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5 Solid Steps for Negotiating with Debt Collectors

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In a Nutshell

If you have a debt that you cannot pay (such as credit card debt) and it has been turned over to a debt collection agency or debt collector, negotiating with that collector may seem intimidating. But in many cases, negotiating with creditors or lenders isn’t as hard as you may think. This article will tell you what you need to know to have a better chance of successfully negotiating with a debt collector.

Written by the Upsolve Team.  Reviewed by Attorney Andrea Wimmer
Updated July 26, 2021


If you have a debt that you cannot pay (such as credit card debt) and it has been turned over to a debt collection agency or debt collector, negotiating with that collector may seem intimidating. But in many cases, negotiating with creditors or lenders isn’t as hard as you may think. This is true whether you’re dealing with the original creditor or a debt collection company. You just need to know your rights and stand your ground, and they will usually work with you. 

Just don’t ignore creditors that try to contact you because they have the power to take actions that will further damage your credit score and make it that much harder to get new credit. 

Make Sure the Debt—and the Debt Collector—Are Legitimate

When negotiating with any debt collector or debt collection agency, start by asking them to validate the debt. By law, a debt collector must be able to furnish you with written proof of the debt showing the amount owed and who the original creditor is. They must do this within five days of first contacting you. 

They must also send you instructions explaining that you can request the name and address of the original creditor and/or contest the debt by filing a dispute. Finally, they must also inform you that you have 30 days to dispute all or part of the debt via a written request. 

Next, verify the debt collector or debt collection agency. Get the debt collector’s full name, business address, and phone number. Then check their state and federal licensing and/or registration. If you cannot find anything about them from an Internet search, be extra careful and ask the debt collector where you can look them up. If they refuse to give you this information, then you should probably report them to the Consumer Financial Protection Bureau or the Federal Trade Commission. 

If you aren’t sure about the amount of the debt, the original creditor, or the debt collector or debt collection agency, then you should request verification of all of these items. If you do this within 30 days of receiving validation information, the debt collector must verify the debt and send you written confirmation of it. They also have to stop all contact and collection activities until they have done so.

Know Your Rights When Dealing With a Collection Agency

If you are going to be dealing with more than one creditor or you expect to be dealing with one creditor for an extended period of time, then it is probably worth your while to brush up on the rules laid out in the Fair Debt Collection Practices Act (FDCPA). This law was created to protect consumers from harassment and abusive collection practices. For example, collectors cannot call you before 8 a.m. or after 9 p.m. local time unless you have given them specific permission to do so. They also cannot call you while you are working if you tell them not to. 

The FDCPA also prohibits collectors from using abusive or foul language or threatening bodily harm. Callers must identify themselves as debt collectors when they first call you and provide their contact information. Although they can call you during the day, they cannot make excessive phone calls. For example, if you’re receiving calls every 15 minutes all day long, you can report this to the CFPB as harassment. 

While debt collectors have the right to sue you for the debt, they cannot threaten to sue you for everything you own. Be aware that they are allowed to call your family and/or friends to confirm your address or contact information, but they must identify themselves and cannot say that they are attempting to collect on a debt. In some cases, they can garnish your wages and/or freeze your bank account, but they must first notify you in writing. Your state of residence may also offer additional protections. For example, your state may prohibit creditors from calling you before 9 a.m. local time, an hour later than the FDCPA law. 

There may also be a statute of limitations on debt in your state. So, if you have old debts that have been around for a period of time established by state law, those debts may be uncollectible. Different types of debt have different statutes of limitations, so be sure to check on this for each of your delinquent debts. For example, the timeline to collect on a credit card debt may be different than for student loans or mortgage payments. You can go to your state attorney general’s webpage for more information on these timelines. 

Develop a Debt Management Plan

If you don’t have any type of debt repayment plan, now is the time to make one. Sound debt management and responsible personal finances always begin with a budget. To get your finances back under control, you’ll need to create a comprehensive budget that incorporates all of your sources of income plus all of your monthly bills. Be sure to include expenses that aren’t paid monthly, such as annual subscriptions and car insurance if you only pay it every six months. There are several excellent websites that can help you to create a comprehensive budget. Don’t hesitate to enlist the help of a financial planner or nonprofit credit counseling service if needed.

In some cases, you may be able to settle your debt for a lesser amount than what you owe. This can be a godsend in many cases, but it may also have a negative impact on your credit score. Furthermore, this will usually require a lump-sum payment, so if you don’t have extra money handy, this approach may not be an option. 

Also be aware that if your debt collector is willing to settle for a lesser amount, they may send you a form 1099-C after the new year showing how much debt they forgave. You may have to report forgiven debt over a certain value as income on your tax return. This is classified as ordinary income, which means that you’ll be taxed on it at your top marginal tax rate. Be sure to ask your creditor whether they will do this if you are able to settle. 

Look at all of the different types of debt that you have and see what can be done with each. If you have student loans, you may be able to get a deferral or forbearance that allows you to skip a few payments. You can then use the money that would have gone to that payment to make payments on other debts you are delinquent on.

If you have a lot of credit card debt or medical bills, you may be able to negotiate for a lower debt settlement agreement. If you have unpaid federal back taxes, you can try to negotiate with the IRS to accept less than the full amount. Just be prepared to receive a form 1099-C for the amount that was forgiven at the end of the year. 

Don’t let the total amount of your debts stop you from making a plan. Your financial situation may seem beyond help at this point, but accredited, nonprofit credit counseling agencies can provide advice and guidance to get you back on track. They can help you identify the most critical types of debt and tell you what to say to each of your debt collectors to avoid harm. They may also be able to help you create a debt management plan that restructures most or all of your debts into a single monthly payment with lower interest rates. 

Begin Negotiating Only When You Have a Reasonable Payment Plan In Hand

You should only begin negotiating with a debt collector when you have a realistic and reasonable payment plan worked out from your budget. Don’t bother contacting them before you have this because you can end up making promises that you can’t keep over time. Don’t let debt collectors pressure you into a plan that you aren’t comfortable with or that you will have trouble making payments on. It does you no good to agree to a plan, only to default on it. This will only delay the inevitable, and it will hurt your credit report more in the long run. 

Whether you want to enter into a revised monthly payment plan or provide a lump-sum payoff, start with a low offer. That will allow the debt collector to make a counter-offer, and hopefully you can agree on an amount that will still be in your comfort zone.

Remember that you have no guarantee that a debt collector will agree to any settlement plan that is different from the original terms of your account contract. Stay calm and professional, and lay out your financial situation logically to your debt collector. This may convince them that negotiating is in their best interest. At the end of the day, the vast majority of debt collectors will be willing to get something instead of nothing, so a partial payment is usually a better alternative than not paying anything at all. 

If you don’t feel comfortable negotiating with your creditors by yourself, consider hiring a debt settlement company to work on your behalf. Just remember that debt settlement companies ultimately cannot do anything that you can’t do yourself, including guaranteeing to get you better terms. They also charge for their services. If you can afford to hire a company and don't want to negotiate on your own, consider it. If not, remember you can do a debt settlement agreement on your own for free. 

Get The Settlement Agreement In Writing!

If you have reached an agreement with a debt collector or debt collection agency, be sure to get all of the settlement or payment terms in writing before you start making any payments. The agreement should also say how your debt or debts will be reported to the credit bureaus. This can help to keep negative information from appearing on your credit report. 

If at all possible, try to negotiate with your creditors to see whether they are willing to remove all of the negative information they previously reported to the credit bureaus. Many times they will be willing to accept a lesser amount and still mark your account as paid in full. Once you get all of this in writing, go over it carefully to make sure that the debt collector has kept all of their promises to you. If they didn’t, go back to them and insist that they keep their end of the bargain, or else you won’t pay them. They will likely back down, so don’t be afraid to stick to your guns here. 

Let’s Summarize...

Although it may seem like a daunting proposition, you really can negotiate directly with your creditors by yourself. Just be sure that you know what your rights are and also what their rights are. Try to establish a workable plan that is acceptable for both of you. You may need to go back and create a comprehensive budget in order to find out how much you can afford to pay, but this is a good thing to do anyway. You can seek help from a nonprofit credit counselor, a financial planner, or a debt settlement company if you feel uncomfortable pursuing this process on your own. 



Written By:

The Upsolve Team

Upsolve is fortunate to have a remarkable team of bankruptcy attorneys, as well as finance and consumer rights professionals, as contributing writers to help us keep our content up to date, informative, and helpful to everyone.

Attorney Andrea Wimmer

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Andrea practiced exclusively as a bankruptcy attorney in consumer Chapter 7 and Chapter 13 cases for more than 10 years before joining Upsolve, first as a contributing writer and editor and ultimately joining the team as Managing Editor. While in private practice, Andrea handled... read more about Attorney Andrea Wimmer

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