how to settle debt with a collection agency?

Question

My wife has some hospital bills from a car accident a year ago that were overlooked at the time and ended up being sent to collections. I have been in contact with the collection agency, I made the mistake of talking to them over the phone before doing my homework. 

As it stands right now, they have offered me a settlement of about 51% of the total.  Some time passed as I'm trying to get the insurance company to pay the tab (thats a whole different story)  and now they have given me a settlement that is 70% of the total, they went up. While talking to them on the phone I asked them why they number went up, and they offered me the original number provided I could pay it today...  So I think they are still willing to negotiate. 

My question is how should I do this.  I have read online about how I should do all negations in writing, I wish I would have read that earlier, but I didn't. Should I use an agreement to compromise debt form I have found online and just put in the value I want to pay, say 25-30%, and let them counter offer?  Or should I negotiate a price over the phone and then request paperwork before sending any money? That seems to be a much more efficient way to do thing to me, as the mail back and forth could take weeks or months.

The other concern I have is the value of this debt.  I don't want to give any exact figures, mainly because that's my business... the original value is over $10,000, so they could be inclined to pursue legal action as it could be cost effective for them. Given that, I don't want to push too hard and get burned. 

Does anyone have any suggestions as to how I should deal with this?

CatDad · Accepted Answer

First, you cannot force them to take any settlement amount. However, the older the debt is, the greater the chance you have of getting a good deal.
The way to do this is to have the cash up front to where you pay them in a one time payment. Money talks with debt collectors... 
Negotiation tactic: Start with a low ball settlement of $2,500. When they inevitably counter for more money, pretend like you're broke and that you might be able to settle for $4,000 if you can borrow from your family. You don't have to keep all negotiations in writing....you can do this over the phone. Just get the final settlement deal in writing once you've agreed to a settlement. Once you get this, pay with a money order or cashier's check. Don't give them your bank account #'s.
How to pay collection accounts:  http://tinyurl.com/4y9fv2y

Anonymous · Answer

Mail or fax your settlement offers to the debt collectors that have your accounts. Offer to settle @ 25% of the defaulted amount and go from there. What you want is a settlement letter on their letterhead stating that the account will be "Paid in Full" once the agreed to amount is paid. Once you get this, pay with a USPS money order. Photocopy everything and keep in your records forever as documentation that the debt was settled.Never agree to any settlement over the phone unless you get the terms in writing. Never give debt collectors you bank account numbers for payment. Don't not take monthly payment options

CPFC · Answer

I don't recommend settling on a debt, medical bills don't have the ability to have interest added therefor any amount that you send to them should be posted to the account.  There is a higher probability that they will take your debt to court because of the amount of the debt, however if you make payments and can show proof in court that you have been sending payments on the debt then a judge may be lenient and allow for you to continue to make the monthly payments that you have been sending.  
I wanted to just let you know that some states require that you report the difference not paid, ie: 49% of the balance as income.  You can be held liable to pay income taxes on that amount.  Before agreeing to a settlement you may want to look into that further.

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how to settle debt with a collection agency?

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