DIY Credit Repair Course Module 9: Negotiating With Debt Collectors

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Negotiating With Collectors

One thing is certain about all businesses; they want to generate revenue.

Collectors collect an unbelievably low amount of the debt they purchase, usually less than 1% per month and less than 20% overall, with almost all of that amount coming from lawsuits. If your debt is several years old and of an appropriate size, and you send them a payoff offer, they will listen.

Remember that when you offer a payoff amount to a debt collector, whether for yourself or your client, it is possible to inadvertently “restart” the debt clock. What this means is that when consumers are contacted by a debt collector, if they “acknowledge”  the debt or make a partial payment, it could “restart” the debt clock and allow the collector new leverage to initiate a lawsuit.

When dealing with debt collectors, credit repair professionals have to be aware of the two “debt clocks” that are in play. The first debt clock is the statute of limitations on debt collections, which varies from state to state. It is usually between 3 and 6 years but can go up to 15 in some states. This is the clock that consumers can inadvertently “restart” and revive the possibility of forced collection activities on an old debt, and that is surprisingly easy for consumers to do. 

All a consumer has to do is acknowledge the debt is theirs, even over the phone, and the state statute of limitations could be reset and their account could again be subjected to forced collections. 

Remember that any time a payment offer is sent to a collector or original creditor, it is best practice for the consumer to always remind them that they still dispute the debt, but that they are willing to offer a small payoff amount in order to get the collector or bad debt to go away. 

Here are some example statements that can be used with this hypothetical approach:

  • “I don’t believe you are reporting this debt accurately. Can you send me all of the information you have about it?”
  • “I’m not stating that this debt is mine, but I am willing to discuss settling it anyway if that will make your company go away.”

The way that consumers can “restart” the clock on old debt is by acknowledging it, or making a partial payment. If you are submitting a dispute letter to a collector on your client’s behalf, or your own, make sure that you explicitly state in the letter that you don’t believe it is accurate, only make full, one-time payment offers in exchange for the account removal, and only communicate with debt collectors in writing through regular U.S. postal mail. 

The second clock is the length of time that bad debt can stay on your client’s credit report and, as a result, affect their credit score. That clock runs for seven years after the original default date of the account in question. No matter when the bad debt was originally reported your client’s credit report, it has to come off seven years after the original default date.

One clock is the length of time a collector has to sue a consumer for bad debt, and the other is the length of time that the negative information can be reported onto a consumer’s credit report. The first clock can be inadvertently restarted by consumers, however the second one cannot be changed by anyone for any reason, and is an item that is often disputed by credit repair professionals on behalf of their clients.  

When submitting a negotiated payoff offer to a collector, the main factor to consider when determining a negotiating position is the age of the debt. After a certain amount of time collectors become powerless to collect (unless consumers restart the debt clock as noted above), but at the beginning they can initiate very effective lawsuits. In the middle of this debt cycle it is possible to create win-win payoff offers with collectors that are easy and effective. 

If a collector is contacting you or your client for a very recent debt, be careful of contacting them for any reason, including sending validation letters, as collectors have all of the power in the beginning of the debt cycle and your client will have almost no room to negotiate a lower payoff.

Consumers should use the link below to check their state’s statute of limitations for debt collection, and then check their credit reports for the date of last payment or activity of the accounts in dispute. According to your client’s records, is the date that they last made a payment or acknowledged the account to the original creditor older than your client’s statute of limitations to sue to collect the debt? If so, your client may have tremendous leverage over collectors who are trying to collect on that account.

Also, if the dates of collector accounts on your client’s credit reports appear newer than they should be, it’s because collectors change those dates on consumers’ credit reports to reflect the date they purchased the debt, not the date of last payment or activity.

Known as re-aging, it is one of the oldest tricks in the book that collectors can use to continue to report negative information onto a consumer’s credit reports indefinitely. This can make a huge difference to the consumer, and you can specifically dispute these dates to the credit bureaus and collectors. 

Consider the following example:

  • If a consumer makes a last payment on January 1 2020, then the account will be seven years old and eligible to “fall off” of the consumer’s account on January 1 2027. 
  • If the collector purchases the debt and re-ages the account to January 1 2024, it now appears that the account should stay on the consumer’s credit report until January 1 2031, however that is not accurate.

When the collector purchases the debt and reports it onto the consumer’s credit reports, they are modifying the “date of last activity” or “date of last payment” to attempt to create a stronger negotiating position. Check your client’s or your own personal records for the date that the last payment was made to the original creditor, or for the original default date, and then check the link below for your client’s statute of limitations. If the debt is beyond the statute of limitations to file a lawsuit to collect, then your client might have a strong potential to negotiate a very favorable payoff to completely and permanently put this account in their rear-view mirror. 

State By State Statute Of Limitations For Debt Collection

Many times collectors don’t pay any of the money to the original creditor when they collect. They own the debt outright and will keep 100% of what is offered to them. If you make an offer in writing and ask for specific things in return, then your client will have a great chance of settling their debt for pennies on the dollar. As with all debt, the older and less collectible the account is, the more leverage is available for the consumer to negotiate with.

A Successful Negotiation Case Study


The consumer in this story had fallen behind on payments after a divorce years earlier. She had no contact with collectors, but eventually was made aware of negative information on her credit reports. The negative information was from a debt collector, however she had almost no information about the nature of the debt, who it was claimed to be for, who the collection company was, or when this account was created. Due to the nature of her divorce years earlier, she was unable to determine if the claimed account was even hers to begin with, whether it was something that her former husband had applied for while they were married, if a fraudulent account had been opened up in her name (which could indicate identity theft), or if this account was just one more error like millions of others. 

The consumer wasn’t comfortable paying an unknown company under these circumstances and began the dispute process by writing round 1 dispute letters to the credit bureaus.

Actions Taken

Initially, the consumer disputed the information by filing a dispute with the credit bureaus as required by law. The initial communication that she received back from the bureaus indicated that they had verified the debt.

The consumer then proceeded to send method of verification request letters to the credit bureaus, along with a validation letter to the collector since the account was older than her state’s statute of limitations for the debt collector to sue her. 

After waiting 30 days, receiving no additional correspondence from the collector or the credit bureaus, and noting that the negative information still appeared on her credit report, the consumer now had the information in hand to file, and likely win, complaints against both the credit bureaus and the collector. 


  1. The bureaus did not respond to the method of verification request letters that the consumer sent within 15 days.
  2. The collector did not respond to a debt validation letter. Although they have an unlimited amount of time to respond to a validation request, they cannot continue to report the negative information onto the consumer’s credit reports until they do. Since a 30 day cycle had passed and the negative information remained on her credit reports, the collector was in violation.

Although at this point the consumer could have filed a complaint with the CFPB against both parties, she understood that if successful, the complaint would remove the information from her credit reports, but would not settle the debt.

In other words, the original debt could still be purchased by another collector and she could go through all of this again in the future. 

Because of this, she elected to pursue negotiating a payoff amount with the collector instead of filing a complaint. 

Even though she was not going to file a complaint via the CFPB, the fact that she had taken the time, through writing dispute letters, to gather all of the documentation necessary to do so greatly strengthened her ability to negotiate in writing a very favorable settlement with the collector. 

Following a dispute process, such as the one in this course, and developing a paper trail can greatly strengthen your ability to negotiate with collectors and creditors on your client’s behalf in two ways:

If they know your client does not have the money to pay but is in a position to file a complaint, then your client has made themselves a “hard target”. By positioning your client in this way, you have created a situation where almost any settlement offer will be accepted by the collector to completely and permanently settle all instances of this debt forever. Since the collector was going to get nothing and is now getting a small payoff, they win by generating a small amount of revenue for their company that would not have otherwise been there. Your client also wins by having the debt completely and permanently settled forever, with no chance that another collector can re-purchase it.  

This also gives your client the ability to walk away if the collector won’t agree to favorable terms, file a complaint, and still have the information removed in accordance with consumer protection standards.  

Ultimately, this consumer weighed the options and her personal preference was to take care of it as quickly as possible, and permanently. She had some extra cash on hand at this point and was willing to use a little of it to put this account completely and permanently behind her. 

She created an offer for the collector that indicated she would pay them $420 in exchange for a complete payoff of the almost $3,700 debt. In reality, this consumer could have offered an amount of around 1/3 to 1/2 of this amount and the collector still would have likely accepted in this case. According to Investopedia, “Debt buyers often purchase these packages through a bidding process, paying on average 4 cents for every $1 of debt face value.” By positioning their client’s properly some credit repair operators have created successful offers of 6 to 7 cents on the dollar for their clients. 

In this example, the collector happily agreed to the consumer’s $420 offer and instructed the credit bureaus to remove the negative account from the consumer’s credit files because it had been disputed by the consumer. This worked because the consumer disputed first, then offered a fair payoff amount to prevent further counter offers and put this circumstance behind her. 

Why did the collector accept this consumer’s negotiated settlement offer?

For debt collection companies, anything that is offered to them is potential profit. They make money by suing people, for the most part, because even though they send out thousands of letters and make thousands of calls, they collect a very low percentage of the debt that they purchase. All of their time and resources are already dedicated to generating what they need to win money in lawsuits, so if they are contacted out of the blue by a consumer who offers to give them money, any money, many times they will comply since they weren’t expecting to collect anything from that particular account anyway.

What does paying the collector buy the consumer?

Negotiating a settlement with a collector will almost always result in faster and more permanent change. Also, paying off debt can provide consumers with peace of mind, and security, in knowing that they have made a major improvement in their lives by completely and totally settled this outstanding debt forever. No other collector can purchase it, the case is closed.

With dispute letters consumers are able to remove negative items from credit reports, but they can come back. All that has to happen is that one collector sells the debt to another one, and the cycle can start again. This makes debt negotiation and settlement a far more powerful option than dispute letters, and much less expensive than is sometimes realized, particularly if the time is taken to position your client prior to making an offer. 

The consumer above felt that a cash offer in exchange for credit for paying the account in full and for the deletion of the record from her credit reports would provide a faster result than filing complaints, and she was correct. 

Because she estimated that the collector had paid approximately .10 per dollar to purchase her account, she created an offer of .11 per dollar. In a letter that she wrote to the collector, she clearly specified that she still disputed the accuracy of the account but was willing to offer a payment to put everything behind her. She also explained that because she still disputed the account the offer she was providing was only valid if the collector agreed to remove the negative information from her credit reports.

This is an example of a collector willing to settle an account to a consumer’s liking to ensure a fast collection. (Many debt collectors follow this “bird in the hand is worth two in the bush” principle.)

This offer allowed the consumer to pay $420 for $3,700 in debt, or approximately 11 cents per dollar.

The collector accepted this initial offer because the age and size of this debt made it a perfect opportunity for negotiation. This amount is not large enough for a debt collector to go bonkers over, but not nearly small enough to ignore either. By making a fairly generous offer, the consumer knows she is creating a win-win situation whereby she is paying an amount she feels is fair for what she is getting in return. 

This account was almost five years old when the consumer made this offer. This means that she would only have had to wait two more years for the account to “fall off” of her credit report fairly easily, but even that doesn’t officially pay off the debt. She wanted to pay off the debt, and get her credit clean 2 years faster, so she elected to pay off the collector and move on with her life. 

In this case the consumer first disputed this item with the bureaus, followed up by sending method of verification request letters, and also sent a validation letter to the debt collector. The collector knew that if this consumer were to continue fighting for her rights, their profit potential was going to decline because she had made herself a hard target, and because she was obviously experiencing a financial emergency and would not have had the ability to pay them any money at all in the future if they did not accept her offer now.

From a business perspective, the debt collector’s only options were to abandon this account and lose the expense already incurred of purchasing and collecting it, sink more time and resources into it with further negotiations, (all the while the actual value of the debt – its potential collectible amount – continues to decrease even further), or to accept the consumers offer and generate a small but significant amount of revenue for their company immediately.

Time is a very valuable commodity in credit repair. Collectors want to avoid burning the candle at both ends when they are pursuing their accounts – that is – continuing to invest time or resources into an account which has a constantly declining monetary value, as they all do.

Negotiating Favorable Terms

You must specifically ask the collector, or whoever you are negotiating with, in writing to provide the relief you are seeking. In this case, the consumer wanted the collector to delete the record from her credit report, which they agreed to do. One additional step consumers should take is to write: “In exchange for total deletion of referenced account(s)” on the front of your payment check, which creates a fast and easily referenced contract between you and the collector since most banks provide photographic scanning of checks they process to their customers via their online portals.   


Students should take note that the actions that were taken by this consumer resulted in the debt collector sending a message to the credit bureaus instructing them to remove this negative collection account from her records. Consumers need to make sure to specifically ask for this in their negotiation letters.

*** END NOTE***

If you would like to generate a letter to negotiate a settlement for yourself or your client, the template on the next page can be completely customized with the appropriate information and used as a guide. 

Pay-to-Delete Collection Agency Request

Creditor Name

Creditor Address

Creditor City, State, and Zip Code

Your Name

Your Address

Your City, State, and Zip Code



Re: Account Name(s) and Number(s)

Customer Care Department:

I (have/have not) received your alleged validation of the above-referenced account. I did not open this account and I do not believe I owe the amount your are requesting from me.

However, I will offer to settle this account in the amount of (insert dollar amount). To be paid within 30 days of you accepting this settlement offer in writing and agreeing to DELETE (not update) this account completely from any and all Credit Bureaus (Trans Union, Equifax, Experian etc.) and agree in writing to provide me with a letter of deletion.

(You may include)

This is not the only Debt I am trying to settle. This is a last effort attempt on my part before retaining a Bankruptcy Attorney. I will not send any payment until I receive written confirmation that you accept the terms of this settlement offer. 

I appreciate your time and look forward to your response.

Thank you for your time,



Module 9 References

1. “DEFINITION of Re-Aging Debt”;  

2. “The State of Debt Collection 2019: Industry Statistics, Trends, Collection Practices, and More”; 

3. ”6 ways not to reset the clock on old debt”; 

4. “How Many Times Can Creditors Buy Old Debts?”; 

5. “How the Debt Collection Agency Business Works”;