How to Set Up a Payment Plan With a Debt Collector

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A debt collector knows you wouldn't be speaking to them if you could simply pay off your debt. They're usually willing to set up a payment plan to lower your monthly payments or forgive part of your debt because they know they could risk getting even less if you file bankruptcy. If you offer enough, the collector might be willing to wipe your slate clean and withdraw negative information they've put on your credit report. Though settling a debt through negotiation appears on your credit report, it's still better than paying late or not paying at all.

  • Determine what you can afford to pay. Before you speak with your debt collector, prioritize your bills, review your budget and determine what you can realistically pay. This is important because it prevents you from promising more than you can actually handle, and gives you a reference point when bargaining. Don't forget that some expenses, like rent and food, simply can't be avoided.

  • Get in touch with your collector. Answer the phone when the debt collector calls, or call the number provided in a written statement. Debt collectors can call you at home between 8 a.m. and 9 p.m., can call you at work if they don't have your home number and can even contact your relatives. It's tempting to just let the phone ring, but sometimes the hardest step is to pick it up and initiate the conversation.

  • Make a lump sum offer. Even if your collector makes an offer first, make an offer of your own to pay off the debt in full at a lower level. Give yourself room to negotiate by offering less than what you can actually pay, and as little as 40 to 60 percent of the total debt. The collector is more likely to agree to a lump sum payment than other collections, but might not accept your initial offer.

  • Request a lower monthly payment. If a lump sum offer cannot be negotiated, request a plan that lowers your monthly payment. This will probably extend the life of the debt, but can be worthwhile if the creditor agrees not to add additional interest. Another option is to request a temporary grace period where you don't have to make payments, which can be helpful if interest is not added to the debt during this period.

  • Get it in writing. If you do reach an agreement, inform the collector that you will not make a payment until you get the terms in writing. This protects both of you, and makes the agreement easier to enforce. If possible, record the phone conversation and take notes.

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