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From the Experts at Credit.com

10 Tips For Negotiating With Creditors

by Gerri Detweiler

Negotiating with Creditors

If you are falling behind on your bills, your phone is probably ringing off the hook with calls from creditors and/or debt collectors. While the last thing you probably want to do is talk with them, you may find that they are willing to work with you. Here are ten tips for negotiating with creditors and collection agencies:

1. Stick to Your Story

The person on the other end doesn’t want to hear all the details about why you’re not able to pay your bills. But they do need to know if you are in a hardship situation and what you are trying to do to get back on track. It’s helpful to come up with a few sentences that you can use consistently when you talk with creditors. For example,

“I was very ill, out of work for two months, and now I am trying to get caught up.”

“My wife was laid off, and I’ve taken a significant cut in pay. She’s looking for a job so we can catch up, but we don’t have any money to pay right now.”

“My interest rates have doubled and I can no longer keep up. I am meeting with a bankruptcy attorney to see whether I should file.”

Be truthful! If you tell everyone a different story, especially one that’s not true, it’s bound to backfire.

2. Avoid Drama

Try to stay calm, no matter what the person on the other end of the line says. You’ll get nowhere if you lose your temper. If you find yourself losing your cool, just tell the collector you’ll have to talk with them later and hang up. If you need to talk with that representative again, tell them you’d like to record the conversation. That usually keeps them on their best behavior.

3. Ask Questions

If a collector says you’ll be sued, or that you’ll lose property if you don’t pay, just calmly ask for specifics: “When can I expect to be notified of this lawsuit?” Or “When will you take the money from my bank account?” Some of these threats may be illegal, and the more information you have, the better.

4. Take Notes

Have a pen and paper handy so you can take written notes whenever you talk with a collector. Write down the name of the person you talked to, when you talked, and what was discussed. Not only can this help you take the emotion out of the situation, but you’ll also have a record if the creditor or collector broke the law in their attempts to collect.

5. Read (and Save) Your Mail

Don’t throw away mail from your creditors or stuff it in a drawer. Open it, read it, and save it in a file.

6. Know What You Can Afford

Go over your income and expenses with a fine-tooth comb, figure out what you can afford, and only agree to pay a realistic amount. Generally, you can negotiate the best settlement on a debt if you can come up with a lump sum amount to resolve the debt. If you agree to a payment plan, you will likely pay more over time. If you do agree to a payment plan, make sure you understand the total amount you will pay.

7. Deal with Creditors, Not Collectors

If possible, try to work out an agreement with your creditors before a bill is sent to collections. While late payments affect your credit reports and scores, collection accounts can result in even greater damage. By the way, it’s a myth that as long as you are paying something toward a debt (even $5 or $10), it can’t be turned over to a collection agency. Once a debt has been sent to collections, you may have no choice but to deal with the collector.

8. Get it in Writing

When you do come up with a payment arrangement, or a settlement agreement, get it in writing before you pay a penny. Otherwise, the terms can change and it will be your word against theirs. We’ve heard of consumers being hounded for balances they thought were resolved years before.

9. Get Help When Negotiating With Creditors

If you are having trouble coming up with a repayment plan that works, find out whether a credit counseling agency can help you work something out with your creditors. If it is unlikely you’ll be able to pay back your debts, or if debt collectors are hounding you, request a free consultation with a bankruptcy attorney. Even if you decide not to file, the attorney can tell you what a creditor can and cannot do to collect.

10. Put the Past Behind You

Catching up on a delinquent account, or paying off a collection account, won’t improve your credit unless you can get the creditor to agree to remove the late payments. But even if that’s not possible, you can still begin to build better credit as soon as your debts are resolved.

Find Out Where You Stand

You can check your credit score each month using Credit.com’s free Credit Report Card. This completely free tool will break down your credit score into sections and give you a grade for each. You’ll see, for example, how your payment history, debt and other factors affect your score, and you’ll get recommendations for steps you may want to consider to address problems. In addition, you’ll also find credit offers from lenders who may be willing to offer you credit. Checking your own credit reports and scores does not affect your credit score in any way.


  • http://www.coralseamercantile.com.au Coral Mercintile

    You should negotiate with the creditors with good manners, Ask debt collectors or creditors politely for some time and tell them a story of your life and you will pay them definitely but right now you can’t have such money. You can also consulate with a lawyer and take some advice for debt repayment.

    • lindamy

      Most are nasty. I had a financial bump after a divorce – treading water. The debt collector called my mother’s house, called and threatened me at my temporary job telling me to sell some of my family’s items to pay them. I didn’t know my rights then. I set up my own plan on a percentage basis and it took 5 years but everyone was paid.

  • Jerry

    But be careful when contacting these, too. You will be charged a fee by them, and they will collect their service fee first before actually paying any, or much of your debt with the money you send them. Also, they won’t tell you about the possibility, or certainty that you will receive the 1099-C from your creditor which can put you in dire straits with I.R.S. if you didn’t realize it and all of a sudden are faced with taxes to pay on what was written off as equivalent of cash income as far as the I.R.S, is concerned. The insolvency worksheet may bail you out, but be aware that any debt forgiven may come back to haunt you as income when it comes to income tax time. Another problem with the debt negotiation companies is the amount they charge you; you are likely to be just as well off doing your own negotiating and using that money to pay down your debt. Also, be sure you have no other recourse before filing for bankruptcy; between that and any debts turned over to collection agencies, you will grow old prior to having your credit score come back to where you can qualify for a loan, or get any kind of decent interest rate if can get one.

    • Ron

      It depends who you use. I just completed a program with Countrywide debt relief and they not only settled all my debts, but they don’t charge you until the debt is settled. I was very skeptical of this myself. The best part is that prior to going with them, my phone was blowing up 5 to 10 times a day from collectors and they made all those calls stop. The calls never bothered me, but my wife would go crazy about them all the time. Not only did I save time and money, they took the stress of those calls away. The representative that helped me sign up was Mark and I contacted him almost 3 years later to thank him and he was still working there. I figuered for sure he had moved on, but I was wrong. Like anything else, you just have to do your homework. Maybe I just got lucky.

  • http://www.Credit.com/ Gerri Detweiler

    Then you have two choices: One is to contact a consumer law attorney with experience in credit reporting cases. You may have the basis for a credit damage lawsuit. Visit naca.net to find one in your area. The second would be to file a complaint with the Consumer Financial Protection Bureau. In the meantime, make sure you get your free credit score. You may need documentation of the impact to your credit scores.

    • jwarelp

      A lot of states attorneys general have a consumer protection division. You can usually find a complaint form online. Fill that out and explain the situation. Make sure to provide them with any documentation you have. Often they will mediate a settlement with the collector. In your case, since it is paid they will have to stop. Collectors do not like the Attorney General looking into their business. And don’t forget to ask for $1000 (the statutory penalty allowed under the federal FDCPA) per occurance. So if it is 1 account and you have sent 3 letters, ask for $3000. It works, trust me, it worked for me to the tune of $8000 from the collection agency.

  • http://www.Credit.com/ Gerri Detweiler

    Thanks Steph – have you been able to resolve your debts?

  • http://www.credit.com/ Credit.com Credit Experts

    Very interesting perspective. Thanks for sharing.

  • Gholston

    At some point the creditor will generate a 1099C and attach to state tax refunds while at the same time selling the debt to a collector. The collector will try a number of maneuvers to see if they can collect anything including all the stacked up fees. Unsuspectingly some people pay twice with no recourse of recovery. The collection industry knows it’s way too much of a hassle and most people just let it go. So now I find little LLc’s that set up shop and create debt invoicing from purchased database information. One lawyer group sent me garnishment of wages for someone who purchased a Range Rover. Not only did I not employ the person, the law group was using a scatter gun concept for the company name trying to effect collection of the debt and my company name was close. Problem was they were trying to serve the garnishment on another company with a similar name variation in another state completely across the country. In a down economy debt collection is the new business. With the advent of “stand your ground” laws process servers are now cannon fodder.

  • BHKH3433

    If they call and ask if they are speaking to “You,” and you ask who’s calling? They will say, “This is so and so company on a personal business matter, are you “Your Name?” Ask “what is this in regards to?” They will say, “Personal business matter between “YOU” and them.” At this point they will ask you again, “Is this “Your Name?” (Repeat after me,) “I don’t know who you are, or what you want but I don’t give out my name, any personal information, or anyone else’s for that matter without knowing what this is about.” By law, they can’t tell you unless they know for sure it’s you who they are speaking with…since it’s a personal business matter between them and you. Also, if they send you a notice in the mail, pretend like you never got it. Unless you get a summons to court, don’t worry about it, and even then, there are things such as statute of limitation for you state that say that after so long, they can’t collect the debt anyway. If you speak to them on the phone and say, “Yes, this is your name,” that is where the statute of limitations starts. You want statute of limitations to start with the company, not the collection agency. If you get a call from a company or number you don’t recognize, send it to voicemail. If it’s an important call, they’ll leave a message. If not, you won’t be bothered with them, oh and one more thing. Check around because I’ve seen statements that if they bought your debt, and try to say that they work for your original creditor, but actually don’t, you shouldn’t owe them that debt. You never agreed with them for services. They never provided you any services, and you don’t have a contract for any services that you’ve received from them. In other words, they are trying to collect a debt for services they never gave you.

  • http://www.Credit.com/ Gerri Detweiler

    Mama Moon – Since she is current on her payments, trying to go the debt settlement route it not ideal. In order to settle she would have to stop paying – creditors don’t settle debts that are current.

    How is her credit score? I’d suggest she get her free credit score (checking it won’t hurt her credit). If she qualifies, a lower rate personal loan may be a good option for her.

    If she can’t qualify for a lower rate personal loan then the next option would be to talk with a credit counseling agency to see if they can help her get those high interest rates down.

    This article should help: 5 Tips for Consolidating Credit Card Debt

  • http://www.Credit.com/ Gerri Detweiler

    I agree on the second point though I would suggest reading IRS publication 4681 rather than relying on the IRS for that advice. As to the first issue, the IRS reports over 5 million of these forms were filed, so I think consumers need to be prepared for it.

  • ron west

    I have never seen so many people comment on something they obviously know soooo little about… for instance, “After a “reasonable” time frame (60-120 days delinquent) they will sell the rights to your debt to an outside company”. No one is selling 60 day paper. Another lost soul says, “At some point the creditor will generate a 1099C and attach to state tax refunds”. A creditor would have to sue you first to attach anything. You won’t get a 1099 unless you settle an account for less than the full balance and “save” more than 599.00 and there are circumstances were you still won’t have a tax liability. Another said “most debt collectors used unethical ways”. That couldn’t be further from the truth. MOST collectors are more polite than customer service reps. They are even trained not to refer to people who they call as “debtors”. They are trained to call them consumers or customers. Another loon says, “statute of limitation for you state that say that after so long, they can’t collect the debt anyway.” The only thing that the SOL means is that if they do sue you you can show up in court and present an affirmative defense that the debt is beyond the SOL. If you don’t show up they can get a judgment. (As I am typing this laws are being talked about under the guidance of the CFPB to change this so that they can’t even start legal action if the SOL has past). They can call you and write you forever even after the statute has run out. There are sooo many things wrong with these posts that I could write a book, One of the few valid posts here was the person that said “people don’t know their rights.” Nothing truer was ever said.

    • http://www.credit.com/ Credit.com Credit Experts

      Thanks for the comment – we try to address incorrect comments as we see them. All the information in the article is correct, and our experts reply to specific commenters with the facts as well.

    • redbloodedamerican

      When you move to America, and deal with these people, yourself, you will understand. Bless your heart.

  • Martin Gray

    Better yet, you can turn the tables on them. The Federal Debt Collection Practices Act allows any consumer to file a federal lawsuit against a debt collector alleging among other things, harassment. You can collect from them up to $1,000. in statutory damage, as well as actual damages plus court ordered payment of your attorney fees if you have one. In addition they have to pay their own attorney. If you notify them in advance that you plan to do this they will drop your their case against you. I have already collected from 3 debt collectors and have been written about in a major publication.

  • FactOfOpinion

    As said, document all contact from
    them and keep a phone # log with time & date stamp not hard to do these
    days.

    Have them Provide and Validate all
    the following information per the;

    Fair Debt Collection Practices Act, 15 USC 1692g, Sec 809(b) that your claim is
    being disputed and validation is being requested.

    1. What the money you say I owe for:

    2. Explain and show me how you calculated what you say I owe;

    3. Provide me with any and all copies of any papers that show I agreed to pay
    what you say I owe;

    4. Provide a verification or copy of any judgment if applicable;

    5. Provide verification of the date of default and last payment made;

    6. Identify the original owner;

    7. Prove the statue of limitation has not expired on this account;

    8. Show me that you are licensed to collect in this state;

    9. Provide a copy of your agreement and/or contract amount with the original
    creditor to collect

    this debt;

    10. Provide me with your license number and Registered Agent;

    Don’t be intimidated just make them comply with the law!

    Give them 30 days and demand they
    only contact you through the mail.

    If you’ve been served show for court and request a continuance, then file a
    responsive pleading countering each and everyone of the claims and require them
    to provide proof of each demand made. They will probably move to dismiss
    without prejudice because they are unable to provide for the courts the
    required validation information that is demanded in your Responsive Pleading.

    NOTE* They paid very little for these accounts and they hope for a default judgment.
    That’s how they make their real $. You do also have the right to sue them,
    document the harassment.

    You’ll be fine

    Also, If a creditor other than the federal government
    tries to garnish your Social Security benefits, inform them that such an action
    violates Section 207 of the Social Security
    Act (42 U.S.C. 407)

  • http://www.Credit.com/ Gerri Detweiler

    Have you asked the hospital about whether you qualify for financial assistance? That might bring it down some though it probably won’t eliminate them. The other alternative is to talk with a consumer bankruptcy attorney and consider going that route again.


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