A Quora user asks: I look up strategies to do a collection agency settlement and they all talk about illegal “things to look out for” that collection agencies do. Well, this agency doesn’t do any of those things but I still want to know if there is a strategy I can use. Can I ask to pay some kind of percentage?
Victor Fong, Licensed Insolvency Trustee in Toronto, Canada replies:
Are you in this situation because you’re unable to pay the debt or because you don’t want to?
If you can convince them that you’re unable to pay this debt due to circumstances beyond your control (e.g., unemployment, illness, etc. – and they’ll probably want documentation, like a layoff notice or doctor’s note) then they might be willing to settle with you. They’d rather get x% of something than 100% of nothing.
They might be more willing to negotiate a percentage of what you owe them if you pay the entire settlement up front. So say you owe $10,000 and they agree to 50% of that (i.e., $5,000). They may only settle on that amount if you pay the entire $5,000 in one lump sum.
If you’re going to agree to this, you should get some sort of letter from the collection agency that it has the authority to negotiate and collect on behalf of the bank you borrowed from. The letter will usually be issued by the bank itself.
In exchange for the settlement proceeds, they should give you a release letter releasing you from the balance of the debt. Go to their office with a bank draft for the settlement amount and exchange it for the release letter. If you pay them the settlement amount without any sort of written release, then you have no documented proof that you agreed to this deal in the first place.
Caveat: I’m not a lawyer, so you should seek professional legal advice before agreeing to any settlement with the debt collector.