How Do I Get a Debt Collector to Negotiate With Me?

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By Michael Bovee

I work with people daily in order to help them better understand their options, and overcome the hurdles that can pop up when resolving collection debts. A woman recently submitted a common concern about being denied any opportunity to negotiate affordable payoff and settlement terms with debt collectors. She is looking for ideas to get over the debt negotiation finish line with collection agencies that refuse to play ball. She says:
"We are trying to clean up my husband's credit. We are now down to a few (debt collectors) that totally refuse to work with us regarding settlement. They keep tacking on interest fees. Any ideas? The ones that are working with us are the collectors that contact us. If we contact them -- no deal -- they want it all."
Negotiating Debts Is Often Case-by-Case

If you fall behind with credit card bills owed to large national banks, how you negotiate, and the realistic results you can aim for, are fairly predictable. But that same approach may not be suitable when negotiating with a smaller credit union or local creditor.

The type of debt you need to resolve can often create roadblocks to negotiating an affordable payoff. Medical bills are a good example of an unpaid bill that may not allow a reduced payoff of any type, and not necessarily because a debt collector is just being hard-nosed. If a portion of your unpaid bill was covered by insurance, and your portion went unpaid, the collector may be unable to offer a lower payoff. There may be insurance contracts with the medical services provider that prevent any discounting after a claim is paid.

There are instances where your account usage prior to defaulting on payments can cause an account to be flagged for little to no balance reduction options. A debt collector may want to offer you a good settlement deal similar to the person he settled with earlier in the day, but cannot because of the way the account has been coded. Recent cash advances and balance transfers are one of the more common reasons consumers are denied settlement options. If a collector sees that a large amount of the balance you owe is similar to the amount of credit you used on other things in the months prior to your defaulting on that bill, the collector may refuse to settle.

Time May Be On Your Side

There are some ways that time will factor into why a debt collector may refuse a fair settlement offer, and can also influence whether you're able resolve that same collection account later. And knowing the type of debt collector you are dealing with can help you better understand what, if anything, you can do to be proactive.

Contingency debt collectors commonly work directly for your creditors. They generally get accounts sent to them in bulk. They work hard to try to collect on them right away, and may not be open to accepting less than what you owe right away, even if your creditor would allow them to. I sometimes call this the first wave of collection.

The contingency debt collection agency may only have the package of accounts that yours was included in, for say three months. Where your first attempt to reach a payoff deal was refused, your next effort could yield a good result, and waiting until just before they lose the account to negotiate could result in the best deal.

Maybe a New Collector

Your unpaid bills may not stay put with the same debt collector for long, but they can also change legal ownership. There is a multi-billion dollar market for buying and selling defaulted accounts. This means that your account with a creditor, who refuses to settle today, may later be sold to a company that will not stop to consider how the account was used when it was still active. The new debt owner may be more than willing to cut the deal you can afford to pay.

If a debt collector refused your settlement offer today, it does not mean the same agency would turn away a reasonable offer next month. And you may, in fact, be dealing with a different debt collector, or even debt owner, in short order.

After having success settling other bills, and depending on the circumstances (mainly your budget and monthly cash flow), it can make sense to pay the last one or two debt collectors who won't negotiate when those balances are small. But be careful what you agree to. Try to resolve a collection debt with lump-sum payoffs, or short payment terms you are confident you will meet. Try to avoid monthly payments that stretch you thin, and that run longer than a few months when possible. Also be sure that you are getting all of the agreements you negotiate in writing.

Finally, pull your credit reports regularly to see how your debts are being reported, and that they are listed correctly. You can get your free annual credit reports from each of the major credit reporting agencies. You can also get a free credit report summary updated monthly on, which can alert you to any changes or problems that you need to address.
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