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Getting in debt is as easy as a click these days. But, getting out of debt can take years and the process can be stressful.
If that debt somehow makes it to collections? The stress just got serious.
Even worse, when you struggle to pay off your debt and are living paycheck to paycheck, it can be hard to keep up.
You might’ve had great intentions to pay off your debt on time, but somehow you fell behind and now you’ve discovered that some of your debt was sent to collections.
Unfortunately, it’s more common than you think, so you’re definitely not alone.
According to this article, more than 30 million Americans have at least one debt that has been sent to collections.
When I was about 23 years old, I had a lot of debt that went to collections. I was a young student with a toddler. I lost my job during my second year of college and practically lived on my student loans until I graduated.
My husband who immigrated to the U.S. shortly after we married in my fourth year of college had an entry level job that helped us make ends meet.
Needless to say, there wasn’t much of his paycheck left to cover ALL of the debt I had accumulated in the previous 4 years.
So, I had many collection agencies harass me and try to scare me into paying off the balance.
Unfortunately, because I was young, I easily fell for their scare tactics. And I hastily made some moves that cost me thousands of dollars.
I don’t want the same thing to happen to you. So, follow the steps below and you’ll sidestep my pitfalls.
7 Steps to Help you Eliminate your Collections Debt the Right Way
1- Do Your Homework
Before you talk to any collector, make sure you know your status with that debt. First, check with your original credit company and ask if they indeed sent your debt to collections.
Once you’ve confirmed that your debt is in collections, then proceed to find out the exact balance you owe.
It’s important to know all the facts before contacting the collection agency, so you can properly resolve your debt.
2- Call the Collector
Now, it’s time to contact the collector. Don’t wait until they contact you at a time that is convenient for them. Contact them when the time is right for you.
Try to pick a time when you’re alone, free from distractions, and can sit down to have a conversation for at least 30 minutes.
3- Negotiate the Settlement Amount
Time to negotiate. Since your debt is already sent to collections, chances are your credit score has suffered.
Since your credit was already affected, no need in trying to pay the balance in full. Once your debt goes to collections, your goal is to settle the debt for the least amount possible.
Always start with 50% of the total and then negotiate accordingly.
4- Get the agreement in email or writing
If you take nothing from this article, please get your agreement in writing!
This mistake literally cost me thousands of dollars. I would speak with a collector, agree over the phone, make a payment over the phone, only to find out 30 days later that they never took the payment as a settlement, but just as an installment.
No matter how much I tried to prove that the agreement was that the amount was to pay the debt in full, I had nothing in writing to prove it.
I ended up paying those debts again, sometimes more than the original total balance due.
So, make sure you get your agreement in writing.
Agree to the amount over the phone, then request that they email you while you are still on the line and you will pay by check immediately with them.
Once you get the email, then, and only then, proceed to make the agreed total payment.
5- Pay Your Collections Debt by Check Online
If possible, make the payment online by check while you are on the phone with the agent.
That way, you can add a comment that states, “Paid In Full”. Also, you can screenshot the payment, so you have the official record.
6- Keep All Your Debt Collections Documents and Records for 5 Years
You never know when a debt collector will be shady and sell your debt after they collected from you. So, be sure to keep all your documents pertaining to the settlement.
7- Send Your Debt Collections Documents to the Credit Bureaus
Make sure that your credit report reflects the new information by pulling your report 30-60 days later.
Eliminating your collections debt doesn’t have to be difficult. Just follow the easy steps and you’ll be well on your way to debt freedom and better credit.