I currently work as negotiator for the debt settlement company and have to confirm Melonie, Zofia and Christany's concerns and suggestions. First, collection agencies can lie.
A lot. I always demand negotiated settlement letter for my clients in writing and further(very important!) to persuade collectors to state that my client "settled in full" versus "settled ". It's a big difference since future creditors will view you as potentially trustworthy rather than PARTIALLY SETTLED DEBTOR. It certainly affects your credit score more severely and for longer period of time than "settled in full" status.
And yes, if they bug you about any debt, you should send them "Validation of Debt letter" which will buy you time since it obligates your creditors to do their lengthy homework that you actually spent this money, open this account, when, etc.
Finally, never forget that collection agency is a third party debt collectors and they buy you debt from original creditors for pennies on a dollar. Based on amount you owe, they should not sue you, so get creative and tell them that you would love to settle your debt, but have a tough financial hardship...offer them 10%.
You'll be shocked how flexible agency can get. A few phone calls later, you might get a different Collector Rep and they may offer to settle for 20-30% max. I do it all the time, "patience is a virtue"

Good luck! And when it comes to unsecured debt(i am not talking about student loans, military cards, cars, home equity), try
never owe any money to Discover, Chase or Amex. Those are the most vicious and instead of collection agencies most of the time will hire lawfirms and can sue over $700!
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