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How do I enter a payment plan with a debt collector?


To enter a payment plan with a debt collector, it is important to understand how the collector has calculated the balance claimed. Frequently, the amount demanded by the collector is negotiable.  Often, non-principal charges, like interest and late fees, are quickly eliminated when negotiated.

You should write to the collector and request a detailed calculation of the amount claimed, which individually lists principal, interest, late fees, etc. 

If you agree with the collector’s calculation and terms for payment, you should formalize the payment plan IN WRITING. Be sure to detail terms, such as total balance owed; monthly payment amount/total number of months, and payment due date.  Send your letter by Certified Mail, Return Receipt letter to the collector.  Be sure to perform according to the agreed upon terms.

NOTE: If you settle a debt consisting of $600 or more in principal (i.e. the actual loan amount - not interest or fees) for less than the full balance due, there could be income tax consequences. If you have a question concerning tax implications of a settled debt, you should seek the advice of a tax advisor or accountant.