Collections: Negotiating a Settlement

Clear your debt! Increase your credit score, improve your chances of getting credit in the future, have more money to spend on yourself and your dreams at the end of the month, and gain peace of mind.

There are ways to clear your debt without having to go through bankruptcy or a consumer proposal. Both of which will negatively affect your credit for years to come.  

If you know you owe a company money and the collections is reported on your Credit Report, you have a few options to take matters into your own hands.

1. Negotiate a Settlement on Your Own

Pre-empt the collections agency by contacting them first to begin the process of clearing your debt. The best time to negotiate with collectors is the last day of the month. Most collections personnel have a monthly target of number of files to “close” before the month’s end; if they succeed in reaching their target, they receive a bonus. So many employees are stretching to meet their target in the last few days of the month. This means they will be more open to negotiating. They still need to meet their client’s needs, but the negotiation may be closer to what you can afford.

So, on the last day, call and say you would like to settle and begin with a “lowball” offer. For example, offer half the amount owed paid over a few months period.  Do not move higher until they begin to counter with a lower amount. Be prepared with the top amount you’re able to pay, but be reasonable. Once you and the agent have come to an agreement, do not send them a dime until you have a written contract stating exactly what was agreed to.

Once your amount owing is paid, it should only take a month or two to be reported to the Bureaus. Keep an eye on your Credit Report for the settlement to show up. Once your Report is updated, you should see the item listed with an outstanding amount of $0. This should also cause an increase in your credit score!

2. Credit Protection

If you know that paying off the collections item is more than you can handle, contact a Licensed Insolvency Trustee (LIT). You can discuss with them the option of bankruptcy or a consumer proposal.

If neither of these options seem to fit, it may be time to consider a Debt Management Program (DMP). These can be completed through a Credit Counselling Program. LoanConnect is partnered with Consolidated Credit Counselling Services of Canada (CCCSC). They are a not-for-profit organization that has helped remove debt from over 500,000 Canadians.

Contact team@loanconnect.ca to learn more about these options, or getting into a Debt Management Program.

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