Is your debt causing you to lose sleep at night?
If you’re feeling overwhelmed by how much you owe, there are many different kinds of debt consolidation solutions you can consider.
While each of these can help you get back on your feet, there might be one course of action you aren’t considering: simply contacting your creditors and asking for a debt reduction.
Sound intimidating? It doesn’t have to be.
Today, we’re sharing how to work with debt collectors in a way that’s respectful and effective. Read on to learn the specific steps to take.
Step 1: Understand Your Debt
Before you can talk knowledgeably about your debt, you have to understand it. By law, all debt collectors must provide key facts about any debt they’re trying to collect.
Upon first contacting you, or within five days of initial contact, the collector must share the following data with you:
- How much you owe
- The name of the original creditor seeking payment
- A statement explaining that you can dispute the debt or request the contact information of the original creditor within 30 days
This step is known as debt validation.
However, these details can often leave you with more questions than answers. In that case, you can respond by issuing a debt verification letter with 30 days of receiving the validation notice. The collector cannot contact you again until it’s issued a separate validation letter in response.
Statutes Of Limitations
Before you move too deeply into this process, make sure the debt in question is still valid, timeline-wise.
The statute of limitations for a given debt is the period in which your creditor could sue you for defaulting. Often, this period is between three and six years, though it’s important to check with your state for specific details. Some states will even restart your timeline if you issue a partial payment.
You can see a breakdown of the debt statutes of limitations for all 50 states on this site.
Is your statute of limitations nearing its expiration date? If so, your collector might be willing to discuss a lower payment or more favorable terms with you. If it’s already expired, then you have a strong defense against the charge that could stop a creditor or collector from obtaining a judgment in the first place.
Step 2: Create A Repayment Proposal
Even with the right information in front of you, it might still feel like your debt is too high to pay. This is when it can pay to contact the collector and work with them.
Yet, you shouldn’t just pick up the phone and start talking.
Rather, you’ll need to approach the collector with a carefully-created repayment proposal that outlines your plan to repay the lower debt in a timely manner.
While creating this plan, be honest with yourself. How much can you realistically offer to pay each month? You don’t want to fall behind on your other debts because you’re focusing all of your efforts on this one.
To get accurate numbers, begin by writing down a simple budget. List your monthly take-home pay, along with all of your regular expenses. These expenses should include all of your existing debts, as well as the amount you want to pay each month toward this specific one.
Keep in mind that you still want to wind up with money left over at the end of the month! Rather than breaking exactly even, strive to leave a little bit for emergencies and unexpected expenses.
With these numbers in hand, decide how much you’re willing to pay to cover the debt in question. You might present this data as a number of monthly payments or a lump sum figure.
Step 3: Contact The Debt Collector
With your thorough debt repayment plan in hand, it’s time to contact the debt collector.
Rather than launching right into your plea, begin by explaining the details of your proposed plan. As you do so, share about your financial situation and why you’re making this request in the first place.
While it might be tempting to dive into an emotional diatribe, stick to the most important facts, and keep your tone as neutral and even-keeled as possible. The goal is to appear confident, respectful and trustworthy.
In many cases, it pays to partner with a credit counseling agency or an attorney to make sure you’re presenting your case as accurately and favorably as possible. Often a debt collector is more willing to listen to this kind of proposal than an original creditor would be.
Another step to remember? Be sure to record the entire conversation. Down the road, you might not remember certain details the same way that the collector did, and making a recording can help everyone get on the same page.
If a debt collector promises to halt collection efforts, lower your debt amount, or forgive your debt altogether, you’ll want those details recorded so there’s no sudden reversal a few months down the road.
How to Work With Debt Collectors, Not Scammers
As you research ways to lower your debts, you might encounter companies that sound too good to be true. Often, they’ll advertise quick and cheap solutions that capitalize on your sensitive situation.
If any agency asks you to pay money before they’ll help you manage your debts, continue your search elsewhere. As mentioned, a credit counselor or lawyer is your best bet if you want someone else by your side during this process. They’ll offer expert, unbiased advice and guidance and won’t try to swindle you out of even more money.
Debt Help You Can Trust
Are you ready to reclaim your financial footing and get on the other side of your mounting debt?
Once you know how to work with debt collectors, this step alone can make a major difference in your personal finance journey. However, it isn’t the only step you can take.
In many cases, you’ll have this conversation while also pursuing other options in the background. One such solution is debt consolidation. With this quick and easy approach, you can bundle your monthly debts into one manageable payment, often with a lower interest payment.
To learn more, fill out this form. We’ll put you in touch with expert debt consolidation companies that can help you get back on your feet, one step at a time.
