How to Negotiate Credit Card Debt in Collections
Many individuals panic when they begin receiving collection letters and phone calls. For many, they're not used to the aggressive debt collection tactics that are used by these agencies to collect on overdue debts. The important thing to realize is that you also have rights, and understanding these rights will help you to negotiate better terms so you can settle your debt. In many cases, you can successfully settle your debt for significantly less than what you actually owe.
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Instructions
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Call the collection company to inquire further about your credit card debt. It's important to avoid disclosing any of your personal information at this point, such as your income sources and amounts. Instead, focus your attention on finding out as many facts about the debt as possible. For example, find out the amount owed, who the original credit was, when the collection agency purchased the account, the name and contact information of the collection agent you're speaking with, and the name and address of the collection company. Keep a log of this information along with any future communications you have with the company.
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Ask for written verification of the debt. Legally, collection agencies are required to send you a letter verifying the debt within five days of your initial contact. Wait until you receive this letter before you engage in any further contact with the creditor.
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Dispute any false information found in the verification letter. You'll have 30 days from the date you receive the letter to dispute any errors. You can dispute items such as not believing you owe the debt or believing you owe a different amount.
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Check the statute of limitations in your state for credit card collections. Each state varies in its laws, but the average statute of limitations on collections ranges from 3 to 10 years. Therefore, if you live in a state where the statute is three years, and the debt is five years old, you hold the upper hand because the collection agency is no longer able to sue you for your debt, meaning you don't have to pay. However, collections can still remain on your credit report for the full seven years.
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Negotiate payment arrangements on the account. Collection agencies purchase these accounts for pennies on the dollar, meaning there's a lot of negotiating room to work with. You may have to go back and forth with the agency a few times before settling on a payment that works for both parties, but try to aim your first proposal for 25 percent of the total debt owed. Also, try to pay a lump sum to settle the debt in full versus making payment arrangements because if you default on your payments, the clock on the statute of limitations starts ticking all over again. Before paying your settled amount, make sure you get the new terms in writing.
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Communicate your inability to pay the debt if you're unable to make affordable arrangements to take care of the debt. Tell the collection agency you don't have the financial means to pay the debt currently, but will contact them as soon as your circumstances change. Each time they contact you, be a broken record and repeat the same thing again. Try not to offer up any new information that could be used against you.
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Tips & Warnings
Consider hiring an attorney to assist you with your case.
