Debt Settlement – Negotiating with Debt Collectors/Debt Collection Agencies

When you are dealing with debt collectors or agencies, there are few things you must keep in mind. First of all, they are not part of the law enforcement or any government body. They cannot garnish your wages or levy your property unless they have a judgment against you. To get a judgment, they or the original creditor must sue you and prevail in the lawsuit. When a lawsuit is filed against any person, it is necessary to give that person a notice of the lawsuit. No court will pass a judgment against any person unless it can be shown that the person was served with the suit papers.

Fair Debt Collection Practices Act

The Fair Debt Collection Practices Act regulates the activities of the debt collection agency. First of all, they cannot contact you after 9 pm and before 8 am. They cannot give you the impression that they are a government or law enforcement agency nor threaten you with imprisonment. They cannot inform any third party about your debt without your consent. In short, they cannot do more than inform you that you owe a debt and enquire how you are going to pay the debt. When a debt collector contacts you for collecting a debt, you can ask the debt collector to validate the debt. If the debt cannot be validated, the debt collector cannot take any action or contact you again. If you inform the debt collector that you do not want to be contacted about the debt, the debt collector cannot contact you but can take steps provided by law to recover the debt.

Who owns the debt?

You can negotiate with the debt collector to settle the debt. However before you enter into any negotiations, find out if the original creditor still owns the debt – whether the debtor collector has only been appointed to collect the debt or the debt has been sold to the debt collector. If the original creditor stills owns the debt, you can choose to negotiate directly with the original creditor if the original creditor is willing to deal with you. If the debt is sold, then the original creditor will have nothing to do with it and you should negotiate directly with the debt collector.

Debt Statute of Limitations

If the debt the debt collector is trying to collect is time barred, i.e. the statute of limitation for that debt has expired, you need not pay the debt. Once the statute of limitation has expired for a debt, you have a valid defense in case the debt collector files a lawsuit against you for collecting the debt. Statute of limitation will run from the last payment or the date on which the debt became due (whichever is later in time).

Debt Negotiations

Most debt collectors will be willing to negotiate with you. If you are seeking to settle the debt for less or you want time to repay the debt, you must explain to the debt collector reasons why you are making such a request. Debt collectors understand that everyone has their own financial ups and downs. However in a negotiation, you must be willing to give up a little. You cannot be rigid.

Debt Settlement

In a debt settlement, you attempt to settle the debt for less than the full amount of debt. If you want to enter into a debt settlement with the debt collector, you must request a meeting with the debt collector. During the meeting explain to the debt collector your present financial position and the other debts that you have to pay. Follow up this meeting with a letter and make an offer of what you think is the best you can pay for the debt. You should keep in mind that debt collector will not generally accept the very first offer you make. You should be ready to increase it slightly. Be prepared for a long negotiation. If the debt collector accepts your offer, you should get it in writing. You must ensure that the debt collector accepts your offer as full and final settlement of the debt. When you make the payment, make sure you keep a record of the payment.



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