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Author: Sergei Lemberg
How to Settle a Debt With a Collection Agency
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General Rule: To settle a debt with a collection agency, you must come to a mutual agreement. What that agreement is will depend on your debt and the specific facts of your situation.
If you have a debt with a collection agency, you likely want to get rid of it as soon as possible. For some, this may be paying off the debt in larger amounts. However, there are certain situations when you may want to settle your debt with a collection agency.
There are a few reasons why you may want to settle with a debt collector. It could be that you simply cannot afford payments. Sometimes you may have leverage if they violated your rights under the Fair Debt Collection Practices Act (FDCPA). Whatever the reason, it’s important to understand how to go about this process.
In this article, you will understand situations when you should request to settle your debt with a collection agency. In addition, you will learn different ways you can finalize these negotiations. Of course, if they are violating the FDCPA during this process there is additional action you can take.
Why Should I Settle My Debt?
There are a few different reasons why you may consider settling your debt. The primary reasons are as follows:
- Cannot Make Current Monthly Payments. You only have so much money. If you cannot feed your family and make your payments then you may consider negotiating a settlement.
A collection agency wants to avoid complete non-payment. If they refuse to negotiate with you, they know you may not pay at all. What’s worse for the debt collector is you may even decide to file for bankruptcy.
- The Collection Agency Violated the FDCPA. In this situation, you may consider settling because you have leverage with the violation. If the violation is significant enough, a collection agency may agree to a heavily discounted debt settlement.
- Any Other Reason. You do not need to have a specific reason. Maybe, you have other debts you are trying to manage. Or maybe you are about to have another child.
How Can I Settle My Debt?
If you decide to settle your debt you have a few options. Depending on your preference you may want to propose a settlement in writing. However, most individuals find it easier to at least begin a negotiation over the phone.
If you are uncomfortable with negotiations, you could hire a debt settlement company or attorney. They can work on your behalf to settle your debt.
The next question you have to answer is what type of terms do I want for my debt settlement. There are two primary options.
- Installment Payments. You can request that the settlement terms contain installment payments. The length and amount depend on your negotiations.
- Lump Sum Payment. Another option is to agree to an amount to pay all at once. Usually, you will receive a greater discount if you agree to a lump sum payment.
Whatever you agree to, make sure you get the settlement terms in writing. If you do not, a collection agency may continue collection attempts after you paid off the agreed amount.
Is the Collection Agency Violating the FDCPA During This Process?
Even during debt settlement negotiations, a collection agency is not exempt from following the requirements of the FDCPA. Watch out for the following:
- Harassment. A collection agency may harass you and threaten lawsuits if you do not agree to a proposed settlement.
- Deception. A collection agency may change the amount owed to trick you into settling for a higher amount.
If these types of violations are happening, notify them in writing about the violations and demand they stop. You can also report them to the Consumer Financial Protection Bureau (CFPB). For specific FDCPA violations, you can report the collection agency to the Federal Trade Commission (FTC).
If neither of these options works, you can always file a lawsuit.
Conclusion
There is a great sense of relief when you finally resolve a debt. In some cases that involves negotiating and settling your debt with a collection agency. If they deal honestly with you, this may be a beneficial process for both parties.
If you need assistance in settling your debt, you can always seek the assistance of a consumer rights attorney. They can assist you and ensure that the collection agency does not violate the FDCPA in the process.
Additional Resources
About the author:
Sergei Lemberg is a consumer rights attorney, practicing since 2006, whose practice focuses on consumer law, class actions and personal injury litigation. He is known for a United States Supreme Court case (Facebook v. Duguid) defending consumers from autodialers under the Telephone Consumer Protection Act of 1991 to send unsolicited text messages. He is also the author of Defanging Debt Collectors, a book that teaches consumers how to battle debt collectors and win.
See more posts from Sergei Lemberg