How can you settle your debts to avoid collection calls?

Today’s guest post is from Patricia Sanders.

Debt collection lawsuits are on the rise. Around 12,000 collection lawsuits have been filed in the last few years. This number is up from 9300 in 2009. These often are the result of medical or credit card debts that many people are unable to pay off. Sometimes, financial hardship prevents you from making monthly payments on your debts. Soon, you start getting calls from collection agencies. The problem arises when you cannot pay the debts in full. One option is to consider a negotiation process with the collection agencies for debt settlement. In this process, creditors and/or collection agencies accept less than what you owe on your credit accounts. How can you negotiate the best debt settlement deals? Some simple tips are important when you negotiate.

1. Meet in person for discussion

Try to not communicate over the phone with debt collectors. Even if you have to talk to them by phone, make sure you write down the time and the name of the person you’ve talked to. Keep the records of every conversation and follow up with a letter. If possible, meet in person at their office to discuss the matter.

2. Keep patience while negotiating

You should always keep patience while negotiating with collection agencies for debt settlement. Stay calm and don’t lose your temper. If they don’t agree on a reduced payoff amount, then tell them that you may have to file for bankruptcy.

3. Do not show your eagerness to settle

It may happen that you want to settle the debts fast since you want to buy a property. However, you may not get the best deal if you show your eagerness to settle the debts faster. Usually, the collectors do not agree with the first proposal you make. You should continue negotiating and have them understand your financial situation so that they agree on a reduced payoff amount.

4. Keep all the documents

Don’t start making payments without a written agreement listing the terms and conditions. Do not rely on verbal promises. Always insist on having a written agreement. Check the terms carefully and then make payments per the amount agreed upon to settle the debts. Keep records of all communication so that you can produce them in future if required. Send all letters through certified mail with return receipt requests.

5. Ask to have negative statements removed

While negotiating with the collectors for debt settlement, you should negotiate for the removal of negative statements from your credit reports. Negotiate with collectors to update the account statuses as “Paid in full” instead of “Paid as settled”. It will be favorable for your credit report.

About collection agencies

Before approaching the collection agency, you should have some knowledge of them. Here are some questions and answers for your help.

What is a collection agency?

A collection agency or a CA is the third party that pursues you as a debtor for payments on your debt/debts. Collection agencies (first party) are often subsidiaries of the original credit company to which you owe the debt. However, there are some collection agencies (third party) who usually work for commissions. They receive a percentage of the money they’re able to collect from you. A CA can also purchase a debt from a creditor and collect the outstanding amount owed from the debtors.

Do you need to pay the extra fee to a collection agency?

You need not pay any extra fee or any extra money to the collection agency other than the outstanding amount owed by you. Collection agencies are forbidden to collect any extra amount other than the amount you owe.

Are there any regulations on collection agencies?

Yes, collection agencies are regulated by the FDCPA (Fair Debt Collections Practices Act). The Act prohibits collection agencies from using slangs and threatening to collect the dues from debtors. They can’t call you before 8.00 am in the morning and after 9.00 pm in the evening. As a consumer, you should know the FDCPA in detail.

Can collection agencies keep contacting on a debt not owed by you?

No, if you don’t owe any debt, then collection agencies can’t continue harassing you for making the payments. You can ask the collection agency to stop contacting you. If they still continue, you can ask for validation of the debt. Consumer advocates and collection attorneys are urging that the FDCPA must be amended to provide more protections to the consumers or debtors if contacted by the collection agencies.

Final thoughts

Many people think that their debts are overwhelming and there is simply no way to get rid of them without filing for bankruptcy. Many debtors panic when confronted by collection agencies. However, harassment, lawsuits, and bankruptcy can be exceptional cases. Consider whether these other options are better for your situation. Be knowledgeable to take the right step that is best for you.

About John Kimball

Over the past few decades, I have experienced most of these financial issues with both mistakes and successes. I sure wish someone had told me these things when I was first starting out. So many times I have cried out, "I want a do over!" when I learned a new financial lesson or tip. I aim to pass along to you the financial insights I have gained from experience, reading, analysis, and living the financial aspects of managing, saving, investing, and spending your money. I am an analyst with a large organization and happily married with two children on their way to an expensive college, no doubt. I read numerous financial blogs, websites, newsletters, magazines, newspapers, and books to bring you the latest news, insights, tips, and lessons combined with decades of experience.

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