If you are having a difficult time financially or you have debts that you cannot afford to pay back, one of the things you may consider is not paying and allowing those debts to go to collections. While this is damaging to your credit, it can be helpful if you want to negotiate and were not able to negotiate directly with the original lender or creditor.
When your debt goes into collections, the goal of the collectors will be to get as much of that debt repaid as possible. Since the debt may remain on your credit until you pay it off, it’s worth negotiating to see if the collections agency is willing to work with you to settle for a lesser amount. If so, then you may be able to pay a smaller sum, sometimes much less than you originally owed, and have the payment reported to the credit bureaus as “paid in full” or “paid as agreed.”
This account may stay on your record for a while, but you can often go into the credit bureau pages and ask that they be removed due to payment of the debt. This may help you repair your credit more quickly.
Will collections agencies always accept lower debt repayment settlement offers?
No, but some of them will. While most collection agencies push for the full amount you owe, you may be able to get them to agree to a lump-sum settlement that costs you less rather than setting up a longer-term payment plan.
If you do get an agreement to pay less than what you owe, ask the collections agency to send you the agreement in writing. That way, you will be able to show that you paid as agreed and settled the debt.
Why do you want to do this? It’s possible that the debt could come up again in the future due to another agency calling to collect. If you have proof that you already paid, you may avoid having to argue against that bill in the future.
What if you can’t settle what you owe?
If you can’t settle what you owe, then it may be worth looking into bankruptcy. Bankruptcy could help you get your finances back on track and help you have at least part of the debt you owe dismissed.