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Updated by: and
Published: Mar 28, 2024 12 min read

If you have past-due debt that you’re struggling to pay off, you may be able to negotiate with the debt collector to reduce the amount. Depending on your situation and financial priorities, this can help you get out of debt faster and, in some cases, improve your credit.

Keep reading for a step-by-step breakdown of exactly how to negotiate with debt collectors and everything else you need to know about dealing with a debt in collection.

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7 Steps to negotiate with debt collectors

Although you can negotiate directly with your lenders — a tactic that works especially well for medical bills — we’ll focus on negotiating down your debt once it’s been sent to collections. If you follow these steps, you should be able to negotiate your debt to a more manageable amount.

1. Understand how debt collection agencies work

If you understand how debt collection agencies work, you’ll be empowered to negotiate the best arrangement possible. Original lenders — say, a credit card company — sell their delinquent accounts to debt collection agencies to get “bad debt” off their books and access the related tax benefits of this type of expense.

Many agencies specialize in the type of debt they collect, usually by amount and age. Reputable ones will also only collect debt within their state’s statute of limitations. Delinquent debt, which comes from missed payments, can include credit card debt, student loans (or other kinds of loans), and utility or cell phone bills.

Debt collection agencies rely on the debtor to settle their debt. They buy the debt for pennies on the dollar. In other words, if your original debt was $700, they may have bought it for $200 or less. Thus, there should be wiggle room when it comes to negotiating a settlement. The agency you’re working with will want to recoup their investment and make a profit, often between 25% to 50% of the debt they purchased.

Keep in mind that having a debt sent to collectors will negatively affect your credit score. Unfortunately, it will stay on your credit report for seven years in most states. However, you cannot ignore a legitimate debt collector — ignoring them doesn’t make your debt go away, and they may be able to sue you for the unpaid debt.

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2. Know your rights under the Fair Debt Collection Practices Act

The Fair Debt Collection Practices Act (FDCPA) is legislation designed to prevent abusive, deceptive, and unfair debt collection practices of debt collectors. When this legislation was proposed, findings suggested that abusive debt collection practices “contribute to the number of personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual privacy.”

Provisions of this legislation give you several rights that you should be aware of:

  • Debt collectors may call you between the hours of 8:00 am and 9:00 pm in your local time zone unless you give them permission to conduct phone calls outside those hours.
  • In some cases, debt collectors may be prohibited from contacting you at your place of employment.
  • You can request, in writing, that debt collectors stop calling you and communicate via other means instead.
  • Debt collectors may contact your friends, relatives or employer to find out your phone number or where you live, but they cannot reveal details about the debt owed.
  • Debt collectors cannot engage in any type of harassment that includes profane, abusive or threatening language when attempting to collect a debt.
  • You have a right to dispute your credit report and get validation of the debt. Debt collection activities must stop if you dispute it within a certain time period.
  • Debt collectors can contact you on social media and send a friend request, but they must make clear that they’re a debt collector.

If a debt collector or creditor violates the FDCPA, the statutory damages can cost them up to $1,000 for each action. You might also be able to get actual damages, attorneys' fees and court costs.

Depending on the entity you are dealing with, your only recourse may be to file a complaint with the Federal Trade Commission (FTC), which will conduct an investigation and take action against the creditor if needed. Finally, you should know that the FDCPA only applies to third-party debt collectors like debt collection agencies. Original creditors are not bound by the FDCPA.

3. Ask the debt collection agency to validate your debt

It’s tempting to comply with a debt collector’s request for money right away, but take some time to get your ducks in a row. You have the right to get all the information about the debt.

Within five days of contacting you, the debt collection agency must verify details about the original debt, such as the name and address of the original creditor, amount, date incurred and more. You can also get information about the debt by checking your credit report. Make sure all of the information from the debt collector matches the information in your credit report.

If you don’t believe the debt is yours, you have up to 30 days to dispute it. While the collector is confirming the validity of the debt, they can’t engage in any collection activities. If the debt can’t be verified, the collection agency has to stop collection activities and remove it from your credit report.

4. Come up with a reasonable repayment plan or settlement proposal

If it turns out that the debt is valid, you must start planning to pay it off. However, it is possible to get them to settle for a partial payment, depending on the debt collector.

When coming up with a proposal, choose an amount that makes sense for your budget. Consider the following things:

1. Decide how much you can pay: Consider your current income, debt and other obligations. Make sure to leave some cushion in your remaining income for emergencies. You want to ensure you don’t pay more than you can afford.

2. Decide how you want to pay it: You can make a lump sum payment or propose smaller monthly payments.

It might be a good idea to use a credit counselor to help create a debt management plan. Credit counseling is free through non-profit organizations. You can also look into credit repair companies, but be wary of scams.

We should also note here that starting a payment plan for old debts could reactivate an account. If this debt was slated to fall off your credit report due to the statute of limitations, reactivation could hurt your credit. Starting a payment plan will create new activity on this debt and may also restart the clock for both the statute of limitations and your credit profile.

5. Negotiate with the collection agency using your proposal

Once you have a clear view of your position, it’s time to negotiate a settlement offer. If possible, avoid presenting your settlement offer first. Let the other side make the first suggestion, then present a counteroffer with a lower number. Repeat this back-and-forth process until you arrive at a settlement amount you are happy with.

It’s OK to start negotiations with a lowball offer. You might be surprised to find that the debt collector agrees so it never hurts to try.

While you may be inclined to go with a debt settlement company, be wary of some red flags, such as promising to settle all your debt or charging money before settling your debt. If their debt relief package sounds too good to be true, it probably is. Additionally, there is no guarantee a creditor will be willing to work with a debt settlement company. And this could leave you in a worse position than you were in.

6. Make sure all agreements are set in writing

Debt collection agencies are notorious for not keeping a record of payment agreements or even reneging on them. The representatives you talk to may or may not annotate your account with the details of your conversations or payment arrangements you’ve negotiated.

Before you think your arrangement is set in stone and you begin making payments, make sure the debt collector puts your payment arrangement in writing on official company letterhead. That way, if they deviate from the agreement or claim to have no record of it, you have all your bases covered.

If some time passes and you still haven’t received a letter from the debt collection agency, you should reach out to them. Be persistent until your letter on official company letterhead comes in the mail from the debt collection offices.

7. Keep calm, be patient and be careful about what you say

Although dealing with debt and debt collectors can add stress to your life, do your best to stay calm and level-headed. Even if a bill collector is rude or becomes belligerent, keep your cool. Be polite and keep records of the dates and times you communicate with the debt collector.

What not to say to debt collectors

Avoid divulging too much information about your personal and financial situation when you talk to debt collectors. As all collectors inform you in their communications, any information you give them can be collected and used to help collect your debt. Provide enough information to support your negotiations and nothing more.

Be especially careful if you receive a call from a debt collector and are unsure if they are a legitimate company or a scam. According to the Consumer Financial Protection Bureau (CFPB), never share your full social security number, bank account information, other financial account information or credit card numbers with a debt collector if you aren’t sure. If they turn out to be a scam, they could use that information to charge your credit cards, open new accounts or get loans in your name and write fraudulent checks.

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How to Negotiate with Debt Collectors FAQs

What percentage should I offer to settle debt?

Most debt collectors will settle for much less than you owe, but all debt collection agencies differ. Some will agree to settle your debt for as little as a third of the total, while others will try to get as much as 80% of the debt paid. You may choose to start your negotiation by offering to pay a low percentage of the total debt — such as around 25% — and negotiate from there.

When is the best time to initiate a negotiation?

It's a good idea to initiate debt negotiation as soon as you realize you're facing financial difficulties. Ignoring the problem or delaying communication with creditors can lead to more severe consequences, like higher interest charges, late fees and potential legal action. Keep in mind that creditors are more likely to negotiate when they believe it's in their best interest to recover at least some of the debt. Initiate negotiations with respect and honesty, and be ready to provide documentation to support your financial hardship claims.

What is considered the best approach to negotiating with debt collectors?

Debt collectors are prohibited by federal laws from engaging in abusive and unfair practices. Approach negotiations professionally, assertively and with a clear understanding of your rights. Your goal is to reach an agreement that is manageable for you and aligns with your financial situation. Communicate in writing with the debt collector, request a payment plan and document everything for your record-keeping.

How long do I have to wait to pay the debt after negotiating?

Once you've successfully negotiated a settlement or payment plan with a creditor or debt collector, it's important to adhere to the agreed-upon terms and timelines. The specific time frame for making payments will depend on the terms you negotiated.

Summary of Money’s guide on how to negotiate with debt collectors

If your creditor sells your unpaid debt to collections, the debt collector will try to contact you for payment. However, if you cannot pay it, you may be able to negotiate with the debt collector using the following steps:

  1. Understand how debt collection agencies work
  2. Know your rights under the Fair Debt Credit Collections Practices Act
  3. Ask the debt collection agency to validate your debt
  4. Come up with a reasonable repayment or settlement proposal (either a lump sum payment or installments)
  5. Negotiate with the collection agency using your proposal
  6. Make sure all agreements are set in writing
  7. Keep calm, be patient and be careful about what you say

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