subject: Debt Settlements: Understand Your Negotiating Power [print this page] Debt Settlements: Understand Your Negotiating Power
Debt collection agencies can be relentless - and more than a little ruthless. If you are being hounded by a debt collector, it's tempting to do anything within your power to get the calls and letters to stop. All too often, though, consumers cave in without realizing that they actually have quite a bit of negotiating power when it comes to debt settlements. Here are some points to consider:
1. Take a step back. It's hard to see things objectively when you have a debt collector on the phone, pressuring you or harassing you to pay up and pay now. You have to be in the right frame of mind to negotiate a favorable debt settlement, so arrange to talk to the debt collector at a time and place that's convenient for you.
2. Make sure you owe the debt. Debt collection agencies are notorious for trying to collect on debts that you might not even owe. You have the right to request a debt validation, and the agency must provide you with the precise amount you owe, the name of the original creditor, and other relevant information. If your records differ from the debt collection agency records, you have a right to dispute the debt.
3. Debt collectors will settle for less. Third-party debt collectors either work on commission or they are debt buyers and have purchased your debt for pennies on the dollar. If they work on commission, collecting 50% of something is better than collecting 100% of nothing. If they're a debt buyer, they'll make a profit even if you pay a fraction of what you owe. Although debt collection agencies won't admit it, you're in the driver's seat when it comes to negotiating a debt settlement.
4. Get it in writing. The staff turnover rate at debt collection agencies is astounding. Just because you came to a verbal agreement with one collector doesn't mean that it's binding. That collector may be out the door next week, and another will take his place. As a result, you'll have to start all over again. When you reach a settlement agreement, don't pay a dime until you have the terms in writing.
5. Keep records. If you've arranged a payment plan, send all correspondence and payments via certified mail with return receipt requested. Once the amount has been paid in full, get an acknowledgement from the debt collection agency. Keep all of your records in a safe place.
6. Avoid postdated checks and automatic withdrawals. Although a debt collector may try to insist that you write postdated checks or that you agree to automatic withdrawals from your checking account, don't be pressured into doing that. Some agencies routinely violate federal law by depositing postdated checks early, or continuing to withdraw money from your checking account after the debt is paid in full. You don't want to hand them that kind of power.
If you have an overdue debt, you may be able to negotiate a favorable settlement with the debt collection agency that can get you back on track and stop the harassment. Just keep your cool and exert your power.
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