It is impossible for anyone to exactly predict how much a debt collection agency will accept during a negotiation over delinquent debt. All negotiations are different, and debt collection agencies are independent companies. That means one debt collector could accept a certain percentage, with another insisting on a different percentage. SmartMoney reports that generally, debt collectors will negotiate settlement of unsecured debt such as credit cards for 20 to 70 percent of the balance.
Debt collection agencies sometimes own the debt they are collecting after purchasing it from the original creditor. In other instances, the original creditor still owns the debt and hires the agency on commission. The original creditor reserves the right to approve settlement offers on assigned debts, with the debt collector making its own determination on debts that it owns.
Many factors can affect debt settlement agreements. Debt settlement is an accepted strategy for resolving delinquent debt, but it often requires strong negotiating skills on the part of the debtor. Debt collectors are at an advantage because of their experience, while debtors are often novices. The negotiations are strictly voluntary on both sides, with the debt collector having considerable leverage because of the threat of a lawsuit or garnishment if the debtor does not pay the debt.
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Debt collectors usually try to collect as much as possible and theoretically, could demand that the debtor pay 80 or 90 percent of the balance – or even all of it. Debtors can respond by offering to pay, say 20 percent, and continue negotiations from that point. Debt collectors may make different offers at different times depending on direction from the original creditor, or other factors. For example, debt collectors may offer a better deal during the spring when debtors are receiving income tax returns and may have some extra cash. Or the debt collector may offer a more reasonable settlement offer during the Christmas holidays when collection efforts are slower because debtors are spending on holiday expenses.
Debtors negotiating with debt collectors should start at around 20 percent and force the debt collector to counter. The process could take months because the debt collector may not make his best offer right away. Ultimately, it’s up to the debtor to decide whether a debt collector’s offer is reasonable — and affordable. Contacting the original creditor is also an option. The original creditor may refer the debtor to the debt collector, but making the call won’t harm the negotiations and could lead to a direct settlement.