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How Much Will a Debt Collector Settle For?
by
JG Wentworth
•
August 13, 2024
•
6 min
When dealing with outstanding debts, many consumers wonder about the possibility of settling for less than the full amount owed. Debt settlement can be a viable option for those struggling with overwhelming debt, but understanding how much a debt collector might settle for is crucial.
In this article we’ll explore the factors that influence settlement amounts, strategies for negotiation, and important considerations to keep in mind when pursuing your debt settlement.
Factors influencing settlement amounts
Several factors can affect how much a debt collector is willing to settle for:
- Age of the debt: Older debts are often settled for less while debts nearing the statute of limitations may be settled for lower amounts.
- Type of debt: Credit card debts are often more flexible for settlement while secured debts (like mortgages) are typically less negotiable.
- Original creditor vs. debt buyer: Original creditors may be less flexible than debt buyers who purchased the debt for pennies on the dollar.
- Financial situation of the debtor: If you can demonstrate financial hardship, collectors may be more willing to settle for a lower amount.
- Debt amount: Larger debts may have more room for negotiation, especially if you can demonstrate financial hardship as discussed.
- Collector’s policies: Different collection agencies have varying policies on settlements.
- Time of year: Some collectors may be more flexible near the end of financial quarters or years.
Typical settlement ranges
While every situation is unique, here are some general ranges to consider:
- 40-60% of the original debt: This is a common range for many settled debts
- 30-50% for older debts: Debts that are several years old may settle in this range.
- 50-70% for newer debts: More recent debts might require higher settlement percentages.
- 10-30% for debts owned by debt buyers: Debt buyers who acquired the debt for a fraction of its value may accept lower settlements.
It’s important to note that these are general ranges, and actual settlement amounts can vary widely based on individual circumstances.
Strategies for negotiating with debt collectors
If you plan to negotiate with your collectors, keep these pointers in mind…
- Understand your debt: Know the age, amount, and current owner of the debt.
- Assess your financial situation: Determine how much you can realistically afford to pay.
- Start low: Initial offers should be lower than what you’re willing to pay.
- Be prepared to explain your situation: Collectors may be more flexible if they understand your financial hardship.
- Get everything in writing: Never agree to a settlement without written confirmation.
- Consider lump sum vs. payment plan: Lump sum payments often result in better settlement terms.
- Don’t be pressured: Take time to consider offers and consult with financial advisors if needed.
- Know your rights: Familiarize yourself with the Fair Debt Collection Practices Act (FDCPA).
- Be persistent: Negotiation may take several attempts.
- Consider professional help: Debt settlement companies or attorneys can negotiate on your behalf (for a fee).
Factors that may lead to lower settlements
See if any of these factors apply to your situation…
- Imminent bankruptcy: If bankruptcy is likely, collectors may accept lower settlements.
- Statute of limitations approaching: Debts nearing the end of the collection period may settle for less.
- Multiple delinquent accounts: Having several outstanding debts may lead to more flexible negotiations.
- One-time windfall: Offering a lump sum from an inheritance or tax refund can be persuasive.
- Debt sold multiple times: Debts that have been sold to multiple collectors may be settled for less.
Steps to take before negotiating
A few tips to position yourself for success…
- Verify the debt: Request debt verification to ensure the collector has the right to collect.
- Check the statute of limitations: Know if the debt is still legally collectible.
- Assess your budget: Determine how much you can afford to pay.
- Save for a lump sum: Having funds available can improve your negotiating position.
- Research the collector: Understand who you’re dealing with and their reputation.
- Document all communications: Keep records of all interactions with the collector.
The bottom line
The amount a debt collector will settle for varies widely based on numerous factors. While it’s possible to settle debts for less than the full amount owed, it’s crucial to approach negotiations carefully and with a clear understanding of your financial situation and the potential consequences.
Before pursuing debt settlement, consider all available options and their implications. If you’re unsure about how to proceed, seeking advice from a financial counselor or attorney can help you make an informed decision.
There’s always JG Wentworth…
If you have $10,000 or more in unsecured debt, there’s a good chance you’ll qualify for the JG Wentworth Debt Relief Program.* Some of our program perks include:
- One monthly program payment
- We negotiate on your behalf
- Average debt resolution in as little as 48-60 months
- 24/7 support
- We only get paid when we settle your debt
If you think you qualify for our program, give us a call today so we can go over the best options for your specific financial needs. Why go it alone when you can have a dedicated team on your side?
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The information is provided for educational and informational purposes only. Such information or materials do not constitute and are not intended to provide legal, accounting, or tax advice and should not be relied on in that respect. We suggest that You consult an attorney, accountant, and/or financial advisor to answer any financial or legal questions.
* Program length varies depending on individual situation. Programs are between 24 and 60 months in length. Clients who are able to stay with the program and get all their debt settled realize approximate savings of 51% before our 25% program fee. This is a Debt resolution program provided by JGW Debt Settlement, LLC (“JGW” of “Us”). JGW offers this program in the following states: AL, AK, AZ, AR, CA, CO, FL, ID, IN, IA, KY, LA, MD, MA, MI, MS, MO, MT, NE, NM, NV, NY, NC, OK, PA, SD, TN, TX, UT, VA, DC, and WI. If a consumer residing in CT, GA, HI, IL, KS, ME, NH, NJ, OH, RI, SC and VT contacts Us we may connect them with a law firm that provides debt resolution services in their state. JGW is licensed/registered to provide debt resolution services in states where licensing/registration is required.
Debt resolution program results will vary by individual situation. As such, debt resolution services are not appropriate for everyone. Not all debts are eligible for enrollment. Not all individuals who enroll complete our program for various reasons, including their ability to save sufficient funds. Savings resulting from successful negotiations may result in tax consequences, please consult with a tax professional regarding these consequences. The use of the debt settlement services and the failure to make payments to creditors: (1) Will likely adversely affect your creditworthiness (credit rating/credit score) and make it harder to obtain credit; (2) May result in your being subject to collections or being sued by creditors or debt collectors; and (3) May increase the amount of money you owe due to the accrual of fees and interest by creditors or debt collectors. Failure to pay your monthly bills in a timely manner will result in increased balances and will harm your credit rating. Not all creditors will agree to reduce principal balance, and they may pursue collection, including lawsuits. JGW’s fees are calculated based on a percentage of the debt enrolled in the program. Read and understand the program agreement prior to enrollment.
JG Wentworth does not pay or assume any debts or provide legal, financial, tax advice, or credit repair services. You should consult with independent professionals for such advice or services. Please consult with a bankruptcy attorney for information on bankruptcy.