Can You Make Monthly Payments on a Debt in Collections?

This personal bankruptcy question was posted on the internet in 2011 in a bankruptcy discussion: “Will a collection agency or the original creditor accept monthly payments to pay off a debt that is in collections?”

Most creditors in today’s world specialize in credit loans or provide you with credit in order for you to purchase their products. Very few have collections departments like in days long since past.

Once a lending institution sends the debt for collections, technically, they will no longer deal with you about the matter, and you are not suppose to talk to them about settling the issue. Contracts for collections and the Fair Debt Collection Practices Act makes it hard for a company to deal with a debtor even if they are one of the few who still may have a collection’s department.

Therefore, if the debt has been sent to collections, you will have to make any negotiations for payments with either a collection agency or department. Whether or not you can negotiate a payment plan depends on basically two things- who now owns the debt and how much they know about your current financial situation.

Lending institutions today are much more likely to sell their debt to others specializing in the art of debt collections rather than try to collect from you themselves through their collection’s department. Most large lending institutions selling debt write off the debt for tax purposes and sell the debt for pennies on the dollar.

What this means to you is that most collection agencies are anxious to work with you in getting the debt paid in full, and many will normally allow you to make monthly payments to pay off the debt. What you should know before you agree to any kind of payoff is that a collection agency that has bought your debt is much more likely to negotiate with you than the original creditor.

Most debtors find it is often hard to negotiate with original creditors who do not always know whether you have the means to fully pay your debt, and their current perception of you stiffing them is still fresh on their minds. By this time, the original creditor will have reported your default to all the major credit reporting agencies. If it was easy to settle with them at this stage, everyone would be trying to talk them down.

If you are nearing bankruptcy, a collection agency is more likely to negotiate favorable conditions on a payout. If you have assets and the agency learns of this, they are more likely to make larger demands including interest and penalties. Before they learn what the score really is, they will most always ask for the full amount, interest and penalties. In any case, their biggest tool for collections is the threat of a judgment from a lawsuit.

After a successful judgment has been obtained by a collection agency, your only recourse is to pay them or file bankruptcy. Bankruptcy laws can be complicated, and common sense indicates you might need a bankruptcy lawyer in order to help you understand how these complex laws may apply in your particular situation.

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