How to negotiate with debt collectors

If you think you will lose the case, you can contact the debt collector as soon as you receive notice of the case and try to settle the debt before the court hearing.

You have the right to see proof of the debt before agreeing to pay any money. This is called debt “verification” or “validation.” See a sample Letter to a Creditor Requesting Verification of Debt. If you did not receive any documents explaining the debt before the court date, then you can request to see the proof at the court hearing. You are allowed to wait until after you review the proof to discuss settling the case.

If you settle before court, get documentation in writing from the debt collector that the case is being settled. Confirm that the debt collector will report to the court that the case is settled. You can also call the court to confirm whether the case has been settled. Otherwise, if the court case proceeds and you do not show up on your hearing date, you will automatically lose your case.

Consider:

• the amount you owe;
• whether the debt collector has documents or other proof that shows you owe the debt;
• whether the 6-year statute of limitations has passed;
• whether the “contract” you first entered into for the debt, like a contract with a credit card company, was unfair;
• whether any amounts (e.g. fees) you were charged were unfair or disputed by you; and
• whether you have protected income and assets. 

If so, you might have defenses that could help you win your case.

It is important to show up to your hearing in court. Otherwise, the court may “issue a default judgment.” This means you automatically lose the case.

If the clerk calls your case and you have not seen the proof, you can let them know that you would like to see the debt collector’s proof and have a few minutes to review it. 

There are 3 possible outcomes in these cases: 

1. settlement, 
2. dismissal, or 
3. judgment.

If you proceed with a trial, you can ask the judge to dismiss the case or to rule in your favor for a particular reason. If you agree that you owe the debt, but you cannot pay, you can sign an “agreement for judgment.” You may be required to make payments if the court finds that you have wages or other non-exempt income that you can use to pay.

After a trial, you will get a “judgment” in the mail from the court about the ruling in your case or if there were issues of proof at the hearing and the case was dismissed. If the case is dismissed or the judgment is in your favor (“Judgment for Defendant”), then the case is over.

You can also negotiate a settlement after a judgment is entered against you (“Judgment for Plaintiff”). If the judgment is for the full amount you owe, you can still get the creditor to agree to allow you to pay less.

After the judgment is entered, find out who is responsible for collecting the debt. You can do this by checking who you owe the payment to on the judgment form and contacting them. You could also contact the court to get the plaintiff’s information. (The plaintiff is the debt collector or creditor.) Then you can negotiate with them. 

In Small Claims Court, when the court rules in favor of the debt collector, they often set up a Payment Review hearing. You may have a better chance of settling the case when you go to the Payment Review hearing. You can create a payment plan based on your budget or explain why you can’t afford to pay. But you can also try to settle by phone before your Payment Review court date. If there is no Payment Review hearing, you can contact the debt collector directly and ask to set up a payment plan.

Debt collectors have to give you (and the court) certain information about your debt, known as “validation” information.

Debt collectors usually must show this documentation: 

• the bill of sale*, 
• affidavit from the creditor (including the amount of debt, itemization of the debt, and how this was calculated), 
• account statements, 
• a copy of the original contract or agreement, and documentation showing that your account was part of the sale (e.g. schedule of accounts sold).

These documents must show:

1. that you owe the debt, 
2. that you entered an agreement with the creditor, 
3. that the account number corresponds to your account, and 
4. documentation of the current amount of debt you owe.

* Important: If you are dealing with a collector that has bought your account, they must show ownership of the account through a “bill of sale.” An affidavit from the collector or credit card statements are not enough alone. Ask them to bring a physical copy of the bill of sale. 

You can either request these documents in court or ask for proof by sending a debt validation letter. See a sample Letter to a Creditor Requesting Verification of Debt.

Debt collectors and creditors often do not have all the required documents, so it is important to ask for them because this could help you win the case. 

Debt collectors and creditors are more likely to agree to a lump-sum payment. This means a single or a few payments, instead of monthly payments.

Remember that you do not have to agree to their specific amount, and you can negotiate the debt down. Some debt collectors are willing to settle for 50% of what they say you owe. Others may want 75-80%. You can start with a low offer and work your way up from there. Usually, the debt collector starts with a number that is higher than the lowest amount they are willing to accept. If you can, let them make the first offer, so you can tell where their starting point is.

Some debt collectors will also agree to a short-term payment plan for less than the full balance. Sometimes they may agree to postpone a court case to give you time to make the payments. Other times they may ask you to agree that a judgment should enter in their favor. This means they are asking you to agree that they should win the case.

If you reach a settlement agreement, keep these things in mind: 

• Make sure you can afford the payment plan.
• Make sure the document you sign does not say “judgment” on it (unless you agree that the debt collector should win the case).
• Make sure no future interest will be accruing on your debt.  
• You can ask the debt collector to remove interest and fees from the balance of what you owe. 
• Judgments are public records. They do not usually show up on credit reports. But they may show up in housing and employment screenings.

You can agree to pay the amount:

• in a few larger payments, 
• a monthly repayment plan, or 
• all at once, if you can afford it. 

It depends on what works best for you.

Know what you want to ask for before going into the negotiations. Calculate a realistic payment plan and make a repayment proposal to the debt collector. To do this, you can: 

1. Use your monthly take-home pay and monthly expenses to figure out how much you will be able to pay each month. 
2. Decide what period of time you will be able to make payments to reach the full amount you owe.
3. Find out if you have protected income and assets. Creditors cannot take money from that protected income, unless you agree to it.

Before you speak with the debt collector, make a list of the facts above and have all documentation ready and in front of you.

Tip

If you can pay a larger amount quickly (usually within 3 months), debt collectors are often willing to accept less than the full amount they say you owe. 

Start negotiations as low as possible and set a limit on how high you’re willing to go. You can slowly adjust the offer, but feel comfortable being firm. Do not let them convince you to accept a payment plan that you can’t handle, like higher payments or less time. Do not agree to pay more than you can afford.

If you lose your case, then you owe:

• the amount the judgment says you owe, 
• the court filing fees, and 
• interest.

You may be able to avoid a judgment with interest. If you are agreeing to a judgment or settling a case, be sure that the debt collector signs a document agreeing to waive all “pre and post-judgment interest.” 

Be prepared. Creditors and debt collectors are strong negotiators because of their line of work. They usually negotiate to give themselves the best deal, not you.

If you agree to a plan, record your payment and debt collector’s promises. Put it in writing. 

To learn more, see What happens if I lose my debt collection case? 

No, you do not have to agree to the payment plan they offer. You can negotiate. Do not agree to pay more than you can afford. If you accept an offer that you cannot afford and default on the payment, there can be legal consequences. 

Before the judgment is entered, you can negotiate as much as you like. Remember your firm number of exactly what you can afford to pay, and over what period of time. Go into negotiations with that number in mind. 

After the judgment has been entered against you, negotiations are less flexible. There is a balance that the court has determined you owe, which is written on the notice of judgment.  You can try to negotiate the amount you have to pay back. You can try to get the debt collector to agree to a lump-sum amount or payment plan for less than the judgment amount. But keep in mind that the court may set the amount for you (usually based on income) if you and the debt collector cannot agree on an amount.  

If they propose a plan you can’t afford:

You can tell the debt collector during negotiations that you cannot afford a plan, and they will usually try to work with you.  It is very important to have proof of your income and the debts you owe, especially if you are settling before a judgment is entered. If you are in court, you can ask the court to review the settlement agreement you have come to with the debt collector or creditor. But courts tend to not get involved with settlement agreements unless someone violates the agreement. For a Payment Review hearing, the court must follow the exempt income laws. See “Money and Property Protected from Collection.”

No. You can negotiate a payment plan. Remember:

• You don’t need to pay the full amount all at once. But if you can pay a larger amount quickly (usually in 3 months), debt collectors are often willing to accept less than the full amount they say you owe. 
• Interest grows on the judgment amount. In Massachusetts, interest at 12% per year is added to a judgment unless the debt collector agrees to waive interest. 
• Debt collection judgments last for 20 years in Massachusetts. The interest will increase the amount of money you owe until you pay off the judgment. 
• Only agree to pay what you know you can afford. 

See “What do I owe the plaintiff, and when do I have to pay the debt?”

Debt collectors and creditors have the right to try to collect money you owe them. But you also have rights. See “What are my rights when debt collectors contact me?”