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Tips on debt negotiation

I'm aware that some people being chased by debt collectors or lawyers look through The Debt Book for ways to negotiate with them. (I know this, because some of these people email me!) There are some tips on debt negotiation in The Debt Book. I'll summarise them by extracting certain sections from the book. But first:

  1. All this material is copyright, but you can make any 'fair use' of it under copyright law. That of course doesn't include poor-attitude things like re-publishing the work (or parts of it) and claiming it's yours, or copying it to another website or mirroring it, or putting parts of it in some other document or website and implying you wrote those parts, or using any of it in a publication that you sell. You get the idea.

  2. I'm not a lawyer and don't claim that the general information below will work in any given situation. If you have a legal question, see a lawyer. The information and advice is provided without any responsibility or liability on any account whatsoever on the part of the author or the copyright holder or the book publisher.

Here are sections I've extracted and my comments:

EXTRACT from Debt Book

TIP: if a big debtor is in financial trouble, and you push him hard, he might find something 'wrong' with your product and offer part payment. Your product was faulty, or your service wasn't up to scratch -- or whatever. This is face-saving. But it offers an easy chance to get most of your money.

Consider his offer very seriously. Believe me, it can be the best thing you can do. You'll probably still end up with a profit on the deal. (And he'll be happy, because he's got a reduction.) You'll have saved yourself a lot of time. And you'll probably get more money from the debtor than you'd get in any other way. Also you'll come away feeling like a good guy. You're reasonable, you can compromise. Do it! Do it! Don't get involved with law courts and endless hassles if you can avoid it. Pride can be very expensive.


Applies to any debtor, not just big ones. I don't suggest you claim something is wrong when it isn't, but pay close attention to that second paragraph: debt negotiation pays for both sides, very often. Make an offer and try to keep calm. The people chasing you for money may have experienced the bliss of successful debt negotiation and may listen to you carefully.

EXTRACT from Debt Book

Some middle-sized debt collectors specialise in negotiation. They adjust their approach to the type of debtor. They do go out and see the debtor, but mainly with negotiation in mind. Maybe the debtor can pay so much a week? Or he could make an offer that might be OK? Anyway, what's the real reason this person hasn't paid? The debt collector wants information, he picks up vibes, he uses his common sense and experience to find some way to make progress. Only as a last resort does he use legal action -- and then only if he's sure there's really money at the end of it.

"I tell our new people, you wear three hats. First, there's social welfare officer -- there's no point taking legal action with some of these people. They've got nothing. And it won't do our client any good. The second hat, the main one, is a negotiator. Sometimes our client has done a bung job, so let's settle this thing. The third hat is the hard-nose collection officer."


A debt collector is often more sensible than you'd expect. But if you slam the door, never answer the phone, and just swear at them and make threats, then their capacity for negotiation and common sense never gets a chance. Try talking to them. Even make an offer, if you really do owe the money (and you aren't in dispute about that.)

EXTRACT from Debt Book

"I settle a lot of accounts for our clients purely on economic grounds. One just the other day: I spoke to the guy, the client wanted three grand. There was a little bit of funny business going on. They wanted $3000 from this debtor -- the client told us the debt was $3000, but we'll credit them $500 because there was a bit of a dispute on the job. They acknowledged that this guy would have a bit of a claim. So we'll accept $2500. So I went to the debtor and he said, no way, mate. The shoddy job, they did this and this. I talked to him a bit, joked with him -- as I said, it depends how the debtor responds, what we do. He could see the funny side, and also the business side. He was a bit stubborn. So he said, I'll give you $1500 and that's it. I said, you've got to be joking, mate. They've already dropped $500.

"So I came back to the client and spoke to him. He said, no, no, no, I want the $2500, but look, if you really have to take $1500 I'll take it. But get more if you can. I went back to the debtor, and said, look the time you're going to take off work, any sort of legal action, there's no winners. The time and money you're going to spend on this, even though you think you're right is going to be horrific, you're going to employ a solicitor -- you won't get all your costs back, because the court doesn't work that way. You might get 50% of your costs back, awarded, if you win.

"So I said, meet him halfway. $2000. And he thought about it and said, look, yeah, I can't afford the time off work --self-employed business man. OK, I'll settle. The client was happy. All done."


That's a debt collector talking. A rare look behind the scenes. If you're in a situation like that debtor, then talk to the debt collector. The debt collector would probably love to negotiate a happy settlement and get it "all done."