Making Debt Collection Companies Settle

by Steven on February 24, 2012

Before the economic downturn credit card debt was at an all time high. Estimated at almost $1 Trillion dollars. A large number of these accounts went bad because the card holders couldn’t keep up with the payments.

Also with the new credit card act of 2009 credit card companies were required to increase the minimum monthly payment to an amount that would enable the card holder to pay off the debt.

Before that the credit card holder would never pay off the debt if they continued to pay the minimum monthly payment. This was a good thing but it had bad consequences. A large number of card holders payments doubled forcing them into default.

By law after a card holder missed 6 months of payments the credit card company has to write off the debt as bad debt and then they would sell it off in bulk to debt collection companies.

These debt collection companies buy thousands of default accounts for literally penny’s on the dollar. After they buy the accounts they start to see the balances on the accounts and they start to call the default card holders to pay up. They will push hard to get monthly payments or full payments.

But most default card holders don’t know that they can settle with the debt collection companies at a discount. Most of the time the default card holder is running from the debt collection company when they should be setting them up for a settlement by keeping the lines of communication open.

There are some rules to what you should tell them and what you should not. Basically you shouldn’t tell them anything about your financial situation, job status or checking account information.

Here’s exactly what you should do to settle your old credit card balances with debt collection companies:

1) Request that they send you their request in writing.

2) When they send you the initial letter requesting that you pay the debt you should actually send a letter to them requesting that they send you “Verification” that they actually have the right to collect the debt. You want all the paperwork from the previous creditor such as paperwork with signatures, purchases, original credit contract, etc.

3) If they don’t provide it the are in violation of The Fair Debt Collection Act. Keep requesting this information. If they take you to court you have the right to still request the documents. If they provide it you go to the next step.

4) If they provide the necessary paperwork validating the debt then you can start the settlement phase. At that point you should ask for time to make an offer to settle the debt in full. From my experience they will accept 25 cents on the dollar for debt 2 to 3 years old and 5 to 8 cents for debt older than 4 years.

Another thing you should check is the statute of limitation in your state for collecting old debt. I had a debt from 1990 that built up to $4,500. I ended up settling the debt for $500 but if I would have looked at the statute of limitation I would have been able to move for “Dismissal” due to the statute of limitations in my state.

For more information on how to settle with debt collection companies and repair your credit please click the banner below.

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