Settle Debts with Collection Agencies for
Pennies on the Dollar
by Lisa Phillips
Pennies on the Dollar
by Lisa Phillips
Collection agencies must produce
documentation, such as the original creditor
contract, that says you owe the actual debt.
If the collection agency cannot validate the
debt they must immediately delete the debt
from your credit files and cease any further
collection efforts. If they continue reporting
the debt they are in violation of the FCRA,
and you can sue for $1,000 in damages for
any violation of the Act. Read more on the
process of Debt Validation.
documentation, such as the original creditor
contract, that says you owe the actual debt.
If the collection agency cannot validate the
debt they must immediately delete the debt
from your credit files and cease any further
collection efforts. If they continue reporting
the debt they are in violation of the FCRA,
and you can sue for $1,000 in damages for
any violation of the Act. Read more on the
process of Debt Validation.
Related Topics:
The first thing you want to do before attempting to settle your debts with a collection agency is
request debt validation from the collection agency. Debt validation forces collection agencies to
prove you owe them a debt.
request debt validation from the collection agency. Debt validation forces collection agencies to
prove you owe them a debt.
Debts are purchased for pennies on the dollar.
The first thing you should keep in mind when settling with a collection agency is that most
companies which purchase bad debts pay pennies on the dollar for those debts. How much
they pay depends a lot on the age and type of debt. Recent debts can be purchased by a
collection agency for 6 to 7 cents on the dollar and older accounts may be purchased for as
little as 2 cents on the dollar.
The first thing you should keep in mind when settling with a collection agency is that most
companies which purchase bad debts pay pennies on the dollar for those debts. How much
they pay depends a lot on the age and type of debt. Recent debts can be purchased by a
collection agency for 6 to 7 cents on the dollar and older accounts may be purchased for as
little as 2 cents on the dollar.
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Check the statute of limitations.
Every State has a statute of limitations when it comes to collecting a debt. If you are near the
statute, you may choose not to settle and allow the debt to become legally uncollectable.
However, if you choose to pursue settlement you may be in a good position to settle your
debts for much less. If a collection agency contacts you after the statute of limitations has run,
the debt is legally uncollectible. In writing, tell them to get lost and never acknowledge you
owe the debt. Acknowledging you owe the debt or even making a partial payment on the debt
could restart the statute of limitations.
Start your offer low.
Now that you know collection agencies purchase debts for pennies on the dollar, it’s time for
that savings to be passed onto you. Start your offer at twenty-five percent (25%) or less. Even
at this low offer the collection agency will still be making a profit from your debt. Be aware that
collection agencies will almost always add extra fees, costs and interest to the debt. Start your
negotiations from the original debt owed, not the new amount with the extra fees, costs and
interest.
All negotiations should be writing.
Unlike original creditors, who are a lot more ethical than collection agencies, never speak to a
collection agency over the telephone. Put all your negotiations in writing. Make sure your
correspondence includes the words “full payment on the debt” and “complete discharge of all
monies due”. Keep excellent records when negotiating with a collection agency and always
mail all correspondence certified, return receipt mail.
The older the debt, the lower your settlement offer.
Your debt may be on its second or even third round of collection agencies. You may have
been contacted by a few different collection agencies for the same debt. This is good news for
you. It indicates the original creditor and the first collection agency has given up on you. Now
you know for sure the second collection agency has paid even less for this debt. This is a
good position to be in to settle for pennies on the dollar.
Collections on behalf of the original creditor.
If the creditor has not yet written off the debt and hires a collection agency to collect the debt,
it may be more difficult to negotiate for pennies on the dollar. The collection agency has not
paid for the debt, they want to maximize their collection in order to get a percentage of what
they collect for the original creditor.
You should still offer to pay a lump sum at 25% of the original debt. Stick to your guns,
because once a collection agency realizes you are willing to pay something, they assume you
can be talked into paying more. Your first offer may be turned down; however, you should
continue to negotiate, in writing, at small increments.
Negotiate entire settlements. During your negotiations you want to make sure you
negotiate the entire balance in full. Some collection agencies will settle for less then turn
around and hire another collection agency to collect the difference. This is illegal in some
states. You may want to check with your State’s Attorney General in order to confirm whether
or not a collection agency can settle, then have another collection agency go after the balance.
Do you need debt relief NOW? Is your credit card debt out of control? CareOneSM Debt
Consolidation can help you. Get online debt relief now!
Page: 1 2 Next
Every State has a statute of limitations when it comes to collecting a debt. If you are near the
statute, you may choose not to settle and allow the debt to become legally uncollectable.
However, if you choose to pursue settlement you may be in a good position to settle your
debts for much less. If a collection agency contacts you after the statute of limitations has run,
the debt is legally uncollectible. In writing, tell them to get lost and never acknowledge you
owe the debt. Acknowledging you owe the debt or even making a partial payment on the debt
could restart the statute of limitations.
Start your offer low.
Now that you know collection agencies purchase debts for pennies on the dollar, it’s time for
that savings to be passed onto you. Start your offer at twenty-five percent (25%) or less. Even
at this low offer the collection agency will still be making a profit from your debt. Be aware that
collection agencies will almost always add extra fees, costs and interest to the debt. Start your
negotiations from the original debt owed, not the new amount with the extra fees, costs and
interest.
All negotiations should be writing.
Unlike original creditors, who are a lot more ethical than collection agencies, never speak to a
collection agency over the telephone. Put all your negotiations in writing. Make sure your
correspondence includes the words “full payment on the debt” and “complete discharge of all
monies due”. Keep excellent records when negotiating with a collection agency and always
mail all correspondence certified, return receipt mail.
The older the debt, the lower your settlement offer.
Your debt may be on its second or even third round of collection agencies. You may have
been contacted by a few different collection agencies for the same debt. This is good news for
you. It indicates the original creditor and the first collection agency has given up on you. Now
you know for sure the second collection agency has paid even less for this debt. This is a
good position to be in to settle for pennies on the dollar.
Collections on behalf of the original creditor.
If the creditor has not yet written off the debt and hires a collection agency to collect the debt,
it may be more difficult to negotiate for pennies on the dollar. The collection agency has not
paid for the debt, they want to maximize their collection in order to get a percentage of what
they collect for the original creditor.
You should still offer to pay a lump sum at 25% of the original debt. Stick to your guns,
because once a collection agency realizes you are willing to pay something, they assume you
can be talked into paying more. Your first offer may be turned down; however, you should
continue to negotiate, in writing, at small increments.
Negotiate entire settlements. During your negotiations you want to make sure you
negotiate the entire balance in full. Some collection agencies will settle for less then turn
around and hire another collection agency to collect the difference. This is illegal in some
states. You may want to check with your State’s Attorney General in order to confirm whether
or not a collection agency can settle, then have another collection agency go after the balance.
Do you need debt relief NOW? Is your credit card debt out of control? CareOneSM Debt
Consolidation can help you. Get online debt relief now!
Page: 1 2 Next
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