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Settle Your Debts with Collection
Agencies for Pennies on the Dollar
by rebuildcreditscores.com
Agencies for Pennies on the Dollar
by rebuildcreditscores.com
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 Validation.
Debts are purchased for pennies on the dollar by collection agencies. 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.
Check the statute of limitations. Every State has a statute of limitations when it comes to
collecting a debt (See Statute of Limitations). If you are near the statute, you may choose not to
settle and allow the debt to become legally uncollectable. If you 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, tell them to leave you alone. The debt is legally uncollectible. When
it comes to your credit reports, a negative entry and the collection entry cannot remain after 7
years. Most times it will automatically be deleted when the 7 years is up. This is because once
the debt has gone unpaid for 7 years, it can no longer legally remain on your credit report.
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, perhaps 40 to 50 cents on the dollar. So if you owe $3,000, you
might offer a settlement of $1,200. Get to the bottom line and ask what it will take to reach a
settlement. You may go back and forth in the negotiations but stick to it.
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.
Get Deletions. Paid collection entries do not improve your credit score. It may even bring it
down. If you can get the debt removed from your credit file in exchange for paying a little more,
do it. Some collection agencies even have a “pay for deletion” fee. The collection agency may
delete their entry entirely but the original creditor may still show negative marks. Negotiate the
negative entries from the original creditor also. At the very least you want the original creditor to
show as “Paid as Agreed,” or “Account Closed/Paid as Agreed” and request any derogatory
remarks taken off your credit report. See Deletions
Secured Debt. Secured debt such as your home or automobile is a lot harder to negotiate a
lesser settlement. The debt is secured by real property and if you cannot make payments the
creditor can simply repossess or foreclose to cover the debt.
Never let the collection agency know where the money is coming from. First, it’s none of
their business, but more importantly, if you mention you are getting a settlement, tax return, or
borrowing money from relatives, they may press you for the entire amount. If you are negotiating
over the phone (why are you negotiating over the phone?) make sure you take excellent notes
and send a confirming letter, certified, return receipt and keep a copy for your records. The letter
should state that the creditor is accepting the lump-sum payment in settlement of the entire
amount you owe.
Do not give a collection agency your bank account or debit card number. Pay off the
settlement with a cashier’s check or a money order, preferably from another bank. Some banks
will not sell you a cashier’s check unless you are an account holder. The U.S. Postal Service sells
money orders. Be sure to keep a copy of the cashier’s check or money order.
Do not disclose your place of business. You do not want a collection agency bugging you on
your job and you definitely do not want a collection agency knowing where you work in case you
are sued. Do not make it easy for them to get a judgment and wage garnishment against you. It’s
not likely that collection agencies will go this far as the costs involved in pursuing a lawsuit are
expensive.
Settle Debts with Original Creditors. Learn to how settle debts for pennies on the dollars with
Original Creditors.
in damages for any violation of the Act. Read more on the process of Validation.
Debts are purchased for pennies on the dollar by collection agencies. 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.
Check the statute of limitations. Every State has a statute of limitations when it comes to
collecting a debt (See Statute of Limitations). If you are near the statute, you may choose not to
settle and allow the debt to become legally uncollectable. If you 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, tell them to leave you alone. The debt is legally uncollectible. When
it comes to your credit reports, a negative entry and the collection entry cannot remain after 7
years. Most times it will automatically be deleted when the 7 years is up. This is because once
the debt has gone unpaid for 7 years, it can no longer legally remain on your credit report.
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, perhaps 40 to 50 cents on the dollar. So if you owe $3,000, you
might offer a settlement of $1,200. Get to the bottom line and ask what it will take to reach a
settlement. You may go back and forth in the negotiations but stick to it.
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.
Get Deletions. Paid collection entries do not improve your credit score. It may even bring it
down. If you can get the debt removed from your credit file in exchange for paying a little more,
do it. Some collection agencies even have a “pay for deletion” fee. The collection agency may
delete their entry entirely but the original creditor may still show negative marks. Negotiate the
negative entries from the original creditor also. At the very least you want the original creditor to
show as “Paid as Agreed,” or “Account Closed/Paid as Agreed” and request any derogatory
remarks taken off your credit report. See Deletions
Secured Debt. Secured debt such as your home or automobile is a lot harder to negotiate a
lesser settlement. The debt is secured by real property and if you cannot make payments the
creditor can simply repossess or foreclose to cover the debt.
Never let the collection agency know where the money is coming from. First, it’s none of
their business, but more importantly, if you mention you are getting a settlement, tax return, or
borrowing money from relatives, they may press you for the entire amount. If you are negotiating
over the phone (why are you negotiating over the phone?) make sure you take excellent notes
and send a confirming letter, certified, return receipt and keep a copy for your records. The letter
should state that the creditor is accepting the lump-sum payment in settlement of the entire
amount you owe.
Do not give a collection agency your bank account or debit card number. Pay off the
settlement with a cashier’s check or a money order, preferably from another bank. Some banks
will not sell you a cashier’s check unless you are an account holder. The U.S. Postal Service sells
money orders. Be sure to keep a copy of the cashier’s check or money order.
Do not disclose your place of business. You do not want a collection agency bugging you on
your job and you definitely do not want a collection agency knowing where you work in case you
are sued. Do not make it easy for them to get a judgment and wage garnishment against you. It’s
not likely that collection agencies will go this far as the costs involved in pursuing a lawsuit are
expensive.
Settle Debts with Original Creditors. Learn to how settle debts for pennies on the dollars with
Original Creditors.
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. If the collection agency cannot validate the
debt they must immediately delete the debt from your credit files and cease any further
collection efforts.
request debt validation from the collection agency. If the collection agency cannot validate the
debt they must immediately delete the debt from your credit files and cease any further
collection efforts.
More Resources
Settle Debts with Collection Agencies. Learn to how settle debts for
pennies on the dollars with Collection Agencies.
Disputing information on your credit files Tips for Disputing Negative
information in your credit files.
Debt Validation
How to halt the collection process by requesting a collection agency to
validate your debt.
Get Deletions
Request Deletions when paying a negative account because paid
collections do not change your credit scores.
pennies on the dollars with Collection Agencies.
Disputing information on your credit files Tips for Disputing Negative
information in your credit files.
Debt Validation
How to halt the collection process by requesting a collection agency to
validate your debt.
Get Deletions
Request Deletions when paying a negative account because paid
collections do not change your credit scores.
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