Negotiating debt works best before your account is transferred to a collection agent.
When your account is with a debt collector, depending upon how long the collector has held the debt, you may be able to negotiate either a repayment plan or a payoff at a reduced amount, but rarely are you able to negotiate both.
Being contacted by collector can be frightening. Collectors use scare tactics often and sometimes, but there are lines they are not to cross. Unfortunately, they do so be prepared. Know what they can and cannot do. Familiarize yourself with the Fair Debt Collections Practices Act (FDCPA).
MOST importantly start by requesting proof and validation of the debt. This basically means you want proof they have right to collect the debt and proof that the debt exists. It can be complicated so a good explanation can be found here.
Why bother? Check the FDCPA you have rights. How do you know the person calling actually owns or has the right to collect the debt? Maybe it's the guy down the street.
Debt, what debt? You have two options to play with the question. First, the collector has to have proof that the debt exists. Do they have old records of the payments or better yet the signed contract? Demand it.
The second option is for old debt that may come back to haunt you.
Do not even acknowledge any debt before you check the Statute of Limitations for debt collection in your state and what triggers a new date under statute.
Most have a period of time for legal action to collect a debt. These time period vary depending on your state. In most states the statute of limitations begins when the last payment was made. But watch out. In several states the beginning time period restarts when you acknowledged the date. Be careful. Look both ways. Check your states Attorney General website.
Be prepared to be told you must pay the amount in full and pay it now. So be mentally prepared. Collectors are trained to be aggressive. Stay calm and do not sink their level. Take notes, times, dates, names and addresses if necessary. You may to have information to send to the Consumer Financial Protection Bureau if your rights have been abused.
One you have done your above homework, make sure you have prepared your budget and now how much you are able to pay the collector on a monthly basis.
The original demand will always be for payment in full right now or a monthly amount much higher than the original payment. Next will come threats to garnish your wages if you do not pay the amount demanded. This is a pretty common threat even when garnishment is not allowed in state. Be sure to check your state law.
Collectors can not just call your employer and order them to withhold amounts from your pay. It takes a court order and you must given notice to appear and present your case. This is where your notes and offers come in to play. Better yet, negotiate a mutually acceptable repayment plan before you get there.
Do not promise what you can not pay. Making promises you can not keep is not a form of debt negotiation. If necessary, offer to share you cut to the bone budget to the collector.
Make sure that once you have reach a mutually agreeable payment, get it writing. Without a written agreement, you are open to someone other than who you spoke advising you that the person with whom you negotiated did not have authority to make a deal. No written agreement; no deal.
Do not give the collector access to your checking account under a debit program. Their withdrawals from you account will not stop if from reason your cash flow is impaired. Collection agents are known for trying to take money out of account repeatedly whether the money is there or not causing your account to over-drafted. Having the account number will make it easier for it to levy your account (with a court order). Levying your account is essentially draining all of your money from it.
Do not provide it with predated checks. These are often deposited immediately.
When negotiating debt, the older the debt the more likely you will eventually be offered a pay off at a discounted amount. If somehow you are able to get the money, do not accept the offer until you have it writing. It sounds simple but often is not. Do not accept email as a substitute for a written and signed offer. One old trick of some collection companies is to call upon receipt demanding the balance because the person you made the deal with was not authorized to make the deal.
If you cannot make an arrangement is may be time for an extreme action to and call a lawyer to find out if bankruptcy can protect you.