In order to begin debt negotiations, one most understand certain terms, conditions, and the debt negotiation process:

The original creditor is an institution that extends credit owed by the debtor, which creates an obligation for the debtor to repay the debt at a later date.

Collection Agency is a business that pursues payments on debts owed by individuals. Most collection agencies operate as agents of creditors and collect debt for a fee or percentage of the total amount owed. Creditors generally send debts to a collection agency in order to remove them from their account receivable records; the difference between the amount collected and the full value of the debt is then written off as a net loss.

Debt Buyers purchase debts from creditors for pennies on dollar, which is a small fraction of the value of the credit card debt, once the account has been written off and aged considerably.

Debts that have been written off- sell on an average for 6 to 7 cents on the dollar.
Debts that are slightly older or repossessions and which several collection agencies have serviced the debt- sell on an average of 1.5 cents to 2 cents on the dollar.

Debts that are years-old, out-of-statue debts- sell for pennies on the dollar or less.

Statue of limitation laws limit the length of time from the commencement of the delinquency in which a collection agency can file suit. Please note- making any payment, including a good faith or token payment can reset the statue of limitation clock and open the door for the collector to seek further action against you. When the statue of limitations has expired, and you can not afford to pay the debt, you may want to consider sending the collector and all major credit bureaus Expired SOL Letter.

Collection Attorneys After the debt has been written off, some creditors may choose to employ the collection services of collection attorneys. The collection law firms are still recognized as debt collectors and are governed by FDCPA. Make no mistake, the collection law office does have licensed attorneys on staff to pursue legal action, but their common practice is collections. That information would scare the average debtor, but there is a loophole, the attorney has to be licensed in the state where the debtor resides to enforce legal action. If the attorney is licensed in your state, the debtor must be notified of the lawsuit by having the court documents served upon the debtor, usually in person. Once the debtor is served, the debtor must take some action to respond to the lawsuit, though the specific type of response depends on individual state law. If there is no response, the collection attorney will usually request that the court grant a default judgment.

Arbitration is a legal technique for the resolution of disputes outside the courts. Not all creditors choose arbitration. Arbitration is a faster, simpler, and less expensive alternative to litigation. The creditor must introduce the right to arbitrate at the time the contract is signed. All debts can be settled before or after arbitration and litigation. Arbitration and litigation are aggressive and strategic efforts to recovery outstanding debt; to assess fees and cost, in an attempt to increase their profit.