subject: Getting Collection Agencies To Accept Payment Arrangements [print this page] Some collection agencies accept payment arrangements immediately, but it's not uncommon to find an agency that refuses them. This can lead to a lot of frustration for someone who is trying to get debt free but who simply has not achieved the means to pay the full balance of a bad debt. Typically, however, it's not the payment arrangement that collection agencies object to so much as it is the approach. You can increase your chances of working out a favorable payment arrangement by understanding just a few key points.
Negotiations Start at Balance in Full
A collection agent is almost always going to ask you to pay the full balance of your debt up front as soon as he gets you on the phone. Don't get angry when this happens. There are several reasons why this happens. First, since nobody ever wants to talk to collectors this could be, in the agency's eyes, the first and last time they get you to communicate with them. Second, if your bill is in collections at all, it's a bad debt. That means you've already proven that the bill isn't a priority for you (even if it wasn't a priority for perfectly understandable reasons). Third, that agent has a manager, and that manager is pushing the agent to get that money out of you now.
There is a Universal $50.00 a Month Fallacy
Everyone offers $50.00 a month, no matter how large the bill is. It's one of the first lessons collectors learn, and it's true. Other common figures include $10.00 a month and $20.00 a month. There's just something about those three figures that have universal appeal to people struggling with their bills. The arrangement works if your bill is between $100.00 and $150.00. It's very difficult, however, to get a $50.00 a month arrangement on a larger bill.
$50.00 a month, on a larger bill, is the kind of arrangement that often works with first party collections. If you owe the hospital $5000.00 and pay $50.00 faithfully every month, you are unlikely to be sent to collections. Usually first party collections don't forward the bill to the collection agencies until they've aged past 90 days, which means three months with no action, whatsoever, on the bill. That's why third party collectors aren't so crazy about handing you a similar arrangement.
Collections is Not the Bank of Bad Debt
The collection agency really has no obligation to take partial payments on your bad debt. Therefore, the quickest way to ensure that you don't get an arrangement is to adopt a hostile "take it or leave it" style attitude with the agent on the phone.
To get out of debt, you must face up to the fact that you owe the debt. Trying to treat your account manager like a recalcitrant salesperson who depends on your goodwill is a really bad idea. If you really want to maintain control of the conversation, stay polite and open the conversation with the type of arrangement that the collector is likely to accept. That means that you're giving the agency some kind of payment right then, and then you're creating an arrangement that will get the debt paid in a reasonable amount of time. Expect the collector to be ready with a higher counter-offer and negotiate. Be sure to cooperate with all of the agency's procedures. If a collector has to take down certain information in order to get an arrangement approved for you, then refusing the information doesn't hurt anybody but you.
Think Two to Nine Months
If a bill is less than $100.00 the agency typically won't go any higher than two payments. You can generally get up to three months on a bill that runs between $100.00 and $400.00. Bills running between $400.00 and $1000.00 can generally be handled in three to six months. You can typically get up to nine months on bills that are between $1000.00 and $6000.00. If your bill is even higher than $6000.00 you might want to consider other options, such as debt consolidation, personal loans, or transferring the balance of your bill to a credit card, unless you are willing to create a $1000.00 per month payment arrangement.
Change Your Mindset
Our society has become so accustomed to the concept of the "monthly payment" that it's not really surprising that most people approach payment arrangements with a mindset of stretching the bill out over the course of two to five years. However, when you ask for a payment arrangement you are basically asking a stranger to grant you an interest free loan. Understanding this is even more important if your bill is large enough to perhaps warrant a trip to court, which could result in wage garnishments or other penalties. Not only are you asking a stranger for an interest free loan, but you are doing so from a proven position of being a bad credit risk. That's why most agencies will ask you for an ACH bank draft before approving any arrangements. They want those arrangements secured and locked into place if they're going to give them out at all. Your bad debt is a problem that you need to solve. It is not an item that you need to finance.
