How To Negotiate With Debt Collectors

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Most people know when they have fallen behind on debts, so it’s seldom a surprise when the phone rings and it’s a collection agency on the other end of the call.

While it’s understandable if your stomach flips like an Olympic gymnast every time you’re contacted about an unpaid debt, it is possible to negotiate settlements with collectors and pay less than the amount owed.

It’s not easy, but it is possible.

There are laws that protect consumers in debt collection. Get familiar with the rules so you don’t get taken advantage of.

“The first thing to do when contacted by a collection agency is to stay calm and not panic,” James Allen, founder of, said. “It's like finding a wasp in your car while driving -- panicking won't help, but a calm, measured response will.”

How Do Debt Collection Agencies Work?

The original creditor you owed usually gives you from 6-9 months to pay. If no payment is made, the creditor often sells the debt to a collection agency, which is now going to contact you in order to collect.

Collection agencies are permitted to reach you via cell phone, mailbox, or social media. They will use all of them and the best advice is to go ahead and pick up the phone or respond to the email.

Ignoring debt collection calls can be hazardous to your health, medically and financially. Don’t do it. You need to address the debt head on, and that begins with asking for written verification of the loan amount, and the name of the creditor who held the loan before the collection agency got involved.

There are consumer protections that collection agencies must follow. (More on that later.) Make sure to get the terms of the delinquent loan and repayment in writing and request written confirmation of any settlement offers the collection agency makes.

If you’ve fallen hopelessly behind in debt and didn’t think through the consequences of letting that debt accumulate, just know there’s time to adopt a smarter approach by learning how to negotiate with collection agencies to settle your debt.

Should You Negotiate With Debt Collectors To Settle Your Debt?

If you have the means to pay off the debt you owe in a lump sum, that’s the best thing you can do for your credit report. Having a debt turned over to collection is a blemish that remains on your credit report for seven years.

Chances are that being cash strapped is how you fell behind in the first place. Negotiating with a debt collector happens at the discretion of the collection agency but most are open to a settlement for less than what is owed to avoid a long-drawn-out collection process.

“Negotiating with a collection agency can be challenging, but it is vital to reach a fair settlement,” Raymond Quisumbing, a registered financial planner at Bizreport, said. “Offering 25%-50% of the total debt as a lump sum payment may be acceptable. The actual percentage may vary depending on the circumstances of the borrower as well as the prevailing practices of that particular collection agency.”

One benefit of negotiating settlement terms is likely to reduce stress. Reaching a settlement can also reduce the credit implications since debt that goes to a collection agency is a major hit on your credit score and can affect the interest rates you’re offered on future loans.

“When a debt goes to a collection agency, it's like a black mark on your credit report, similar to a bad grade on an otherwise stellar report card,” Allen said. “It can significantly lower your credit score.

“This mark stays on your credit report for seven years from the date of your first missed payment. It's a long time, but the impact on your credit score diminishes over time, especially if you offset it with positive credit behavior.”

6 Steps for Negotiating With Debt Collection Agencies

A calm, measured approach is the best way to deal with collection agencies. There are sound, proven steps you can take when addressing your debt and negotiating a settlement.

Here are six steps that should help you successfully negotiate your debt.

1. Learn About the Debt

By law, collection agencies must provide evidence that the debt is your. They must give you  a written validation notice, addressing specific information such as:

  • The full amount owed (interest and fees)
  • The name and address of the creditor
  • The date the debt became delinquent.

“If the debt is yours, create a budget to determine what you can afford to pay,” Allen said. “If it's not, you can dispute a debt. Remember, you have rights under the Fair Debt Collection Practices Act.”

2. Understand What You Can Afford To Offer

Sounds simple enough, right? But at the risk of generalizing, this may be the most important step for anyone in debt. In fact, not understanding what you can afford to pay on a debt is chief among the reasons people get behind in payments in the first place.

One proven way to understand what you can afford is to create a budget. It’s a safeguard against overusing credit cards. It’s a way to pay off mounting debt. Creating a budget only grows in importance when collection agencies get involved.

You can do this yourself. But don’t be shy about reaching out for help if you’ve fallen head-first into the choppy waters of debt collection.

“A nonprofit credit counselor can be beneficial if you experience a job loss or sudden illness,” Derek Jacques, a bankruptcy attorney at The Mitten Law Firm, said. “They can help if you do not see a path forward out of debt and don't have financial resources for other options.”

Having a better understanding of what you can afford to pay prepares you for the different strategies in negotiating debt with collection agencies.

Payment Plans

Unless your lumpy mattress is caused by a thick sum of cash you can use to pay off your debt, the next best strategy might be to negotiate a payment plan. The plan can’t compromise your ability to make rent, buy groceries and live your life.

That’s why you create an affordable monthly budget that includes a line for payment to the collection agency.

Collection agencies are often flexible in assessing the particular circumstances of individuals in debt and might see a payment plan as the best avenue to recoup what you owe.

Partial Payments

Collection agencies in certain situations will accept a one-time partial repayment, otherwise known as a lump sum. They get to put your case behind them. You get peace of mind and maybe more. Maybe.

“The collection account will still be on your credit report for seven years from the date of your first missed payment, but it will be marked as paid, which is better than an unpaid debt,” Allen said. “However, in some cases, you may be able to negotiate a ‘pay for delete’ agreement with the collection agency, effectively erasing (the stain) on your credit.”

3. Speak to the Debt Collector

This is your chance to explain your situation and detail your plan to settle your debt. Remember, debt collection agencies most likely bought your debt for pennies on the dollar and could be more agreeable to a partial repayment or payment plan than your original creditor.

Take detailed notes of the conversation and terms of the agreement, if applicable. Better yet, record the conversation. Not that collectors intentionally mislead. It’s just that you need to leave as little room for misinterpretation as possible.

4. Make Sure All Agreements Are in Writing

You wouldn’t take out a loan for a mortgage or new car without having the terms in writing. The same goes for agreements with collection agencies.

Also, as you investigate available resources to help manage your debt, beware debt settlement companies that make too-good-to-be-true promises.

“Much like anything these days, if you are receiving robocalls, that is a good sign of a scam,” Jacques said. “If they ask for upfront payments, that is a huge red flag, as these companies are prohibited from collecting upfront fees. If the company is guaranteeing results, that is also a red flag, as there is truly no way to guarantee success in debt settlement.”

5. Make Your Payments

Once you reach an agreement, be extra careful not to fall behind in paying debt in collections.

Repayment plans require discipline. It’s why it’s so important to understand how much you can afford to pay each month, given your other bills and your cost of living.

Whether you pay online or by check (certified is probably safest), keep all your receipts and ask the collection agency for a letter of completion once you’ve settled your debt.

If for any reason you find yourself dealing with a different collection agency after reaching an agreement with the original collectors, you’ll want a detailed account of the terms you negotiated and the payments you already have made.

6. Negotiate Improvement to Your Credit Reports

The benefits of a good credit score can’t be overrated. Bad credit can cost you the house you want to buy, the car you want to drive and even the job you seek to support yourself and your family if, for instance, a security clearance is part of it.

If the collection agency is amenable to a settlement, it doesn’t hurt to ask for credit score consideration.

“Depending on the collection agency, if you pay off the debt in a lump sum, you can request they remove the debt from your credit report,” Jacques said. “Some will do this, others will not.”

As always, get any agreement in writing.

What Are Your Rights and Protections?

The Fair Debt Collection Practices Act (FDCPA) was passed in 1977 to address abusive and unfair debt collection practices. Understanding your rights with debt collectors is crucial in protecting your interests while negotiating a settlement.

The Consumer Financial Protection Bureau clarified some provisions of the act in 2021. That revision primarily dealt with how collection agencies can contact you. Namely:

  • Calls from collectors are limited to the hours between 8am and 9pm unless otherwise permitted by debtors.
  • Agencies can contact you via social media but must identify themselves as debt collectors.
  • If requested in writing, debt collectors must stop contacting you by phone.
  • While debt collectors can contact your friends, family and employer for a phone number or place of residence for you, they are legally barred from sharing information about your debt.
  • Debt collectors cannot use harassment or profane or threatening language in collecting a debt.

“If a collection agency is threatening you, making false statements, or trying to collect more than you owe, it's time to call an attorney,” Allen said. “It's like having a guard dog when a trespasser is on your property. An attorney can help protect your rights and may be able to negotiate with the collection agency on your behalf.”

Debt Collection Negotiation FAQs

Allen compares negotiating with a collection agency to haggling at a flea market and recommends starting low to provide room to negotiate.

“Offering 25% is a good starting point,” he said. “Remember, the agency bought your debt for pennies on the dollar so even if they accept less than the full amount, they’re still making a profit. However, each situation is unique, so adjust your strategy based on your circumstances.”

Circumstances specific to the delinquent loan could affect negotiations with debt collectors. For instance, if the statute of limitations (the period when you could be sued) is close to expiring, a debt collector may agree to terms more favorable to you.

Jacques said: “It is fine to offer a low-ball payment to see what they will accept. They may be willing to accept a lower amount than their stated settlement offer.”

If your debts are still held by the original creditors, settlement amounts tend to be significantly higher than settlement amounts accepted by collection agencies. It is not uncommon to settle debt with a collection agency at 30%-50% of the amount owed.

An overall strategy in dealing with collection agencies depends on your circumstances and the practices of the collection agency that bought your debt.

“It's difficult to know a collection agency's track record for accepting less than full payment,” Allen said. “However, you can research the agency online, check for complaints with the Consumer Financial Protection Bureau or your state's attorney general's office, and read others' experiences on online forums. This can give you a sense of their general practices.”

Remember, it’s counterproductive to negotiate a settlement with a collection agency if you can’t meet the financial terms.

That’s why one of the most important steps, once you’ve verified the validity of the debt, is to contact a nonprofit credit counselor who can help you create a workable budget and recommend a debt management program if necessary.

About The Author

Robert Shaw

After a 45-year career in journalism, Robert's focus is helping consumers cope with personal finance issues. Finding solutions to paying off credit card debt, mortgage payments and that darn student loan, is far more fulfilling than explaining why the Cleveland Browns can't win (It's the quarterback!!). Robert wrote about the Browns and all Cleveland sports as a columnist at the Plain Dealer before transitioning to television sports commentary at WKYC. Now, his passion is helping people navigate their personal finances.


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  2. Smith, K. (2023, March 24) How To Respond When Your Debt Is Sent To Collections. Retrieved from