Today a reader asked me how she should go about beginning the debt settlement process with collection agencies and creditors she’s avoided for three years. I thought it would be a good idea to give her a short ‘duty’ list of how to handle talking with bill collectors. Collection agencies thrive on debtors who don’t know their rights, don’t know the law, and therefore can easily be intimidated. Remember, the bill collector just wants some money, and if possible, they’ll do whatever they can to grasp that money today! Most bill collectors work on commission and know how to handle different types of debtors. You must understand up front that these collectors have a career on the phone talking about debt settlement and you do not. Therefore you must arm yourself with knowledge before beginning the arduous task of negotiation. Here’s my response to June on how to proceed with her debt settlement issues.
**Disclaimer – Debtprison.net does not administer legal or financial advice. The contents of this website are my opinions on collection agencies and how to deal with them. Nothing on this website should be interpreted as legal advice or council. No opinions on this website should be used to replace the advice of your financial advisor or your legal council.
Remember to check out all my articles on collection agencies.
Hey June,
First a reminder that this is not legal advice but is my opinion on how I would handle this situation.
First you need to pull your credit report and look at it. Go to http://annualcreditreport.com and review your credit report since the collection agencies may be listed there. Next you need to create a list of your debts, how much the balances are, and who owns them. You must do this before you can make any settlement offer.
Once you know how much your balances are on each account, and who owns the account, then you can request validation of the debt. You can answer the phone, but you must be careful. You must know your rights and what you can afford to pay.
After reviewing my credit report I would start answering my phone… this is how I would do it.
1. Have paper and pencil sitting next to the phone.
2. Always assume the collection agency doesn’t have the legal right to collect on the debt.
3. Admit no knowledge of the debt.
4. Request validation of the debt over the telephone.
5. If they don’t know your address then hang up…. ignore them for now.
6. Wait on their validation letter, if they don’t validate, or refuse to validate, then tell them to call back when they are ready to mail you a validation letter.
7. Keep an accurate log of who you talked with, the name and address of the collection agency, date and times of the call, and the name of the supervisor on duty. To understand why this is important read Collection Agencies and Their Lies.
8. Once the collection agency validates the debt, if it looks correct you can begin to negotiate with them.
9. You can also opt to request a copy of the original contract (signed by you) that indicates you ever entered into any such contract with the original creditor. At the end of the day this is about contract law. Requesting the collection agency to produce the original contract that you signed is a reasonable request and your local judge will likely agree.
10. Since its been three years since you made any payment I’d start out by offering 20% of what they claim you owe, since what they claim you owe is heavily bloated with late fees and interest, and they only paid a few cents on the dollar for the debt.
11. I’d stick with whatever I could pay and nothing more.
12. Don’t make any promises you cannot keep.
13. Pay in lump sum if possible and get a letter from them in advance stating that this payment 100% satisfies your obligation to this debt and is considered ‘paid in full’ and will not be transferred or sold to another collection agency nor will they attempt to collect on the remainder of the debt. The devil is in the details and you can smother them with the details.
Remember, they are counting on you not knowing your rights!!! They will lie to you and intimidate you. If you sense this is happening just hang up and do some research, call a lawyer, or come back here and talk to me!
Discuss this article and meet new people at Debt Prison Forums.
Related Articles
* Restrictions on Wage Garnishment for Debt Collection.
* The Fair Debt Collection Practices Act
* Reasons not to file Bankruptcy or Settle Your Debts
* Can you go to jail for not paying your debts?
* How to settle your debts on your own
I am $60,000 in debt on a HELOC due to a forecluse. I had an agreed upon short sale with my first mortgage company but BoA wouldn’t agree on the second HELOC. The home forclosed 4 years ago and I would like to attempt to purchase a new home. The HELOC is with a collection agency and I was told by BoA that they collection agency is servicing the debt that it hasn’t been sold. Should I attempt to settle the debt with the collection agency or BoA. I am looking for advise as I could only pay 10% of the debt. Please help.
I have a debt with Amazon for their ‘store card’ I think the credit is with GE.
At the start I missed payments for about 2 months and was being constantly called by them. One of this times I answered and was told that I could make a payment and get back on track if I did it that day (the 5th of the month), I agreed but made the payment online. A month later I got an email stating that my account was now closed because of being 3 months without payment. I got in contact with them and was told that it happened because payment over the internet took longer than phone and they received the payment late. After this I just lost interest in settling that debt as the payment I made before was just used to pay late fees I shouldn’t have added to my account. I continued receiving calls from them and having late fees added to the total debt.
Any pointers to what action I should take to settle this again?
Hello debt prison it is such a relief to find such a resource like this so thank you very much for investing your time and effort to help people like myself who dont know which way is up. If you could perhaps point me in the right direction with my personal situation it would be very appreciated sir.
Im 27 years old
Im around $10,000 in debt and im now in collections with alliance one.
My debt is from three traffic tickets from 2004 (697.00), 2007 (1,054.00) and 2009 (8,062)
I have 800 I can use immediatly if you can help with some advice I would be very thankful
Hey,
I am about 20k in debt and beginning in October, I am going to have to start making payments toward my 40k tuition loans so I am not sure what to do. I just graduated in June and finally started my new job last week at an entry level position at 30k/year. I haven’t made a payment to the credit card companies for almost 2 years, and they have even sent out a summing which I didn’t go too. I have a few third party collection agencies that have bought my debt from places like Capital One and Macy’s. Where should I begin with the credit card debt, and should I even consider settling? I have no savings and have had to place money in a secure place in my house because if I use a bank, they take out money when they feel like it (seriously).
Like I said, I have to start with paying back my student loans in 2 months and I’ve only been at my current job for 3 days. Any advice? Thanks!
Anne,
The only thing I can think of is for you to contact those creditors and see if they are willing to work something out with you. I would call HSBC and see what they say.
Barry
Hi DP!
Your site is very helpful! It’s comforting to know there are a lot out there who’s in the pit of debt.
I would like to inquire about what best I can do regarding my case.
I have been a very good client with my credit card here in Dubai (HSBC) and have standing instructions of direct debit to pay off the monthly dues. I have 3 cards with HSBC. My total credit card dues now for the 3 cards is about 45,000dhs. I have never missed paying any monthly dues, and I am paying 10% payment for the 2 cards and mnimum payment for the other 1.
My case is, I want to resign by September of next year, which gives me just about over a year to settle my dues. I am aware it is possible, however, if I can come to a settlement with HSBC, because I want to just settle my dues and not use the cards anymore, I want to do that. Is that possible? Who should I talk to?
Your advice will be greatly appreciated!
First, I’d want to know who is suing me and for what debt. Secondly, I’d want to see a breakdown of charges they claim I owe so that I could try and contest them if I thought any of them were unfair. Thirdly, I’d go to court, regardless, and defend myself before the judge. Tell him or her what’s up and why you haven’t been able to pay this debt, if in fact you owe it.
How much time has gone by since you last made a payment on this debt?
I have received some court paper stating the debt that i owe and to appear in court. I have got in contact with their law office it was told to me that i HAD to pay the whole amount due. What action should I take?