Most collection agencies buy packages of loans that are in default for pennies on the dollar. They are bound by a different set of rules than the original creditor and there are differences in the way that you should negotiate with them. The first step is to have them validate the debt and you can read about how to do that and what it means in my post on Are You Being Hassled by a Collection Agency.
Some things to remember when negotiating with a collection agency:
- All correspondence should be Certified Mail, Return Receipt Requested. You will want proof to send to the Credit Reporting Agencies.
- Do Not talk to them on the phone. You need to have written proof of all negotiations, agreements on the phone are not binding.
- They are not allowed to charge you for validating the debt.
- They are not allowed to sue you unless they have validated the debt.
- They are not allowed to report a debt to a Credit Reporting Agency until they have validated the debt.
- They have 30 days from receipt of your request to provide proof of validation.
If they do not validate the debt within 30 days, you need to send them a request to remove the listing from the credit reporting agencies. Send them a copy of the original request for validation and a copy of the receipt along with a letter requesting that they remove the entry from the credit reporting agency. You can also dispute the entry with each credit reporting agency by sending them a letter with copies of your requests for validation. Most of the time the collection agency will remove the listing and you will be home free.
If they provide proof of validation, the next step is to begin negotiating settlement. This should also be done in writing and sent by Certified Mail Return Receipt Requested. Remember that the original creditor has written this debt off and sold it for pennies on the dollar. You can start your offers as low as 30% of the original amount. If you can pay your offer immediately upon reaching agreement you stand a better chance of settling for
the low amount. If not you should request a reasonable repayment schedule.
The book that has helped me the most in negotiating my debt settlements is called Good Credit is Sexy and it can be purchased here. Order the Book! You can download the e-book right away or order it in paperback for $19.95
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Tags: debt, debt settlement
My wife and I are fighting with a collection agency over cell phone charges, and it has been a nightmare. It was a small company that went bankrupt and didn’t keep very good records. We actually canceled our service with them within the first 30 days, but they continued to bill us. We would call and they said that they had records that we canceled and would “take care of it.” Then they went bankrupt and a few months later a collection agency sent us a letter. Unfortunately, I didn’t keep all of my past bills and didn’t write down a phone log for each time I called. It’s an ongoing nightmare, and one that I do not want to repeat.
Mike, If the company is out of business there is a good chance that the Collection Agency will not be able to validate the debt. They have to prove that you actually owe the amount that they say you do or they cannot continue to try to collect it.
Check out this link http://creditinfocenter.com/re.....tion.shtml for more info. I will warn you I spent a couple weeks researching in the forum and on their site. If I had it to do over, I would buy the book Good Credit is Sexy. They have more information than is on the website and form letters as well.
The most important thing is to stop talking to them on the phone and get everything in writing.
I didn’t keep all of my past bills and didn’t write down a phone log for each time I called. It’s an ongoing nightmare, and one that I do not want to repeat.