Debt Negotiation: Guidelines to Follow Before the Final Payoff

Before you make the final payoff with the collection agency in your debt negotiation process, see to it that you already have negotiated the entire settlement thoroughly. The amount that you have to pay for is not the only thing that should occupy your mind. You should also make sure to negotiate how the settlement will get reported in your credit report. It is also important that you protect yourself from lawsuits and collections from other collection agencies. Yes, this can happen and if you read on, you will find out how.

Make sure that you check the details of your account. Most of the time, it will grow to staggering proportions not only because of the interest but because of the additional fees levied on it by the collection agency. Since the debt collector has already bought your debt for only a few cents on the dollar, you should not take the first offer that they give you. Rather, negotiate to pay 25 to 30 percent of the debt first. The older the debt is, the more amenable they will be to lesser payments. 

See to it that you have the money in lump before you attempt to settle with a collection agency. It’s generally not a good idea to agree to installment payments as the interest and other fees they will charge will just increase your debt and prolong your agony.

A very crucial part of your debt settlement negotiations with debt collectors is how the settlement will get reflected in your credit report. You should agree to settle but with the express provision that the negative item be deleted from your credit report. While you will normally have a difficult time convincing an original creditor to do this, many collection agencies will simply agree to it. After all, they don’t stand to gain anything if the item remains in your account. This is especially true for debts $500 (or even $1000) and below that you agree to pay in full in exchange for a deletion.

Never disclose where you work or which banks you keep your deposit accounts in. You will only be making it easy for them to collect a judgment against you in case the settlement fails and they file a lawsuit against you and win. Safeguarding your financial information also means not paying the settlement with a personal check. Pay in cash with the appropriate receipts from the debt collection agency or even better (for documentation purposes), pay through cashier’s check from a different bank or a money order from a post office.

A very dishonest practice committed by some collection agencies is that of agreeing to settle the debt for less than the full amount owed but hiring another collection agency to collect on the remaining amount. This is unlawful in many states. But just to be on the safe side, you should still take the necessary steps to protect yourself. In addition to getting everything in writing, you should write on the check: “Cashing this check settles account (write account name and number) in full.”

Finally, review the contract before signing everything. See to it that it specifies everything you want so that you can sleep at night knowing that you will not anymore be burdened with this particular debt.

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