5 Tips to Negotiate with Debt Collectors

Ignoring the phone calls from debt collectors is not going to solve your debt problem. Interest will continue to compound and your balance due will go up. You’ll also take a hit on your credit score every time you miss a monthly payment. As pesky as those calls may be, it’s best to find a way to resolve your debt.

Before you implement any of the five tips we’ve laid out here, pull up a loan payoff calculator to figure out when you can be debt-free and how much you’d save on interest by committing to a payoff plan.


Tip #1: Verify and understand your rights and responsibilities

First off, make sure the debt belongs to you. With the rise of identity theft, there’s a chance that the debt you’re being chased for is not yours. If you don’t answer the phone, you’ll never know that. Letting it go too far could result in a judgement against you.

If the debt doesn’t belong to you, dispute it with the creditor, not the collection agent. Debt collectors get paid for extracting funds from you. They don’t care if you’re the responsible party or not. Go back to the original party you owe money to and negotiate with them.  

Tip #2: Ask about hardship programs

Most credit card companies are offering hardship programs to offset the economic impact of COVID-19. They also offer them during times of national disasters and even when you’re simply unemployed for a while. If any of this applies to you, ask for hardship terms. 

If your only source of income is state or federal government benefits, it could be protected from garnishment by collection agencies. Before a debt collector can take action against your wages, they must take you to court, so any threat to just “seize” your money is empty. 

Tip #3: Offer a lump sum to discharge the debt

Having a lump sum of money available to negotiate with a debt collector is a good way to get your overall bill reduced and settled. This is a luxury for most folks, but the debt collector may be able to waive accumulated interest payments and penalties if you can offer up some dough. 

In fact, some debts are settled for pennies on the dollar if you can offer a lump sum payment. If you get an offer like that, ask for it in writing and make sure the debt collector reports it as “paid in full” to credit bureaus.

Tip #4: Mention bankruptcy fornegotiating leverage

Bankruptcy stops all collection activity. Debt collectors don’t want to hear the word, so use it wisely. If you happen to mention that you’re ‘contemplating bankruptcy,’ they might offer better terms. Give it a try. It usually works. 

Of course, you may run into a seasoned debt collector who has experience with that technique. They may even pressure you by threatening legal action, which is illegal for them to do, as debt collectors are not attorneys. Refuse any offer and call the original creditor directly.  

Tip #5: Get the entire agreement in writing

You can ask that the debt collector list your settlement as “paid in full” when they report to the credit bureaus, but they’re not obligated to do that unless you get them to put it in writing. That goes for any other terms of the deal you make as well.

Do not send any money or give the debt collector your bank account number until you have a written agreement. If you agree to make payments, make sure the agreement explicitly states that. If it’s a settlement offer, make sure the amount is clearly written and that it represents a full payment.