College Student Confused About Handling Debt Collection and Striking a Deal

I am a college student who got in over his head. I know I made a mistake and now I have to deal with the consequences.

I raked up about $6000 of credit card debt on one card that I started falling behind on the payments and stopped paying about 4 months ago because I was unable to find work until recently. As a result, the credit card company referred the debt to a debt collector about 2 weeks ago.

I've read some articles on this website and on MSN about how to deal with debt collectors, but I'm still somewhat confused about certain details and what to offer as a deal. First, I was wondering if it isn't too late to talk to the credit card company directly and see if they can offer me a payment plan that I can afford so everything doesn't have to go through a debt collection company.

If that's no longer an option and I have to call the debt collectors, what should I do? I can only work part time and make about $600. I certainly can't afford to pay in full and I don't have any assets or savings. I heard that you should call at the end of the month to a debt collector and start off with an offer of about 25% of the total debt, which in this case would be $1500.

Does that sound like a good idea? Even that I can't afford to pay in whole and would have to have it broken up into 3 payments at least. What about a deal in which I pay half the debt over a course of 6 to 8 months (about $375-$500 a month)?

Overall I just don't know how to strike a deal and what I should offer. Any advice would be appreciated.

Comments for College Student Confused About Handling Debt Collection and Striking a Deal

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Feb 25, 2010
Negotiating with a debt collector
by: Gerri

I imagine this is pretty confusing and overwhelming for you. The challenge is that there is no single approach (or specific formula) for negotiating with a debt collector. It's a negotiation - a matter of give and take. We discuss negotiating in more detail in our ebook Debt Collection Answers, and you can
read the first chapter online for free here. But here are a few tips:

The most important thing for you to know is your bottom line. That's the most you can afford to pay. You always start lower than your bottom line, and negotiate up to your bottom line. Never start at your bottom line.

It doesn't hurt for you to call the original creditor, and see whether they will work with you. It may or may not work, but there is no reason not to try.

You may find, though, that you can get a better deal from the collection agency. However, part of the challenge here is that you don't know the arrangement between the creditor and the collection agency. The creditor may still own the debt and simply be allowing the collector to collect on their behalf. In that case, the collection agency may be limited in how low they can go. If the collection agency has purchased the debt, they may have more flexibility to offer a lower deal. (If you can, try to find out from the creditor whether they have assigned the debt or sold it.)

Also remember, when negotiating, don't give the collector details about your work, how much you earn etc. Say as little as possible, make your offer, and stick with your guns. Don't agree to pay more than you can afford or you are setting yourself up for more problems. If you can't pay what they need now, then you must simply wait until they either come down, or you increase your income.

Please share what happens with your situation in the comments section below this question. We are very interested in hearing how this turns out for you, and your experience can help other students who are dealing with debt collectors.

Feb 25, 2010
Debt Validation
by: Craig

Hi Gerri,

Thanks so much for your quick response! I will definitely call the creditor to try and find out what kind of deal they made with the debt collector to see whether they sold the debt or just assigned it to the collection agency.

In the meantime I was reading this article on debt validation at this website that the author of the page recommends trying before negotiating with the debt collector. The article recommends sending a letter like this, , before the 30 day window for debt validation closes. Does this sound like a good idea? Is there really any point to the process beyond just verifying that the debt collector has the right to collect my debt (and it being a possible stalling tactic)? Might it be something smart to do?

Thank you!

P.S.-Would having the mark of a collection agency on my credit report keep me from taking out a new student loan even if I try to sign up for the loan with a co-signer with good credit?

Feb 26, 2010
verification of debt
by: Gerri


Yes, we talk about writing to a collection agency to verify the debt in our ebook, Debt Collection Answers. In fact, we state in bold type in the ebook that this is an important consumer right.

I didn't realize from your email that you have just recently been contacted by a collector. If it has been less than 30 days since the initial notice from the collector, you have every right to request verification of the debt.

I have to confess, though, I am not a big fan of the type of letter you've found online. There is no need to quote legal statutes or use specific formal language like that in your letter. A simple, straightforward request is fine. Just make sure you put in your identification information (name, current address, and account number if there is one), tell the collection agency you want them to send you written verification of the debt, and that's it. Send your letter by certified mail, return receipt requested.

The verification will do two things:

1. It will allow you to double check that the amount they are asking you to pay is correct and

2. It will give you some additional time to research your options for resolving the debt.

My understanding is the collection account on your credit report can make it difficult to get a student loan (or require you to pay a higher interest rate). But the damage is done. Whether it's paid or unpaid, it affects your credit the same way. We describe approaches to getting collection accounts off your credit reports in our ebook and we also have a new podcast on this topic that you can listen to here:

MP3 File

Jun 18, 2010
A Few Questions
by: Craig

You have been so great for answering my questions a few months ago and I would really appreciate it if you could answer a few more.

First off, I was wondering if you could negotiate with a debt collection agency through the mail once you have already sent them a cease communications notice. I'd rather not deal with these people on the phone and I want everything in writing, but I don't know if they are allowed to respond to my proposals for a settlement if I send them one now.

Next, when you have multiple debt collection agencies, including a law firm, contact you about handling a debt, which one should you go through to settle?

Finally, is the threat of bankruptcy a good bargaining chip to get a good deal on a settlement or is it just likely to anger the collection people and the creditor and make them sue you more quickly?

Thanks again!

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