So you’re looking to negotiate a settlement or a payment plan with a debt collector? There are a few critical things you need to do to prepare for that. 

The most obvious thing you need before you make an offer to resolve debt is money. But there are a couple of not-so-obvious pieces that also go along with solving your debt puzzle. Let’s take a look at them. 

1. You Must Be Willing to Address the Debt

Being willing to negotiate and solve your debt problems is critically important to this process. Most of us want to pay our bills on time, all the time. But by the time debt collectors enter the picture, those bills have not been paid for a good while, and your willingness to straighten out the issue may wane as a result. 

There are a host of reasons why you might have become reluctant to make good on old debts. Here are a few:

  • You’ve been surviving the collection mill of constant phone calls and letters (for months and perhaps years), and you might just be worn out and not thinking about resolving old bills.
  • You forgot about the debts. You may only be reminded about them when you have reason to look at your credit reports. You might see how old collection accounts are holding you back from getting something accomplished right now.
  • A debt collector (or two) stepped over the line with you, and you flat out refuse to pay as a matter of personal principle.

However, the most common reason I have observed for lack of willingness to pay debts is likely also the reason most misinterpreted: margin. People still want to make good on unpaid bills, even many years after they fell behind. You may not be struggling as much financially as when you first fell behind, but could still be considered only marginally able to pay for the past, while living with the costs of today. And it can be overwhelming. If you have little set aside for emergencies, or unexpected expenses, it may require more than you are willing to part with to resolve debts. Even when the money or ability to pay exists, you can’t seem to gather the willingness to pay.

Smart debt collectors want to spend time collecting from people who have both the ability and willingness to pay old bills. So keep in mind that your reluctance to pay for the past does impact your future. Paying old bills is, in fact, a matter of choice for many people. So if you’re looking for some good reasons to get on board with solving your past debts, here are some of the motivators for tackling debts head-on that people have shared with me:

  • They want to limit or avoid any risk of being sued in court for collection.
  • They want to clean up their credit reports in order to move forward with other financial goals.
  • They feel an obligation to pay, whether moral or spiritual.
  • The decision to pay, or not to pay, is one each must make on their own. Debt collection companies, and the collectors that work for them, have made the process of resolving debts fairly predictable for the most part. And that is a good thing.

2. Know Your Facts & Figures

Your debt has a story. If you know the facts and figures about your debts and income, you are two-thirds of the way to being ready to tackle your debt. 

Other than major medical bills that can come about suddenly, most debts take time to accumulate, or to otherwise become unaffordable. And it is the facts surrounding how your debt came to be, or how your personal and household budget stretched to the breaking point, that are the facts in your hardship story. 

You may have told your story several times to several people, before finding yourself in a better place financially, where you are preparing to be proactive about your debt. And you may have to repeat the facts to more than one debt collector. A word of caution about telling your debt story: Don’t embellish or fabricate anything. It is not necessary in most cases. Also be careful not to view a debt collector as someone who cares much. They are not an overly empathetic lot. But they may need reasons to do something, like settle for less than the balance owed, or agree to monthly payment options that are affordable for you (which may be less than the percentage of the debt the company was aiming to get). Working out a summary of your hardship in advance will come in handy, whether talking to your bank’s collection employees, or later debt collectors who take on your accounts. 

3. Determine What You Can Afford

Many of us will look at an overwhelming amount of debt as an obstacle that won’t budge, but that is often because we look at our debt picture in its totality. 

When you look at moving smaller pieces of the obstacle (tackling one overdue debt at a time), you may suddenly see a clearer path to reaching your financial goals. 

How do you know what you can afford to pay? One of the simpler exercises I have used over the years takes into account repayment plan averages with major credit cards, set alongside negotiated settlement averages that are then laid next to known success timelines. 

Here is what that looks like, and how you can get an outline of affordability for yourself: Add up all of your unsecured bills, like credit cards, gas and department store cards, etc. Now calculate what 2.1% of that total would be. If you have room in your monthly budget to pay roughly 2% of your balances, and are confident you can maintain that level of payment consistently, talk with a credit counseling agency about consolidating all of your bills into one lower payment through them. Just be careful not to start a repayment plan you are not confident you can afford. 

And how do you know what a debt collector is willing to accept? The 2.1% average I just used is more for someone who can pay their debts back over time. Someone with a dependable income, whose debts have only recently become unaffordable, or who has only missed a few months of payments. If repayment over time is just out of reach, or simply out of the question, you are often looking at either bankruptcy, or negotiating settlements with debt collectors as the next most realistic options. 

And while I recommend talking about those options with professionals who offer these services in order to get a full understanding of both, there are some calculations you can do, too. Debts that are newly assigned or sold off to debt collectors can often be settled for a lower amount. 

If you are able to pool resources together that equal between 30% and 60% of a particular account, you have a good shot at reducing your debt via settlement. Later stages of collection, such as when your debt has been passed along to a half-dozen debt collectors to try to get you to pay, or where your state’s limit for using the courts to collect (the statute of limitations) has expired, can sometimes lead to better savings, while debts with attorney collectors, or in the courts, may settle at higher rates. 

Using your story outline, and sticking to sharing the hardships you have, or continue to endure, combined with the reality of your finances, and what you are able to pay, is relatively simple. Picking up the phone is not, at least for some of us. I am talking about dialing out to a debt collector… you know… the same people whose calls you’ve been avoiding repeatedly, and for some time. Debt problems can be resolved in a single call, or over multiple calls spread out over several weeks. It's a good idea to know how and when to talk to debt collectors, and it's important to get your agreements in writing

Finally, while you may not want to even know what condition your credit is in at this point, it can be helpful to check your credit reports and credit scores to do a full assessment of your current standing, and to help you plan for a way to rebuild when you’re ready to. Check your credit reports to make sure all accounts are being reported accurately (even if past due or in collections). You can come up with a plan that can help you rebuild your credit by using free tools at Credit.com, where you can also monitor two of your credit scores on a monthly basis to check your progress.

Read More from Credit.com

10 Tips for Negotiating With Debt Collectors          

3 Strategies for Consolidating Debt 

Understanding Your Debt Collection Rights