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Your goal is to Settle for the best possible deal. That means an agreement between you and the collection agency for payment less than was originally owed. This agreement includes never asking you for the remainder of the money.
Follow these simple steps:
- Call the Collection Agency
- Ask a representative:
• What is the total amount due?
• What was the principle amount owed?
• Who is/was the original creditor?
• When was the date of last activity (when the last payment was made)?
• Was the account purchased by any institution?
• Is the collection agency hired to collect by the original creditor?
- Action Steps _ Think like “Let’s Make A Deal”
Is the date of last activity within 2 years?
If yes, offer 70%. Traditionally, it’s an 80% settlement.
Is the date of last activity is older than 2 years?
If yes, offer a settlement anywhere from 30% -50%.
Be prepared to provide proof of why it should be so low. A Credit Report, Termination Letter, Unemployment Stub etc.
Is the original debt older than 3 years? If so, offer 50% settlement.
For example, if you owe $5,000 offer $2,500.
- Remember that debt collection representatives usually get paid when they bring in money. So you both really have a vested interest. When you offer to settle a debt, start very low. I provided industry standards above.
- If the collection company refuses, wait until the last 5 days of the month and then make another offer, this time slightly higher. Do not sound too anxious. You do not want them to try to get more money from you.
- Make a final offer. If they refuse, tell the debt collector you will settle the debt on your own with the original company you held the account with. Make it sound as if you will only settle with them if they offer you a really deep discount on the debt.
- Contact the company you owe the debt to and ask them if they will settle the balance for a lesser amount.
- With any agreement, ensure you receive a letter of agreement first, prior to sending in any money. Read the letter carefully, especially the fine print.
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