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Will a Debt Collector Settle For Less?

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If you have a delinquent debt that is leading to collection calls and you are afraid of being taken to court, you might wonder if you can settle the debt for a lesser amount. In many cases, you can indeed. Sometimes you can do this by paying off your debt for pennies on the dollar by paying out a lump sum. Sometimes a lesser amount can be agreed to if you make larger installment payments for a set period of time and they are paid on schedule.

Understanding Debt Collectors

Debt collectors or collection agencies have a goal of getting as much money as possible for a debt. They can add fees onto the debt as state law permits, or they can try to get a judgment in a court of law. Often, debt buyers obtain these debts to earn profits. They pay the original creditor just pennies on the dollar for the past due bills to collect them for their own profit.

They only make money when the debt is paid. Property cannot be seized, bank accounts cannot be frozen, and paychecks cannot be garnished unless they file a lawsuit, get a judgment and then get permission to do any of those things. Taking a consumer to court is costly, so it is beneficial to the debt collector to reach a deal with the debtor.

Can a debt collector settle for less?

Know Your Rights

When you are trying to negotiate with a debt collector, you need to understand your rights as a debtor through the FDCPA. First, you need to understand the statute of limitations for your state. That is the timeframe for which a debt can legally be enforced. You also need to ask for the debt to be validated. Before trying to negotiate a settlement, you need to figure out how much you can pay. Usually, they want to be paid fast, so plan it all out and know the most you can afford before you try to settle with the creditor.

Check for implications regarding your settlement. You need to know what will be reported to the credit bureaus and if you will receive a 1099-C form to include the cancelled debt as income on your next tax return. Also, be prepared for a counteroffer if your initial offer is not accepted. Stand your ground and be careful what you say during the negotiations because they can be used against you in negotiations.

Consult With an FDCPA Attorney

If you are facing debt problems and you are being harassed by debt collectors and would like to negotiate a settlement, you should consult with a FDCPA attorney. An FDCPA attorney understands the debt collection process and your rights as a debtor. An attorney can help you negotiate settlements and stop the harassing phone calls from creditors. Complete our Free Case Evaluation Form today to get your details shared with an attorney who can review your case and help you get your financial situation back on track. Get your free case review today!

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