This is an attempt to collect a debt. Any information obtained will be used for that purpose.

There’s probably no on in the world that likes to open a letter and see those words. This disclaimer is especially troubling to anyone who is having problems repaying their debts. This is called a mini-miranda in the collection industry. It is a mandatory notice that lets recipients know the debt collection process has started. But once the process has started, what happens next? Can you put the brakes on it? Can it be reversed? Is your credit already ruined?

A notice from a collector isn’t the end of the world

It also isn’t the end of your credit. There are many ways that you can deal with a collector. Collection laws provide you various protections, as long as you handle the situation in the right way. So, most importantly, relax. No matter if you think you owe the money or not, a calm head will help. Now, let’s get the process started…

Do I need to talk to the collector?

Not really. Emails work well enough. The point is that you should communicate with your debt collector. That doesn’t mean that you must tell them you are going to pay or that you’re admitting to anything, though it will help you get a better idea of what the collector is expecting of you and what the situation actually is.

In many cases, collectors will decide to simply sue debtors in court to get a default judgment without negotiating. This is because in most cases the debtor refuses to communicate with them. If you break the trend and start a dialog, you may be able to avoid any legal issues. It doesn’t hurt to try, and all you will be spending is time.

Do I really owe this?

You may not feel like you owe the debt in the first place. The first step in this situation would be to look over your contract that you signed with your creditor, if you have one. There may be late fees, early termination fees and other liabilities that you may have missed. Merchants using a payment gateway, for example, are liable for their customers perpetrating fraud. This can rack up fees that they will be responsible for paying. The more knowledge about the situation you have, the more capable you will be to secure a better settlement.

If you’re still not sure whether you owe the debt or not, it is always a good idea to ask for a debt verification. Not only will a debt verification present you with details about the debt, it will also buy you an extra few days without the debtor contacting you. To get a verification, you must send a written letter to initiate the process within the first 30 days from the day the first notice was sent to you. Some debtors will prey on a missed deadline, so make sure you get your letter sent in time. The debtor may still aggressively call you until they receive your letter.

How to negotiate with a collector

First and foremost, if you owe the debt, you should pay it. This is only negotiable if you were horribly wronged by the debtor, but you would have to prove in a court of law that evidence of that wrongdoing. You can’t simply decide to not pay. This is a legal issue and you may even need to contact a lawyer.

If you do owe the money, but just don’t have the funds at the moment, then keep reading. You’re not a deadbeat. You just need time. Not paying not only hurts you, it also hurts other people. The stability of the business you owe may be damaged and they will need to find a way to make up for the loss somewhere else. Plus, in a civilized society, not paying is simply wrong. This is why the law allows debtors to sue if a contract is broken. If people could go without paying, there wouldn’t be a reason to trust each other. No one is exempt from these rules.

There are many ways, other than a lawsuit, that not paying can hurt you. It can damage your credit so that you can’t get loans for a car, home or personal loan in the future. If you think that there is no way to avoid getting negative marks on your credit report, don’t give up. With help, in time, you can get your finances back in order.

When is the best time to negotiate?

Right away. Non-payment can rack up interest and fees, so it is best to get things rolling as quickly as possible. Negotiating with a collector will help balance the potential negative effects of non-payment such as hurt reputation, ruined credit if you get reported, and potential legal action, with your own solvency. Collectors who are inefficient profit from interest and fees on payment plans.

How much should I negotiate?

Creditors will limit the size of any settlement discount that you can get, as long as your debt hasn’t been sold, even if you pay the entire debt at one time. When considering the limitations of the creditor and the add-on costs, you should try to get at least a10% discount for a single payment of the whole discounted amount. You may also be able to get a better deal for a direct debit. Debt collectors are less likely to give you a good deal if you are paying with a check or card payment. See if you can make an online payment and always pay attention to charges once you get your monthly statement so that you do not get overcharged.

If you are not able to pay the balance in full, a good option is securing a flexible payment plan for the amount owed. This arrangement will probably come with added fees or interest, so a short-term agreement is best. If you’re paying more than 20% of the total in each of your payments, you may be able to get a small discount. Always get the payment plan details in writing, read the terms, and follow up on your agreement’s progression every time you make a payment. When coming up with an agreement, make sure that your payments go towards your debt, first. You don’t want your payments to go to just interest and fees because then you will just be getting into more financial trouble instead of making things better. Good collectors will help you get out of debt, not give you more.

Some additional words of advice…

Though being in debt can be stressful, it isn’t something that can’t be undone. It is a manageable situation as long as you are working with a company that is understanding and fully capable of helping you with your debt. Choose the right collection partner that cares about your long term prosperity, take care of your debt as soon as possible, document everything, gather as much information as possible, and never agree to a financial arrangement you can’t uphold. If you don’t do these things the financial results can be overwhelmingly destructive.

Ohad Samet

articles from Ohad

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