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Collection agencies may settle for less, though consumer credit counseling agency could help avoid running into them
By Oscar Monfort on Mar 18th, 2010
Consumers who are facing debt obligations and collections agencies may have a way out when it comes to the amount they owe.
Recently, Philadelphia Daily News personal finance columnist Harry Gross got a letter from a reader who has a collection agency after them. The reader said the collection company wouldn't accept a plan to pay the debt in monthly installments and also noted that the amount is too high for them to afford.
Gross said that because collection companies often buy this type of debt from companies for much less than it's worth, they may be willing to negotiate down the amount a person owes.
"Determine what you can afford to pay in a lump sum, and cut that down by about 20 percent," Gross said. "This is your negotiating range."
If the company agrees to take a smaller amount of money, consumers should make sure they get it taken off their credit report.
Of course, the best thing to do in the first place is to avoid needing to settle debt in the first place. One way consumers may be able to do that is through the services made available through a consumer credit counseling agency.
These firms can help people avoid debts by examining their finances and setting up a budget that works within a consumer's means.
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