Credit Mechanics Part 2 - Negotiating with the Creditor / Collection Agency

Negotiating Theory Part 2

It is important that we cover the theory behind what should inspire a sense of entitlement on your part to settle your debt for pennies on the dollar despite the discouragement you will receive from the creditor / collection agency. Keep in mind, when I say "pennies on the dollar" what I mean is a savings of 30% to 75% of what you originally owe in debt on any given collection. How is this possible?

Great question! Collection agencies want you to think that the debt they're trying to collect from you is the original debt that was borrowed along with all of the late fees and penalties. In reality the debt that they purchased was at a wholesale rate. In other words, when you opened up your Master Card and charged up $800 and never paid it back that debt was sold to a collection agency for around $300 or so and the original creditor wrote it off as a loss. Then the collection agency turns around and attempts to collect that debt from you for the full amount in addition to late fees and penalties that continue to accrue.

Knowing the truth about the amounts of money that could be involved with your debt and the strategy behind the collection agencies methods to collect is the intelligence you need to formulate your plan to counter this assault on your privacy and peace of mind. Here is what you need to know going into your phone call:

Step 1

Call the creditor / collection agency and tell them you want to settle the debt. Get the name and extension of the person you are talking to. Along with the date and time of the conversation. Make sure you log this in your file for the particular trade line you are calling in reference to.

(Please note: assume that the amount of the debt owed is $1,000.00)

Step 2

Listen to what they have to say and make a note of it. Often times they will tell you bluntly that you owe the full amount but that if you pay it today they will knock off some small amount, usually 10% which in this case is about $100.00

Step 3

At this point what you want to do is tell them, "listen, I don't have that much money but what I can pay is is $250 right now. Can you work with that?" In response the collection agency is going to tell you that they don't have the authority to take that and that they will have to call there client (the original creditor) and get back to you. The truth is, they're not going to call anyone. They might put you on hold and make you think that they calling someone, only to get back on the phone with you and tell you the answer to your request is "NO, their client would not accept that offer."

Step 4

Tell them you want to talk to a supervisor. Inform them that you're in the process of cleaning up your credit and trying to avoid filing bankruptcy. Tell them that you have a very limited budget and that if you can't settle for something that you can afford that you will take what very little money you have and file for bankruptcy. So what you're offering is what you can afford and they can take it or leave it.

Step 5

Shut you mouth, don't say a word. Let the silence sell them on your offer and watch what happens. you will most likely settle for something in the ball park of 50% or better. And if for any reason you are not happy with the offer that they make on behalf of your settlement be sure to leave your name and number and tell them that you're off to call your other creditors and pay them the money that they're going to miss out on and ultimately if they do not call you with a better offer than you will simply file bankruptcy and they will get nothing. Tell them your credit is already ruined and you have nothing to lose. I can assure you that within hours or days you will receive a call from the account manager with an update and a possible offer that makes better sense for your budget.

This technique really works, all you have to do is work it. Use your imagination and be confident. You deserve to settle your debt for as little as possible and get your credit back on the right track. Look around the website community or yellow pages and inquire with some credit counseling companies and or credit repair companies if you feel that you want to hire a professional to negotiate the settlement of your debt for you. It will cost you but it is an option nonetheless. I hope that this information will help you to do it yourself and save you money. Again if you have any questions please feel free to post your question in the comment section and I will be sure to get back to you with the answers you need.