balance
today, period. But every bill collector I know will take less than
that. They don't get paid unless you pay them. So set up some kind
of reasonable arrangement."
Step one in negotiating with a debt collector
is to know your rights. Debt collectors will say all kinds of things
to upset you and pressure you into agreeing to a payment you can't
afford. Don't let them intimidate you. You have the law on your
The Fair Debt Collection Practices Act was passed
in 1977 to protect consumers from abusive debt collectors. There's
a whole list of rules third-party debt collectors must follow when
collecting a debt.
Brutal insults and threats aren't allowed.
For a summary of federal debt collection rules, click
You may have additional consumer protections
in your state. Many states have their own debt collection laws.
In some states, a debt collector can sue on
behalf of a creditor or garnish your wages. In other states, none
of these things can happen to you, no matter how much a debt collector
Glean fact from fiction
"You have to know what's the truth and what's
not the truth so they don't frighten you into a
settlement you can't afford," says John Ventura,
a consumer attorney in Brownsville, Texas, and author
of the e-book "Stop
Debt Collectors Cold."
For example, even if a debt collector could
garnish your wages, first they would need to get a judgment against
you in court.
"Debt collectors will say,
'If you don't pay this tomorrow, it will come out
of next Friday's paycheck,'" says Gerri Detweiler,
author of "The Ultimate Credit Handbook." "They can't do that. But they say it."
For more information on debt collection laws
in your state, contact the consumer protection division of your
state attorney general's office. To find your state's attorney general, click here.
Once you know the absolute worst that can happen
to you if you fail to pay a debt collector, it's time to take a
close look at your finances.
How much can you realistically afford to pay
toward an overdue debt? Providing necessities for your family should
be your top priority. All other bills are of lesser importance,
regardless of what a creditor or debt collector may say. These
16 rules will help you prioritize your bills and expenses.
Once you know how much money you can afford
to give to a debt collector, it's time to start negotiating.
Offering a single lump sum payment is a great
way to go. Debt collectors want your money ASAP and they may be
willing to settle your debt for a whole lot less if you agree to
one big payment.
"They'd rather just get paid quick and
be done with it and move on to the next client," Detweiler
Some debt collectors will send you letters offering
to settle a debt if you pay 50 to 70 percent of the amount due.
Before you agree, try negotiating a better
deal. Start by offering an amount well below the amount you can
afford. Many debt collectors have paid
pennies on the dollar for old debts. They'll make a profit on just
about any payment you send them, no matter how small.