Negotiating With Collectors: Tips for Dealing With Debt
Those dreaded calls can give you sleepless nights. In some cases, they can push you over the edge. But there are ways of negotiating with debt collectors calmly and successfully.
Ideally, we would all like to keep a perfect financial record. No late payments. No unnecessary interest building up on our debts. Being squeaky clean means that when it comes time to get a loan or credit card, we qualify with no problem. Unfortunately, life happens and our bills may exceed what we earn. If a bill goes to collections, that perfect financial record is tainted.
While no one wants to be in this position, it’s not a hopeless situation. Knowing your rights as a consumer — laid out in the Fair Debt Collection Practices Act — will help put you back in the driver’s seat.
What is Debt Collection, Anyway?
It’s not fun, like a collection of Pokémon cards is. Debt collection happens when another company buys out your unpaid debt because the last company had too much too many failed attempts to collect your payment. The company probably won’t stop hounding you to pay the debt you owe.
This can be deeply stressful, sparking feelings that could lead you to lash out. That said, it’s important to stay calm.
What’s most nerve-racking about being in collections is that the debt shows up on your credit report. And the weight of that debt is bringing down your credit score. The further down it goes, the harder it is for you to qualify for a home or car loan, sign up for a cell phone or credit card, or even get a lease on an apartment.
Debts in collections are bright red flags on a report. As a result, you’ll encounter higher interest rates and higher down payments. Deposits cost more. It’s ironic that those with less money end up paying more and spiral further into the cycle of debt.
Negotiating With Debt Collectors
When dealing with debt collectors, make sure to get everything in writing. Debt collectors are pushy. They want to make you believe that if you don’t pay your debt right away, there will be consequences. It’s important not to give them any details. Ask them to send you what you are responsible for in writing. Keeping a paper trail will help you track what’s going on. If you want to dispute a debt, you must do so within 30 days of the date on the letter. That could be two weeks away, depending on when you actually receive the letter, so act fast!
Tips for Dealing With Debt Repayment
When you dispute a debt, you have to make your case. Be concise in your letter. For example, say something like, “I’m not responsible for this debt because I didn’t live in the house at the time the carpet was damaged.” You’ll need to provide evidence of when you signed a lease. If you have photos of when you moved in, offer them as proof, as well.
I’ve had a few financial situations that caused me undue stress. One was a hospital bill that my insurance company refused to pay because the emergency room I went to was out of my network. As if I had a say in where the ambulance took me. After a year of back-and-forth, they agreed to pay the bill in full. That’s when I learned that PPO insurance is far better than HMO insurance.
In another instance, I discovered the value of reading every part of a lease agreement. Being charged for damage caused by previous tenants’ pets is not ideal. This seemed to be a money grab by the leasing company. Without getting into too many details, I was able to make the case that I was not at fault.
Through all of this, I learned to never just accept the consequences.
We as consumers have the right to make our case and don’t necessarily need a lawyer to do so. The power of negotiation can save us thousands of dollars.
At the same time, we have to be fiscally responsible, know our limits, and live within our means. It’s vital to save money for emergencies because life happens, and having a buffer to mitigate the effect will help us stay out of collections.
Sometimes, we are at fault. Admittedly, I had an unpaid bill that I ducked for more than a year when I was a teen. That still hurts me to this day. If you accept responsibility and choose to pay a debt in full, you can ask a debt collector to request that it be taken off your report.
If they choose not to do so or the damage is already done, you can offer to pay half to have them stop calling you. They bought your debt for pennies on the dollar, so it would be a win-win for both parties. Be smart and know your options.