When dealing with debt collectors, negotiating can be a powerful tool to find a solution that works for both parties. It is important to approach these negotiations with confidence and knowledge to ensure the best possible outcome.
Being in debt and pursued by collectors is a nightmare for anyone, and the calls, communications, and harassment make you feel hopeless. Debt collectors demand the total amount of money and want you to pay it quickly. The problem is that you may lack the funds they are demanding, and they may threaten you with a lawsuit.
You can make the problem disappear and even pay less than the full amount you owe. Some debt collectors may be willing to negotiate under the presumption that half a loaf is better than nothing. It never hurts to ask whether debt collectors may be willing to accept less than the amount of money you owe. They have financial incentives at work, and they may still do well when you pay them back anything.
Even still, debt collectors cannot break the law when dealing with you. If they violate any federal or state law provisions that govern their relationship with you, you can file a lawsuit against them. Contact a consumer protection attorney in California today to learn more about your legal rights and whether you may file a lawsuit. They know the laws and regulations that govern debt collection practices and understand your rights as a consumer. Consumer protection attorneys also have experience developing effective strategies and negotiating fair settlements with debt collectors.
Debt Collectors May Have a Financial Motivation to Negotiate with You
To understand why you can negotiate with a debt collector, you must know how they work and their financial motivations. Your initial creditor has likely had to write off the money you owed them as a bad debt under accounting regulations. Under these circumstances, it does not make financial sense for the creditor to keep your debt on their books. If they do not feel they can collect the debt, they will sell it to a debt collector.
A debt collector is a company or individual in a business that purchases debt and tries to collect it. They have likely bought the debt for pennies on the dollar, and they will reap a large windfall if you pay it back in full. If debt collectors purchase a large tranche of debt, they will earn substantial profits if only a handful of debtors pay back everything they owe. Therefore, they may be willing to take less. If debt collectors can resolve the matter while still making a profit, and they do not have to go to court, it is still a big win for them.
Any rational and reasonable business person will want to explore whether they can reach a settlement in your case without going to court. There are expenses involved in the litigation process and no guarantee that debt collectors can receive any money from a judgment. If you have your figurative checkbook and are ready to offer them some money, responsible debt collectors will have to listen. The alternative is that they can launch a much more expensive and uncertain process without any assurances of results.
You May Have Far More Leverage than You Think
Although there is potential liability for you, nothing says that you lack leverage when dealing with debt collectors. They have their own interest: to get as much money as possible from you to make a profit. Debt collectors run the risk that they will end up getting nothing from you if they push too hard. Therefore, they can be willing to take half of the proverbial loaf.
You have an ace in the hole in the debt collection process. Although it is not always a desirable outcome for you, it may be possible to declare Chapter 7 bankruptcy (if you meet the required means test). Chapter 7 bankruptcy can be a tool in your own hands to help you get a fresh start in your financial life. If you qualify for Chapter 7 bankruptcy, it can get all debt collectors off your back, both temporarily and permanently.
When you file for bankruptcy, you can qualify for the automatic stay. You can stop the calls from the debt collectors because they will break the law if they continue to try to collect debt from you after the bankruptcy process begins. Debt collectors can face severe repercussions from a bankruptcy court if they try to make collection efforts during bankruptcy.
The Chapter 7 bankruptcy process may result in wiping out your debt, and you get a fresh start in life. Debt collectors will no longer have the right to collect because bankruptcy can extinguish your debt. The cost to you is that you have to surrender some unprotected assets to pay your creditors, but the reality is that they may get little to nothing on the debt you owe. Creditors often want to avoid this outcome because they will lose the money they spent to purchase your debt.
Therefore, the prospect of bankruptcy gives you some leeway and the ability to negotiate with debt collectors. They may think they can make demands on you but can end up empty-handed if they push their hand too far. You can make an offer as a tactic to negotiate your debt with the collectors, and they can always decide whether they want to enter into a settlement with you. Debt collectors are often happy to get even a fraction of the face value of the debt you owe them because they likely purchased it from the original creditor at an amount that is far less than the face value.
You Will Have to Negotiate to Get Some Relief
Debt collectors may only make maximalist demands at first as the opening in their negotiating position. They may be willing to accept less than the face value of the debt, even right after they initially try to contact you. Knowing whether debt collectors may compromise is only possible once you ask the question. Usually, they want to close out the debts on their books to move on to the next tranche of debt they will purchase. A quick settlement with you puts debt collectors in a far better financial position than if they had continued to pursue the debt collection process.
With all this said, you can always make a much lower settlement offer to see what the debt collector will be willing to accept from you. They may even make you a counteroffer about what they expect you to pay that is less than the total amount of the debt. You may continue to negotiate throughout the collection effort to reach a deal. If you agree to a settlement, it can extinguish the debt you owe for a small amount of the actual value. In the process, you can avoid declaring bankruptcy, which will remain on your credit for seven years.
Remember that there are still some effects if a debt collector settles with you for less than you owe. You may owe income taxes on the forgiven debt because the IRS will treat it as income. Further, it can impact your credit score because you did not fully repay your debt.
Do Not Pay Exorbitant Fees for Debt Collection Services
With that in mind, be wary of services claiming to settle your debt with creditors while charging you a hefty fee. These companies do not provide you with any services you cannot do alone. You can end up locked into an agreement (even though the Credit Repair Organizations Act allows you to cancel this service at any time), paying money you do not have to a company that does not offer you a novel service. Consider working with a consumer protection lawyer who may deal with creditors on your behalf. They can protect your rights and ensure you receive the best possible outcome in dealing with debt collectors.
You Can File a Lawsuit When the Debt Collector Breaks the Law
Debt collectors must follow the law when trying to contact you, and several debt collection practices are forbidden. At the outset, the debt collector must reveal their identity, and they may not engage in deceptive practices or misrepresentation. Then, they cannot harass you, either by subjecting you to verbal abuse or repeatedly calling you. If you tell debt collectors they can no longer call or contact you, they must respect your wishes. If they break the law, you can file a private lawsuit against them under the Fair Debt Collection Practices Act, and they may owe you damages if you prove that they broke the law. The law provides for you to receive $1,000 in statutory damages for a violation of the law and compensatory damages for the harm you personally suffered.
You can also file a lawsuit against a debt collector under state law. Each state has laws that govern debt collectors, and while these laws cannot preempt the federal law, they can impose stricter restrictions. You may even receive punitive damages depending on the state where you file the lawsuit.
An attorney can represent you in court if the need arises. They can file a lawsuit against debt collectors who engage in unethical or illegal practices. This action can be a powerful deterrent and message that you will not allow debt collectors to intimidate or take advantage of you. Having an attorney represent you not only strengthens your legal position but also provides you with peace of mind knowing that you have a legal professional fighting for your rights.
Debt Collection Attorneys Can Fight for You to Receive Full Compensation
The best way to deal with the situation in which a debt collector breaks the law is to hire a debt collection attorney to represent you. They may file a lawsuit on your behalf, seeking damages from the debt collector. The FDCPA provides that a defendant must pay legal fees when you win the case, and you can even obtain legal fees in a settlement agreement. You do not need to pay a debt collection attorney upfront, and you do not owe them a penny for their services and time if you do not win your case.
If you win your case under the FDCPA, you may receive the following in damages:
- Statutory damages of up to $1,000 (although it is a one-time award and not on a per-violation basis)
- Emotional distress damages that you suffered due to the wrongful conduct
- Any other actual damages
- Attorney’s fees
The FDCPA does not allow you to receive punitive damages, but you may be eligible for them under state law (each state has a statute regulating debt collectors, and some of these laws may be even more extensive than the FDCPA). Your consumer protection lawyer can tell you whether it is better to file your case as a federal or state action or as an individual or class action lawsuit.
Contact a An Experienced Consumer Protection Attorney Today
If you find yourself deep in debt, contacting an attorney when you must deal with debt collectors makes sense. A consumer protection lawyer can help you take decisive legal action if debt collectors have broken the law. You do not have to pay any retainer fee to a consumer protection lawyer to get them to take your case, and you do not have to pay hourly bills. If you win your case under the FDCPA, the defendant may even cover their fees. If debt collectors are harassing you, there is little to lose by contacting a debt collection lawyer.
Negotiating with debt collectors can be intimidating, but it is important to regain control of your financial situation. If you need more clarification about the negotiation process or find it overwhelming, seeking the help of a qualified attorney can provide you with valuable advice and representation. An attorney will have the knowledge and experience to handle debt negotiations and help achieve the best possible outcome for your circumstances.