When we talk about negotiating directly with creditors, we mean “paying in full and immediately” accounts that are past due, in collections, or possibly already have civil lawsuits.
Creditors are generally willing to reduce and cancel debts as long as a full cash payment is made.
When a bank sells an account to a collection agency, it does so for a fraction of the original amount. When the account is in collection, it's much easier to negotiate a reduction in the debt payment because the collection agency bought it for much less than the original value. We've achieved debt reductions for our clients of up to less than 50%.
Likewise, second mortgages and home equity lines of credit have a strong incentive to negotiate principal reduction. In most cases, when a property goes into foreclosure or a person files for bankruptcy and surrenders the home, the bank holding the second mortgage and home equity lines of credit doesn't receive a single cent. For this reason, these debts can be reduced by up to 10% of the balance.
To improve your credit score, collections must be paid in full. Otherwise, if you enter into an installment payment agreement, your credit score will decrease, and the account will remain in collections until you pay it off.
When you negotiate the accounts yourself:
- For the sake of protecting your personal information, you should never provide information over the phone to individuals or collection agencies who call you seeking payment. You never know if the calls are real or from a scammer. Likewise, if you receive letters from collection agencies, you should respond within 30 days and request a copy of the original bill signed by you as proof of the claim.
- Likewise, trying to make a partial payment on an inactive account can raise eyebrows with the creditor, who may resume their interest in recovering the money and initiate legal proceedings against you. A judgment against you is more damaging to your credit score than a forgotten account.
- Avoid debt settlement companies that promise to cut your debts in half and offer a payment plan. They're lying to you! These companies offer to cut the balance on current credit cards in half, and even offer to pay the balance in small monthly payments. What these companies do is collect your money, not pay your bills, and let them go to collections. These companies have been heavily investigated and sanctioned for these business practices.
There are several legal implications that must be taken into account when negotiating or speaking with a creditor. For this reason, we always recommend that you use the services of an attorney to negotiate your debts, unless you have sufficient legal skills and knowledge to negotiate them.
English 
Spanish