Settling Debts for Pennies on the Dollar
By: Daniel Gershburg
I have to admit that I have a bit of fun with debt collection agencies and buying debt for pennies on the dollar. More specifically, I find it somewhat amusing to give back to those who cause ohhh so much stress for my clients. Recently, I had a client with a great credit score who had a large amount of debt and was not a great candidate for Bankruptcy. We began to settle all of her debts, and one of the things I noticed is that the debt collectors, and oddly the ones with the smallest amounts to collect, would make up absurd threats as to why the debt needed to be settled right now. Among the threats:
1-We will get a judgment against her for three times the debt owed.
Technically this isn’t really a threat or a lie per se, because generally judgments can be entered for interest, fees, etc., and the judgment can easily double or sometimes triple the amount owed. But for a debt of $122, that will not make a huge difference and wont allow the collector to get their hands on the money any sooner.
2-We will take the debtors house and put it into foreclosure.
Really this is much like saying that because you me $100 from a bet we made on the Jets game last week, I will confiscate your car tires and sell all of your mutual fund accounts. It’s absurd. So long as the debt is unsecured (credit card debt), no one is touching and/or selling your house. The best thing to do in such a situation is to tell the debt collector that your house is worth in excess of $3,000,000.00, then laugh and hang up the phone. (Im kidding-please don’t do that. Im not advising you to do that. Seriously…)
3-Your client can face jail time.
At this point, during this actual call, I asked to speak to the collectors supervisor. Not only is this absurd, but it is illegal to threaten criminal action against an individual in such a situation. If someone tells you that you will face jail time, speak to the higher ups right away.
I guess I went off on a rant because this post was supposed to be about settling debts for pennies on the dollar. Here is my advice to you then. Do not take the collectors first 3 offers. Keep negotiating. The collector will tell you that his “client will never go below “70% of the amount owed”. If you believe that, and pay that amount, then you should also never go to a Turkish Bazaar (that’s because they bargain there also…a lot). These collectors buy your debts for pennies on the dollar, literally. I’ve settled debts for 20% of the amount owed (Not a guarantee of future results). So take my advice and continue to negotiate.
Another trick they try to use is tell you that you have to pay this in one payment or the deal is off. Nonsense. Let me say that again. Nonsense. You can, and should, pay it off over at least 3 or 4 payments. Remember, these guys know you are close to Bankruptcy where there money would just dissapear. They want their money…and they will wait to get it.
Ill be posting more and more tips later on, but please remember that there is a ton of room for negotiation when dealing with debt collectors…so don’t jump at the first offer.
Daniel Gershburg Esq., is a Bankruptcy & Real Estate attorney serving clients in Brooklyn, Queens, Manhattan, Staten Island, Long Island and Westchester. Mr. Gershburg has given lectures and presentations to both attorneys and the community at large surrounding Bankruptcy and financial advocacy in the New York City area. Currently he is working on his first book giving practical advice about repairing troubled credit and how to improve credit post Bankruptcy