If you can’t pay a collection agency the entire amount you owe on a debt, you may want to try to negotiate a settlement with the collection agency. If you are successful, you’ll pay only what you can afford, and the collection agency will accept that amount as payment in full.
Sounds easy enough, right? But keep in mind that collection agencies are trained to get as much money as possible from consumers. After all, the more they collect, the more money they make! So negotiating an affordable settlement can be challenging, although it’s certainly not impossible.
Here are answers to two of the most frequently asked questions we get about settling debts with bill collectors:
How much (or how little) can I pay to settle my debt?
The amount you'll be able to settle for depends on a lot of different things, including:
Ultimately, if you try to settle a debt, your goal should be to settle for as much as you can afford without putting your personal finances at risk. Never agree to a settlement that you cannot afford! Otherwise, you are likely to create new financial problems for yourself. This means that before you begin negotiating with a collector it’s essential that you know exactly what you can afford to settle for.
Also, when you begin negotiating, never offer that amount right away. Keep it in the back of your mind, but always offer something less at first. Because whatever you offer, the collector is likely to counter with a higher amount so you need to give yourself some wiggle room to come back with a slightly higher offer. It may take several back and forth rounds before you and the collector reach an agreement.
Important Tip: Collection agencies are not required to accept whatever you can afford to pay on a debt. While they may have some "wiggle room" to negotiate with you, if your offer is too low, they may decide to sell the debt to a collection agency or sue to collect.
Can I pay a settlement in installments?
When it comes to collection agency debt settlement, the sooner you can pay the negotiated amount the better. Although some collectors will agree to let you pay a settlement amount over time -- maybe in a series of two to six payments -- most of them will expect you to pay the amount immediately in one lump sum.
For this reason, it is very important to put money aside before you begin trying to negotiate a settlement. If you cannot fund an agreement right away, a collector will probably cancel your deal. Also, the lower the settlement amount, the less likely that the debt collector will let you pay it over time.
Warning! Never pay a settlement amount until you have in hand a signed settlement offer. It should spell out the terms of the deal you agreed to and should include language stating that the debt will be considered paid in full when your payment is received. No settlement letter, no settlement!
Can I negotiate my own collection account settlement?
Sure, you can settle your own debt! DIY debt settlement is very common. The main advantage of doing it yourself is that you will not have to pay a fee to a debt settlement firm to negotiates for you, which means that you’ll have more money to settle with. Also, although there are good settlement firms, there are bad apples, too, and you may end up hiring one of them.
Still, it can be very helpful to get expert advice when you want to settle a debt. Here are a couple of reasons why:
Where Can I Get Help That's Not Expensive?
While debt settlement firms have gotten a bad rap (many deservedly so) there are some good ones out there that won’t charge you hefty fees or try to convince you to settle when you’re better off filing for bankruptcy. For example, here is an affordable option that combines the cost savings of do-it-yourself (DIY) settlement with the expert advice you need to confidently negotiate the best deal for you:
For an enrollment fee of just $149, this service gives you access to some of the best information and expert advice available on the web regarding how to negotiate and settle your own debts. You’ll also get a detailed analysis of all the various debt reduction options available to you so you can know if settlement is really your best option or you should pursue something else. If you decide to try to settle, you will pay an ongoing monthly enrollment fee of $50 for as long as you decide to remain in the program.*
Membership in this program can help you settle your own debt and get equal or better results than if a pro did it for you (and you will have professional advice to guide you through the process!) for a fraction of the cost of hiring a settlement firm. Professional negotiation and settlement services are available if you need or request them for a fair cost. This is one of the most affordable and effective debt negotiation programs we’ve found.
*Complete details about the ABR program costs and money-back guarantee are available here:
Get Advice About Settling Collection Accounts Here
Negotiating settlements on your collection accounts can be a win-win for you and the collection agency. You'll feel better knowing you've done everything you can to resolve your debt, and the collection agency will get paid what you can afford to pay. However, we also know there are times when it makes sense to consider bankruptcy.
So we encourage you to also get a free initial evaluation with a bankruptcy attorney to find out whether that's the best option for you to resolve your debts.
Please note: We are an affiliate of CRN and may be paid a small commission for clients we refer to them. We have consulted with CRN many times to get expert advice for consumers and we have also sent many consumers their way. As a result, we feel confident recommending their program to you.
Disclosure: We may receive compensation for marketing some of the services mentioned on this site. Above all though, our goal is to recommend products and services we believe can help our readers. You can learn more here.
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