How to Negotiate with Debt Collectors

Whether you go it alone or hire a lawyer or credit counselor, follow these six steps before wading into debt collection negotiation.

Written by Andrew Pentis / May 30, 2022

Quick Bites

  • About half of debt settlement negotiations are successful, but your odds depend on the age of your debt and who holds it.
  • Before considering a settlement offer, always confirm the debt truly belongs to you and that your legal responsibility to repay it hasn’t lapsed.
  • Working with a debt lawyer or credit counselor could help you navigate negotiations or secure better terms, but going solo is also an option.
  • If you and your creditor agree on a dollar figure, don’t forget to ask about how the settlement will be reported to the credit bureaus—and get everything in writing.

Negotiating with debt collectors probably doesn’t sound like much fun, but for some borrowers who are behind in repayment, it could help close an outstanding account without forking over every cent of what you owe.

Strangely, your odds of a successful debt settlement are better the more delinquent you are in repayment, according to Leslie H. Tayne, the founder of the New York-based Tayne Law Group, which specializes in debt reduction. Your creditor will have less confidence in your ability to repay your entire balance, especially if the debt is so old they can no longer sue for it. (In that case, you might feel obligated to settle the debt only if it’s hurting your credit.)

The rewards of a successful debt collection negotiation are significant: It could start to reverse negative impacts to your credit report while also helping you become debt-free. The process of settling is more complicated than it may sound, though, so let’s review your odds of success, plus the steps to take.

Inside this article

  1. Whether debt negotiation works
  2. 6 steps to negotiate debt
  3. What if debt negotiation fails?

Can you win a debt collection negotiation?

The Federal Trade Commission (FTC) estimates that 45% to 50% of debt settlement negotiations reach completion.[1] That success rate might seem higher than you expected it to be. Consider the reality, though, that lenders, creditors and collections agents likely don’t want to broadcast the fact that they’re willing to settle your debt for less than you owe.

Still, says Tayne, “the likelihood of successfully negotiating a debt settlement with a creditor depends on two big factors: who owns the debt and the statute of limitations on collecting the debt.”

Account status:According to Tayne:
With the original creditorGetting a settlement will be difficult because the creditor may still believe they can get the full balance from you over time.
With a collections agencyReaching a settlement should be easier since the collections agency likely bought your debt from the original creditor for pennies on the dollar.
Nearing the statute of limitationsSettling should be even easier, as the debt holder will be “willing to take anything they can get before you’re legally off the hook,” says Tayne.

How to negotiate with debt collectors: 6 steps

1. Verify that you’re obligated to repay the debt

Request a debt verification letter from the creditor or third-party collections agency. The Consumer Financial Protection Bureau (CFPB) makes letter templates available online if you need to contact the creditor for this information. Compare the information they furnish with your own records, including by viewing your credit report at

Checking your state’s statute of limitations—the number of years you can be sued for debt—is also imperative. Be aware: If the statute of limitations has passed, starting debt settlement negotiation (or making a payment) could reset the clock, triggering active repayment all over again.

“Unfortunately, that means you’ll enter a new set of years that you’re legally liable for the debt,” says Tayne. “Plus, the amount of time the account appears on your credit report could get extended, prolonging the damage to your credit score.”

All the while, understand your rights under the Fair Debt Collection Practices Act. Collections agents are legally barred from harassing you over the phone anytime of day or night, for example.

2. Estimate what you can afford to pay

Once you know the debt is legitimate, see what kind of debt settlement offer you can piece together.

Check or create your budget to estimate how much room you might have on a monthly basis for a potential payment plan. Alternatively, check your savings account to gauge how much money you might be able to offer in a lump sum.

As you’re forecasting, “make sure that you can still cover your other bills—and give yourself some breathing room in your budget to handle unexpected expenses,” says Tayne.

If you simply don’t have room in your budget for a cash offer, you might consider the more serious step of bankruptcy proceedings as a means of discharging debt (more on alternative options below).

Tip: Account for taxes in your offer amount. If your creditor forgives $600 or more in a debt settlement deal, you may have to pay an income tax.[2] Expect to receive Form 1099-C from the IRS.

3. Consider asking for professional help

If you’re being sued over your debt, bringing a debt settlement lawyer to the negotiating table might seem like a no-brainer. But extra, expert assistance could also help if you’re simply stressed and don’t understand the process or your rights within it. A certified credit counselor could also lend their expertise for negotiations that don’t end up in court.

“Plus, since they likely have an existing relationship with your creditors, [lawyers] can often help you secure favorable debt settlement deals,” says Tayne.

To find a debt settlement lawyer, ideally on a pro bono basis or at a low cost, consider the following resources:

Tip: Generally, it’s wise to steer clear of debt settlement companies. “Some are scams requiring upfront payment for their services,” says Leslie Tayne, a New York-based lawyer specializing in debt reduction. “And even if you hire a reputable company, understand that there’s no guarantee your creditors will agree to a settlement. Plus, the fees you pay for the service can significantly erode the savings you realize from a settlement.”

4. Prepare an offer below your actual limit

If you don’t hire a lawyer or counselor to do your bidding for you, it’s time to sharpen your negotiation skills. At this point, you know the highest possible amount you’d be willing to hand over to your creditor. But making your best or final offer off the bat isn’t generally advised.

You could start open negotiations at 25% of your outstanding balance, for example, even if you’re able to pay 50%.[3] The idea is to start out lower, so that your creditor will meet you in the middle.

Practice patience, too. You might have to phone your creditor’s customer service department multiple times, asking for a supervisor or someone else who manages relief options.

Tayne also recommends explaining that you’re experiencing financial hardship, which should give the creditor some doubt about whether you’d fully repay the debt down the road.

“Offer what you can to make good on your promise to repay your debt,” says Tayne. “Be prepared for them to counter with other terms, but remain firm on your limits.”

5. Negotiate credit reporting

Though it’s important to stand your ground, it’s unlikely your initial debt settlement offer will be accepted. The good news is that you can always counter a counteroffer. You might budge a little on the cash, for example, but ask for something in return.

A big-ticket item to request during negotiations: credit reporting. You could ask that the creditor reports your payoff as “paid in full” as opposed to “paid as agreed,” according to Equifax, one of the three major credit bureaus.[3] Just be mindful that creditors are not obligated to report the debt as paid in full, and some won’t negotiate this as an option.

The paid-as-agreed designation “can negatively impact your credit score because it will get noted that you paid less than the original balance due,” says Tayne.

Over time, your credit score should only improve, as having a closed account on your credit report is far better than one in delinquency or default.

6. Get everything in writing

Here’s some classic lawyer advice that bears repeating. Though it’s perfectly fine to open debt settlement negotiations over the phone, end it with a paper trail in case your creditor doesn’t hold up its end of the bargain.

“If you reach a verbal agreement, request a written copy,” says Tayne, “and don’t send the creditor any money until you receive and review it.”

The CFPB agrees, noting that if you’re asked to pay a fee or the settlement before it’s agreed to in writing, you could be dealing with—and have to fend off—a scam.[4] Always make sure you’re dealing with your creditor directly, not an unknown third party.

If your negotiations with debt collectors doesn’t work

The steps of a debt collection negotiation might make the process sound easy. It’s not. If, for whatever reason, reaching a settlement isn’t in the cards, consider your other options, including:

  • Ask your creditor about other relief options, such as temporarily lower payments or interest charges (perhaps via a forbearance).

  • Consider debt consolidation, but keep in mind that taking your debt elsewhere will almost certainly require getting it out of delinquency.

Whatever you do, keep the conversation—if not negotiation—going with your debt collector. Unless you can no longer be sued for your debt, it’s generally wise to keep your friends close, and your creditors closer. This way, you won’t be surprised by their debt collection efforts or, worse, lawsuits.

Article Sources
  1. “The Association of Debt Settlement Companies,” FTC,
  2. “Cancellation of Debt,” IRS,
  3. “Can I Negotiate with Debt Collectors?” Equifax,
  4. “What Is the Best Way to Negotiate a Settlement with a Debt Collector?” CFPB, March 29, 2019,

About the Author

Staff editor Andrew Pentis headshot

Andrew Pentis

Andrew Pentis has used his journalism background to write about personal finance topics since 2015. His work has appeared in over 40 publications, including LifeHacker, U.S. News & World Report and Marketwatch.

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