Denha & Associates, PLLC Blog

Negotiating Debts With Debt Collectors Inside And Outside Of Court

By: Lance T. Denha, Esq.

With more accounts and fewer people having the financial capacity to keep up with the debts, collection agencies handling these debts on behalf of or in lieu of creditors are more willing than ever to negotiate with debtors. As a show of good faith, a Debtor seeking to avoid bankruptcy and attempt to work a deal with Creditor(s), should seek to work out a settlement arrangement with his/her Creditor immediately. What follows is a typical structure of what I see in my practice.

If a debtor has the means to pay a portion of his/her debts, this may very well result in being able to negotiate outstanding debts with debt collectors and avoid the possibility of filing for bankruptcy. However, it should be noted that if these debts are within the statute of limitations and are significant — several thousand dollars or more– such debtors may end up needing legal protection from your creditors. The purpose of this article is to keep the well-intentioned debtor in the driver’s seat by allowing he/she to continue to negotiate with creditor(s) in an effort to satisfy part or all of the outstanding debt owed to creditors.

If a debtor has failed to make payments to its creditors, it is inevitable that such creditors are going to hire a debt collection agency in the form of a law firm to pursue the debt on behalf of their client. Although Debt Collection Agencies/Law Firms have been hired to collect a debt, as scary as that may sound, it’s still a business for them that only makes sense if there’s a potential for collection. Put another way, if it’s unlikely a debt can be collected and it can be proven to the Creditor, a deal can be made instead of protracted litigation.

Unfortunately, not all debt collectors operate in the same fashion. Some can be very bullish and outright rude and threatening, while others more understanding and forthright. A legitimate debt collector will freely provide all information regarding the company, including name of the original creditor as well as the amount owed to such the creditor. A Debtor should be cognizant of the type of collection agency they are working with and provide information which is helpful to the overall success of negotiating such debt.

One form of settling debt is through a Settlement Agreement. A Settlement Agreement is an agreement between a debtor and the plaintiff/creditor that resolves a court case without a trial or a judgment. In most cases, the settlement agreement will include a payment plan or a lump sum payment. Generally, lump sum payments will result in a better deal (i.e. discount) than extending the payment term. The decision whether to settle a debt collection lawsuit is personal, and every situation is different. However, one might want to consider a settlement agreement if:

• You believe you owe some or all of the debt;

• The debt is fairly recent; and,

• You can afford to make payments.

Debtors should be firm, yet truthful to the Creditor, in an effort to consummate a deal and move forward debt-free. The goal is to offer a good faith settlement so that Creditors are satisfied they are able to work with debtors and obtain an amount they find reasonable and acceptable.

While an individual Debtor may seek to go at this alone, many others choose to hire a skilled lawyer in the area that may be able to get a better deal. Hiring a lawyer to do this for you is money well spent.