Trying to dodge bankruptcy….Can I negotiate payment terms even after the debt has gone to the collection…?
The short story is that after a failed business, my home was lost to foreclosure, several bills mounted and I now have a means to payback debt. The other day I was successful at obtaining an agreement to pay a month on a 5k balance and it is my hope I can manage to do so with all of my debts. The monster in the closet is a 20k equity loan that was secured by my home which has no longer mine. When I approached the office I would typically make my payment to they gave me the number for the collections department and before I could even reach them DCS (collection agency) contacted me. Now I have told them that I would like to begin making payments but with my other debts that I am trying to honor being added on to monthly expenses, the old payment on the equity loan (250/mo) is pretty tough to manage. Is it possible to negotiate with these people? They offered a settlement of 13k on the 20k loan but I dont have that kind of money. I had actually hoped to go through the same company I had the loan with perhaps get it back in good standing in hopes that it would eventually help me to recover my credit status after being rocked by the foreclosure. any thoughts? I want to avoid bankruptcy, heck I think after I get my taxes back it would put me over the Median income for my small family of just my son and I anyway. Not sure what to think about chapter 13 either.
Update….Debt consolidation loans are out of the question due to lack of credit score. The debt is not credit card debt though it seems like everyone wants to help people out of credit card trouble. It’s utilities, a couple business debts and the dang equity loan. I need a dependable car and have to use the income tax to buy one. If I buy a decent used car I can lose it to bankruptcy, if I go chapter 13 it seems like I have to live how the court tells me to live and would have no money beyond living expense and with a 9 year old child to raise that is impossible.
Yes, you can negotiate settlement offers and payment plans with creditors. Your problem is that they are not going to accept small monthly payments that stretch out for years. I’m surprised you got anyone to accept $50/mo on a $5K debt. Even if there’s no further interest added, that will still take more than 8 years. Collection agencies typcially want payment within 6 months.
Depending on what debts you have, you may want to consult a bankruptcy attorney. All the defaulted debts have already damaged your credit. Paying them off won’t improve your score. It will be there the balance of the 7 year reporting period. While the bankruptcy would further damage your credit, it would at least give you a clean slate and you could start rebuilding your credit.
Maybe a debt consolidation loan?
Hey Urban Dancer –
It is great you are trying to avoid bankruptcy. It is not a good option all around. After going into collections, it is pretty difficult but can be done. Remember the collections person already has a negative view of you.
"Gimmee the money now" is their best weapon. Usually works. They work on commission so they will try everything.
Ask the person, "What are my options for payments? If I go bankrupt, we both lose. I want to pay it, just cannot do it all right now."
In my article series on getting help with credit cards (http://www.household-budget-made-easy.com/help-with-credit-cards.html) I talk about how to negotiate and also best ways of paying off the plastic with the debt snowball.
Create a budget (spending plan) so you can show the person you are negotiating with you are doing so in good faith.
Hang in there. Change your habits and reach for success!
David
To answer your question: Yes you can negotiate your debt with the collection agency. Remember that they will be happy getting anything from you.
I suggest you take part in Dave Ramsey’s Financial Peace University. It costs about $110.00 but its well worth the cost, I’ve lead this course in my church twice and look forward to doing so again in the future. The answers you get and the things you learn in these classes are exactly what you are asking about here.