How do I Negotiate a Debt Collection Settlement?

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  • Written By: Steve R.
  • Edited By: Kristen Osborne
  • Last Modified Date: 23 August 2019
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When a person is overwhelmed with debt, he may want to consider the option of a debt collection settlement. Sometimes, an individual may negotiate a debt collection settlement simply by contacting his creditor and offering to pay much less than the balance owed in order to get the debt resolved. Some companies opt to have a debt settled in full at a lower amount, rather than to continue pursuing the full amount. When a settlement is reached, a person should make sure to get the agreement in writing.

To settle a debt, a person needs to know which bills can be negotiated. Secured debt, which includes things like homes and automobiles, is not a candidate for settlement. If payments are not made on secured debt, the homes or cars can be repossessed. An individual has a better chance of settling unsecured debt, which includes medical bills and credit cards.

When debt defaults to a debt collection agency, an individual with the debt may actually have the upper hand. Each state has its own statute of limitations for debt. If a person negotiates shortly before the approach of the statute, the individual in debt may gain some leverage.


Debt collection agencies will often be willing to settle for a portion of what is owed, as something is better than nothing. Most often, an agency will ask for the entire balance in one payment. However, if any individual explains his situation and requests the agency settle for less because that’s all he can afford, often times the agency will comply.

Before entering a debt collection settlement, a person should determine how much he can afford to pay. When entering negotiations, a person should offer less than he can actually afford so he has room to bargain, and should not appear too eager. By seeming too urgent, a person can lose all leverage in negotiation.

During negotiations, a person with the debt has nothing to lose by asking. An individual in debt will often rack up late fees, which can add up. In negotiations, a person can see if the agency holding the debt would be willing to forgo all late fees, which can save hundreds of dollars. Also, negotiating near the end of the month may be beneficial, as collection agents often work on commission and may be more willing to work out a deal. If a person threatens that he will file for bankruptcy, the creditor may be willing to budge in negotiations and may make a more-than-fair offer.

When negotiating, an individual must keep detailed records of all calls. A person should record the day, time, first and last name of who was spoken to, and any decision that was reached. Getting things in writing is very important, in order to make sure an agreement is kept on both ends. A person should never settle for only verbal agreement, as there is no paper trail to prove a debt collection settlement was reached. An individual may write a letter to the agency detailing the terms reached. To make sure the agreement is received, a person may send the written proposal by way of certified mail, which requires a receipt upon confirmation. An individual should also keep a copy of the receipt for his files.


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Post 3

@Melonlity -- Be careful about those scammy, credit repair agencies when looking for one of those. A lot of the legitimate ones are nonprofit and rank highly with consumer groups.

Those debt relief groups can help, but do your research and get a good one that will help you instead of ripping you off and leaving you in worse shape.

Post 2

@Soulfox -- That should come as the last option a lot of times. There are a lot of groups out there that will help debtors negotiate with creditors, pay off their bills and stick to a budget so they don't wind up in the same situation in the future.

It might be worth your while to try one of those before talking to a lawyer about bankruptcy. If it works, you'll have a lot less damage to your credit.

Post 1

Like it or not, there are times when a bankruptcy is the best way to deal with extensive debt. If things get too overwhelming, that can be the only option. A good number of people hate to exercise that option, but millions are forced into it every year.

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