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Will Collection Agencies Settle for Less?

Sarah Edwards | November 18, 2022

Sarah Edwards
Legal Expert
Sarah Edwards, BS

Sarah Edwards is a professional researcher and writer specializing in legal content. An Emerson College alumna, she holds a Bachelor of Science in Communication from the prestigious Boston institution.

Edited by Hannah Locklear

Hannah Locklear
Editor at SoloSuit
Hannah Locklear, BA

Hannah Locklear is SoloSuit’s Marketing and Impact Manager. With an educational background in Linguistics, Spanish, and International Development from Brigham Young University, Hannah has also worked as a legal support specialist for several years.

Trying to reach a settlement with a debt collector is like ^^

Summary: Most debt collection agencies are willing to settle a debt for less than the original amount. 95% of consumers who work with a debt settlement company save money in the end. So, settling your debt is definitely worth it. To reach a debt settlement, follow these steps: respond to your lawsuit in court, make a settlement offer, and get the settlement agreement in writing. With SoloSettle, you can settle your debt on your own.

Do you wince every time the phone rings? Outstanding debts are stressful enough without the addition of persistent debt collectors.

The best way to free yourself of this burden is to settle your debt as quickly as possible. But what if you don’t have the money to pay your debt in full? Will collection agencies settle for less? The answer, surprisingly, is yes.

Here’s how you can settle your debt quickly and affordably and rid yourself of the annoyance of unwanted debt collection calls.

Will collection agencies accept a lower payment?

In many cases, it’s in the collection agency’s best interests to accept a lower payment. Remember: the collection agency isn’t the company you originally owed money to. Instead, your original debtor sold your debt to a collection agency, which then set about attempting to reclaim the debt.

Your debt collector may therefore be willing to accept a lower payment if it means getting their money faster. On average, consumers have been able to settle their debts for 50% less than the original amount.

However, this isn’t a guarantee. While some debt collectors may work with you, others might insist that you pay the full amount. And even the collection agencies that show leniency may vary in terms of how low they’re willing to go.

Still, it never hurts to try to reach a settlement — 95% of consumers who work with a debt settlement program end up saving money, even after paying associated fees.

Will settling debt affect my credit score?

Even if you settle for a lower amount, settling your debt will still lower your credit score.

Generally speaking, paying off your debt is better for your credit. When credit bureaus examine your financial history, they prefer to see the words “paid in full” on your debts. In other words, paying off your outstanding debts can minimize the financial damage they cause.

Even so, settling your debt is better for your credit than not paying it at all. Settling quickly can also put you back on track toward rebuilding your credit.

Follow these steps to settle a debt

You can settle your debt by completing three basic steps.

1. File your Answer

If you’ve been hit with a lawsuit, you’ll need to respond by submitting an Answer to the court and the debt collection agency. Failure to do so can result in a default judgment, leaving you on the hook for the full amount.

Even if you’ve already settled, you’ll want to file an Answer anyway to prevent unscrupulous debt collectors from requesting a default judgment.

Act fast. You have to file your Answer before your state’s deadline or you’ll lose automatically. If you’re unsure how to compose your Answer, SoloSuit has got you covered.

You can draft and file a customizable Answer document in just 15 minutes online with SoloSuit. To learn more, check out this video:

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2. Make a settlement offer

Next, you’ll need to determine the maximum amount of money you can pay for a settlement. Then, make an offer to the debt collector based on that amount.

For instance, if you owe a debt of $7,500 and can afford to pay off $6,000, you can start negotiations at a lower offer to give yourself room to grow. To submit your offer, simply use the following prompt:

“I, [your full name], am offering a lump-sum payment of $[amount] to settle the case with case number [case number]. You can accept or counteroffer. If you accept, respond to this email with only ‘Accept.’ If you want to counteroffer, respond to this email with only ‘Counteroffer: [offer].’

Please do not contact me in any other way than responding to this email. I'm prepared to litigate this matter and win in court. I'm also prepared to file an FDCPA complaint. This offer expires in 6 days on [date]. The agreed amount will be paid within 90 days of the date of settlement.

Don’t be surprised if you go through a few rounds of correspondence with the collector or attorney. As long as you explain your circumstances thoroughly, they may be willing to settle to avoid a protracted legal battle.

SoloSettle can help you start the settlement negotiation process on your own.

3. Get a settlement agreement in writing

Always save your correspondence with debt collectors and their attorneys. Once you reach a settlement, request the terms of the agreement in writing. Having a record of the arrangement will prevent the collector from going back on their word.

Only send your settlement payment once you have this agreement in hand. Going through an agency or using special software can help you make a payment while protecting your personal financial information.

Now, let’s take a look at an example.

Example: Trevor is being sued for a $1,000 debt. He has enough money to pay off $800 upfront. Trevor uses SoloSettle to send an initial offer of $600 to the debt collector. After a few rounds of negotiations, a settlement of $750 is reached. SoloSettle sends over the lump-sum payment on Trevor’s behalf, preventing the debt collectors from having any of Trevor’s financial information, and manages the settlement agreement document for him. Having settled his debt, Trevor feels ready to move forward with a better financial future.

Debt settlement has real value

In 2018 alone, debt settlement companies settled $4.5 billion in consumer debt, with an average of 55% debt reduction per person. Not only does it pay to settle your debt, but it allows you to move forward without being hounded by collectors.

Settle your debt with SoloSettle, and save yourself the money, time, and stress of dealing with debt collectors.

What is SoloSuit?

SoloSuit makes it easy to fight debt collectors.

You can use SoloSuit to respond to a debt lawsuit, to send letters to collectors, and even to settle a debt.

SoloSuit's Answer service is a step-by-step web-app that asks you all the necessary questions to complete your Answer. Upon completion, we'll have an attorney review your document and we'll file it for you.

>>Read the FastCompany article: Debt Lawsuits Are Complicated: This Website Makes Them Simpler To Navigate

>>Read the NPR story on SoloSuit. (We can help you in all 50 states.)

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