To give you some background, most bad debt companies pay or receive literally pennies on the dollar for the debts on which they are trying to collect. With this in mind, you should always start your offer at 25% or less. Remember, the credit card companies are out of the picture at this point. This money goes directly to the collection agencies. Some key points to remember when negotiating debt are:
-Never talk to a collection agency on the phone. Period.
-Get your terms in writing before you even open your checkbook. Never expect a creditor to meet an agreement that was made verbally. Everything must be in writing and, even then, you will probably have to fight to make the creditor live up to his end of the bargain.
-Keep good records. This can be the difference between a good and bad settlement. Do not expect them to remember you or what you agreed upon.
-Send all correspondence via registered mail, receipt requested.
-Keep a copy of every letter you send.
-If you call keep a log of when you spoke to the agencies, and who you spoke with. Ask for the name of the supervisor of the person you spoke to, as the turnover rate at collections agencies is high.
-Follow up all phone correspondence with a letter (registered, of course).
-Penalties and extra interest are typically fictitious amounts of money added on by the collection agency to pad their profits. I have seen as much as to 50% of the debt or more claimed to be owed by a collection agency consisting of interest and fees. This is illegal, every state has usery laws (which dictate the maximum interests allowed to be charged.) Most companies would be thrilled to get you to pay the original debt even without the extra penalties they add on and will usually be more than agreeable in waiving these fees.
-Time is on your side. As time passes, the creditors will likely stop calling and the debt will be filed away for future attention. The longer the debt remains uncollected, the better your chances will be of getting a good settlement. Eventually, the creditor will consider the bad debt a loss in order to receive a corporate tax write-off. This does not necessarily mean that they will not pursue you for the debt. The corporation may then collect on the debt themselves, sell or assign the debt to a collection agency, press for a judgment and garnishment, or temporarily ignore the debt. The course of action chosen by the creditor will vary widely between corporations and debts.
-Never look too eager to settle. Take plenty of time to reach an agreement. Never let it slip that you need to settle the debt because you are buying a home, car or anything else. If, for example, you tell a creditor that you really need to get this debt settled to get into your dream home, you can forget any kind of settlement. The creditor will insist on the full balance. Do not accept the first, or even second, settlement offer. Make sure that they are the ones calling you to push the deal forward. You cannot expect to reach an affordable settlement if the creditor thinks he has the upper hand.
-It will be in your best interest if the creditor believes that you have very little money and you are teetering on the edge of bankruptcy. You should approach each creditor as though this is their last chance to compromise, and get something out of your debt, before you declare bankruptcy and they get nothing. Be careful when doing this, however. If you accumulate any more debt after stating this to a creditor, (and they record all of your correspondence and phone calls), you may not be able to discharge this debt within bankruptcy.
Dan Delgado is an active unsecured debt negotiator, he has experience negotiating personal as well as business debt.
For more information please visit pemperandgartle.com pemperandgartle.com
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