I received a collection letter or statement

There are various letters that you will receive from your creditors at different stages of delinquency.  This article covers the most common letters that you will receive.  If you have received a letter from a new collector, it is important to update this information in UGotiate.  To learn how to update this information, please read:  How to change a creditor in UGotiate.  If you do not have an account with UGotiate, start your free trial today.  Keep track of your creditors, save money, start negotiating and become debt free with UGotiate.com.

Original Creditor Statement

The Original Creditor sends a billing statement out once a month.  The statement shows the current balance, the amount past due, the required monthly payment amount and the interest rate.  Once the Original Creditor refers or sells the account to a third party Collection Firm, you will stop receiving monthly statements.  This typically happens when the account is 4-7 months past due.

Each month when you receive the Original Creditor’s statement, you need to update the creditor’s information in UGotiate.  UGotiate will alert you in your To Do list each month.  But, you can update your account at any time.  See the screen shots below.

Collection Firm Letter

Once an Original Creditor Account is referred to or sold to a third party Collection Firm, it is likely that you will start receiving Collection Letters.  The Collection Letter will include details about the Collection Firm (name, address, phone number, etc) as well as information about your account such as the current account balance, and the Collection Firm’s reference number (different from the Original Creditor’s account number). 

When you receive a Collection Letter, it is very important that you update this information in UGotiate.  Depending on the Collection Firm, UGotiate will alert you if it is time to send a Validation of Debt letter or not.  Keep in mind – it is likely that your accounts will move around over time.  This means that one of your accounts may move from one Collection Firm to another, to another, to another, etc.  This is perfectly normal.  Just make sure to always update this information in UGotiate.

Law Firm Collection Letter

An Original Creditor Account may be sold or referred to a Collection Law Firm.  A Collection Law Firm works both as a Collection Agency and a Law Firm specializing in collecting debt.  Collection Letters from a Collection Law Firm are very similar to letters from a Collection Firm.  The Letter will be on the Law Firm’s letterhead and will include details about the Firm (name, address, phone number, etc) as well as information about your account such as current account balance, and the Law Firm’s reference number (different from the Original Creditor’s account number). 

The main difference between a Collection Firm and a Collection Law Firm is that the Law Firm can proceed with litigation to collection on past due debt, if they so choose.  In order for the Collection Law Firm to pursue legal action against you, they must have a licensed Attorney in your state.  There is no way to tell if or when a Collection Law Firm will initiate a lawsuit to collect on the debt.  If the Collection Law Firm is in your state, you may want to prioritize this account over your other accounts and save up money to resolve this account as soon as you can – just in case the Law Firm decides to move ahead with a lawsuit. 

Receiving a lawsuit on one of your accounts can certainly be worrisome.  Most collection lawsuits* are manageable.  How the lawsuit will affect you will depend on your specific situation.  Usually, the collector will still be open to working with you to reach a resolution on the account.  If you have funds available, you can make an offer to resolve the account right away – that is the quickest way to resolve the lawsuit.  Once you settle the debt, the lawsuit goes away.  If you need additional information or assistance handling an account that has legal action, you may want to speak with a licensed Attorney in your state.  UGotiate has access to a network of Attorneys in many states.  Should you be interested, you can speak with a UGotiate representative at 1-800-215-2706. 

When you receive a Collection Letter from a Law Firm, it is very important that you update this information in UGotiate.  Depending on the Law Firm, UGotiate will alert you if it is time to send a Validation of Debt letter or not.  It is likely that your accounts will move around over time.  This means that one of your accounts may move from one Collection Firm or Collection Law Firm to another, to another, to another, etc.  This is perfectly normal.  Just make sure to always update this information in UGotiate.

Settlement Offer Directly from a Creditor (unsolicited)

Once your accounts become past due, the Original Creditor or the Collector may send you settlement offers by mail.  This is called an unsolicited offer.  This is very common and you may receive multiple offers from your creditors over time. 

It is very important to understand that just because the creditor is sending you an offer; it doesn’t automatically mean that it is the best time or the best offer for you to accept.  There are many variables you need to consider.

First, review the offer carefully.  What are the terms?  Oftentimes a Creditor’s opening offer is around 75%-85%.  Whatever the percentage is, does it seem like a reasonable offer to you?  Does is fit into your Plan & Goal?  Most UGotiator’s set a Plan & Goal to resolve their debt for an average of 38%-45%.  This doesn’t mean that every resolution needs to be exactly your goal – all of your resolutions should average to be around the Goal you have set.

Second, review how much money you currently have available.  Do you have enough to pay what the creditor is asking? If you don’t have the funds currently available, but believe the offer is a good one, you may want to contact the creditor to work out payment arrangements.  Some creditors will accept monthly payments on a settlement.  If you know you will have enough money over the next 3, 6 or 8 months, you could propose this to the creditor and see if they will agree to spread the settlement over a few months.  Just make sure you are able to make ALL of the payments you set up – if you miss a payment, it is likely that the settlement will be null and void and any money that you have paid will just be applied to the principle balance.

Third, review the whole picture.  Take in to consideration your other accounts.  Would it make sense to use the money you have saved up to resolve this account now?  Or would the money be better used for another account?  Or would it be better to keep saving right now, say to try and resolve your largest account in time?  If you have any accounts that have heightened collection activity or lawsuits, you may want to save money in case you need it for one of those accounts.  It’s difficult to know exactly what will happen in the future and when and where you money is best used, but take some time to consider different scenarios with you outstanding debts before you make any decisions.

Fourth, consider a counter proposal.  Oftentimes, the creditor’s initial offer is just their opening offer.  Depending on the creditor and the offer, there may be some room for negotiation.  If you feel the offer is too high, you can send the creditor a written proposal for a lower amount that you are comfortable with.  Just make sure you have the funds available.  If the creditor agrees to your counter proposal, it is likely they will want to funds within the next week or so.  If you need longer, or if you need to spread the settlement over a few months, make sure to indicate this in your written proposal.

Sending a counter proposal doesn’t automatically mean the creditor will accept your offer.  The creditor may reject your offer or they may offer you a counter proposal as well.  You may need to negotiate back and forth a few times before both you and the creditor agree on an amount.

After you review these factors, you should have some sense of what make sense to your situation. 

*UGotiate is not a Law Firm and does not provide any legal advice.  All information is general information only.  For legal advice and guidance, speak with a licensed Attorney in your state.

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