Negotiating with Creditors / Collectors

Collection calls can be unnerving and intimidating. It’s easy to feel like you have no power in the call. And some (far too many it seems) collection agents use bullying tactics to collect which make matters more frustrating.

But you do have power. And there are rights that you have. And there are things you can do to negotiate with the collection company.
Will they always work? Sadly, no. But you won’t know until you try. And really, you have nothing to lose by giving it your best effort.

The Following are 3 Strategies Neccesary to Have a Successful Outcome with a Collection Agent

1. Be sensible! – calling and yelling or cursing will not get you anywhere. Be courteous. Be kind. And keep your cool. Tell a brief version of your story. Generally speaking they don’t care about the details and a long story will get you off on the wrong foot.
2. Be specific! – Explain what you need…a few months of reduced payments or help so you can get the debt paid off more quickly. Know what you are asking for. Saying “you need to do something for me” is not specific enough. Ask for a reduced interest rate…or no interest…or lower payments…etc. Or my favorite phrase, simply ask “what can you do for me?”
3. Be persistent! – If you don’t get the answer you are looking for, don’t be afraid to call back and speak to another person, or give it a week or month before you call again. Often you will get a different answer. Depending on your circumstances, you may need to meet some criteria before they will do anything (like making up lost payments or not being late on a payment for a few months).

When to Contact the Collection Agent

The best time to call is ALWAYS before you are behind on payments. React early as soon as you know things are getting tough and the juggling has started. Having said that, you still have some negotiating power once the account is in collections.

The Written Word…

In addition to the above guidelines, I am a huge fan of putting things in writing. You may start with a phone call, but following up with something written can help ensure you document your efforts which can come in handy if you need proof of what was said or agreed to. And may aid you if you end up in court over the debt. Always keep a log of who you spoke to, the date, and the outcome…just in case!

Is there a Statute of Limitations on Debt?

Before I offer some resource letters, I want to briefly mention the Statute of Limitations on Debt. I recently had a client send me an excerpt from the Limitations of Actions Act of Nova Scotia (each province has their own) asking if it was true that they could no longer pursue him for the debt. I find it important to make two points here:
Point #1 – I would like to note the difference between collecting and pursuing. The Statute of Limitations prevents a creditor from “pursuing a debt through the court system” after a specified time (6 years in NS).  It does not, however stop them from trying to collect from you or continue to report on your credit bureau.  This is important. Although they may not be able to take you to court, the fact that the debt still shows as outstanding and in collection on your credit report can have major impact on your ability to re-establish your credit.
Point #2 – If you “acknowledge” the debt within the six years, in writing or by making a payment (the actual excerpt from the Act is below) this can negate the 6-year window. I encourage you to look up the Limitations Act in your relevant geographic area to ensure you have accurate information based on your locality.
“If any acknowledgment has been made, either by writing signed by the party liable by virtue of an indenture, or by virtue of any specialty or recognizance, or his agent, or by part payment, or part satisfaction on account of any principal or interest being then due thereon, the person entitled may bring an action for the money remaining unpaid…”
So!….sending a letter, if there has been NO contact whatsoever, may actually impact your efforts negatively. Just something to be cautions of. I do offer this letter Sample letter – To creditors – statute barred debt DOC as a resource specifically to this cause.

When a Written Request Makes Sense

If this is a new collection account, I have a group of other letters that may be helpful.
Initially, sending a letter requesting proof of the  debt can ensure that you are dealing with a legit collection company and the amount they are collecting is justified.   Sample letter – To creditors – request for information DOC
You may want to send a letter advising what you can afford to pay Sample letter – To creditors – notify of payment amount DOC, or, if the situation warrants it, that you cannot pay anything at this time Sample letter – To creditors – notify of inability to pay DOC. In some instances, if you have an arrangement and they are requesting more, you may need to notify them that you can only commit to your previous payment arrangement Sample letter – To creditors – inability to increase payment DOC. In all cases, these letters should be accompanied by a current Income & Expense Summary Form outlining your present cash flow position.
Advising of your situation may offer some reprieve from repeating yourself to various collectors for the same account. And, as mentioned earlier, can aid you if the creditor/collector does take you to court. At the very least it should ensure you not paying any more than you should be by justifying the debt and the amount before any payment is made.
For PDF versions of the letters, visit the download page.
Dealing with collections is no fun. But with a little preparation and patience, you can approach it armed with the right tools which can get you closer to your desired outcome.
Wishing you happy, healthy finances!
Mary Ann Marriott
aka Dr Debt

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