How to Negotiate Unsecured Debts With Collection Agencies


After unsecured debts have gone to the collection agencies, people have a couple of choices. They can offer a lump sum settlement, or they can seek to change the terms of their loans. Typically, unsecured debts are credit card bills, medical bills or utility bills. In the event that people would like to negotiate with the collection agencies for these types of bills, they will want to follow a few guidelines.

Debt Settlement Company or Negotiate on Their Own?

People may seek to get out of debt by hiring a debt settlement company, but they are fully capable of performing all of the actions these companies would perform on their own. The companies will contact the creditors over the phone, but people can do this themselves. The entire process may require that they spend a significant amount of time making phone calls to the collection agencies before they can obtain an agreement, but it may be worth it if they can obtain a settlement or a new term that is favorable to them.

Negotiating a Settlement

A borrower who has an amount of money saved can offer it as a settlement. If the borrower has defaulted on the payments, collections agencies are more likely to accept a settlement. Once the borrowers demonstrate that they are experiencing financial difficulties, the collections agencies begin to understand that settling would be a better plan for them than expending time, money and energy on collection activities.

Borrowers will need to send the collections agencies proof of their financial hardships. For example, financial hardships can be:

• The birth of a baby
• The loss of a job
• The death of a spouse
• A reduction in income
• Unexpected expenses, such as medical bills

The Possibility of Bankruptcy

When it has been made clear to the collection agencies that the borrowers are unable to pay their bills in full, the collection agencies may accept a settlement for less than is owed to them. The reason they will do this is because they may see bankruptcy in the borrowers’ futures. Mentioning this possibility is not a bad idea during the negotiations because bankruptcy may mean that the debt will be discharged and the collection agencies will receive nothing in payment. The agencies will also be unable to make attempts to collect payment at a later date.

Stick with the Original Settlement

Different collection agencies will want to accept different amounts as a settlement, but borrowers are going to only be able to offer the amount that they can afford. If this is a third of the debt, borrowers must be willing to insist upon this amount. Typically, collection agencies will try to raise the price, but the borrowers must always stick with their original offer. Once there is an agreement, it must be put in writing for future reference.

Changing the Terms of a Loan

People may want to negotiate their debts by offering to change the terms of their loans. With credit card debts, they may be able to lower the interest rates. By doing this, they will be able to lower the monthly payment. For a lot of collection agencies, borrowers will only be able to hope to lower the interest rate and not the entire amount owed. Collection agencies are wary of creating payment plans because people only make payments on these arrangements for, at the most, two months, and the old collections tactics must be taken up again.

When people choose this option, they must also receive the agreement in writing, and they must remember not to give the collection agencies more information that is absolutely necessary.

This post was written by

jason – who has written posts on Budget Clowns.
Father of three and married to a lovely women. Always looking for ways to save money, and invest it properly for my children's future.

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