How to Negotiate a Settlement with a Debt Collector
Debt Collection & Payday Loans
Learn more about how to negotiate a settlement with a debt collector, what your first step should be, what your rights are, and when a debt is too old for a collector to sue.
What should my first step be?
Your first step should be to understand your debt. When a debt collector first contacts you, you should receive information about the amount owed, the name of the creditor, your right to dispute the debt or request the name and address of the original creditor. If you do not receive this over the phone, you should receive it in writing five days after the debt collectors first contacted you. Be proactive about this and ask for this information as soon as possible.
Should I verify where they are calling me from?
Yes. If the collection agency first contacts you by phone, insist that they contact you in writing. Do not give personal or financial information to the caller until you have confirmed it is a legitimate debt collector. Avoid divulging too much information about your personal and financial circumstances. Any information you give them can be used to collect the debt.
What is next?
After understanding your debt and confirming the debt collector's legitimacy, plan how much you can afford to pay and what you will offer. Create a budget that makes sense for your life. What monthly payments can you afford? Can you make a lump sum payment to settle the debt or lower your payments? Once you have a clear plan, you can start negotiating.
What if my first attempt did not end in a settlement or agreement?
Be prepared for a counteroffer. Be patient because your first conversation may not lead to an agreement. Keep a record of every communication.
What would be a good settlement offer or payment plan?
You should offer an amount that is reasonable and less than the full amount you can afford. This tactic will give you room to negotiate. Try not to stretch your budget too thin as you do not want to end up defaulting.
What do I do after we have an agreed-upon amount?
Get it in writing! Do not make a payment or provide any banking information until the agreement is in writing. Ask for a letter detailing the agreement and make the payment by the agreed date.
What are my rights?
The Fair Debt Collection Practices Act (FDCPA) Is legislation created to prevent unfair, deceptive, and abusive debt collection practices.
When is an old debt too old for a collector to sue?
Texas Civil Practice and Remedies Code 16.004 controls the state of limitations on debt in Texas. The statute of limitations on debt in Texas is four years, meaning that they have four years to bring a lawsuit. Otherwise, the debt becomes Time-Barred. Time-barred debt is old debt that a debt collector cannot sue you to collect, as it has reached the statute of limitations. They might still try to collect the debt anyway.