Negotiating and Settling Debts and Accounts

August 19, 2008

Maybe you want to improve your credit; maybe a debt collector has contacted you. Either way, there are several things to keep in mind if you decide to negotiate an account settlement with either an original creditor or a debt collector.

Research and negotiate all legal aspects of the account. Examples include credit reporting of the account, resale of the account, tax implications of a settlement [including discharge of indebtedness (DOI) income], acknowledgment of the debt, and several other considerations.
Watch for illegal collection techniques. Collection agencies and even original creditors may violate applicable state and federal law when trying to collect on an account. Document any such violations to prevent them from compromising your negotiation.
What is the debt collector’s reputation? Attorneys specializing in credit issues often repeatedly deal with the same creditors and debt collectors. You may want to get the advice of an attorney who has dealt with your particular creditor in the past.
Conduct all negotiations in writing. This can cut down on the stress of the negotiation, and will also provide documentation if the creditor or debt collector violates any laws in its attempts to collect.
Give the creditor or debt collector only your name and the account number the creditor referenced when contacting you. Note: the creditor / debt collector may have referenced its own internal account number, which may be very different from the account number in your records.