Make a repayment plan in 7 stepsStephan V. Moyneur
A collection agency has contacted you about outstanding debt. Unfortunately, you can’t make the required payment. What can you do?
The first option is to negotiate a repayment plan. But to maximize your chances of success, make sure you’re well prepared.
Know your rights and industry regulations
Most importantly, read up on the debt collection industry.
In order to prevent abuse and protect consumers, collection agencies must comply with many rules. It’s a good idea to know the rules that agencies must respect.
You should also make sure to understand your rights. We’ve all heard stories of debtors being harassed by collection agencies. These cases are rare, but it could happen to you. If you know your rights, you’ll know how to react to avoid becoming a victim
Finding all the information on this subject can be difficult. Fortunately for you, my colleague Pascal Gagnon summarized this information in a previous blog entry.
How to negotiate a repayment plan with your creditors
You now know your rights and the rules governing collection agencies. If you feel up to the challenge of negotiating with them, read on!
Here are seven steps to help you make a repayment plan and pay your debts.
Step 1: Inform the collection agent of your intention
Don’t hide from agents’ attempts to contact you. Talk to them as soon as possible. Tell them you’ll need a week to review your budget. This way you’ll gain some time. You can organize your finances and prepare yourself to negotiate your repayment plan.
The agent may ask you to make a payment to show your goodwill. Remember that you are not obliged to do so.
Step 2: Take notes and keep your promises
Take notes when you talk to the collection agency. Write down the name of the person you talk to, as well as the date and time of the call.
You can tell them that you don’t want to be contacted by phone. You can even notify them that going forward you will initiate calls with them. If the agent refuses these terms, ask to speak to their supervisor.
Of course, if the agent agrees, you must keep your word. Call back on the agreed-upon date or earlier and fulfill all your other commitments.
Step 3: Determine how much you can pay each month
Carefully study your budget and expenses. Determine how much you can reasonably afford each month in a repayment plan.
Refer to your budget. Sort your expenses into “essential expenses” and “non-essential expenses”. See if you can reduce your non-essential expenses to increase your cash on hand. Determine how much you will be able to use to repay the debt demanded by the agency.
If you have other overdue bills, try to catch up with them. Otherwise, another collection agency may contact you, which could complicate your situation.
If you can borrow money at a reasonable interest rate to repay your debts, debt consolidation may be an option. However, make sure that you can make your payments.
If you are considering asking for help from your friends or family, think twice. You may put a lot of pressure on them by asking for a loan. You may also harm your relationships with them.
Step 4: Establish your budget and provide proof of income
To accept your payment agreement, the collection agency will ask for a copy of your budget and your repayment plan.
Make sure your budget clearly demonstrates:
- Your monthly income
- Your expenses
- Other debts you are repaying
Attach a copy of your pay stub as proof of income. Make sure you cover up the name and contact information of your employer so that the agency cannot contact you at work.
Step 5: Do not agree to pay an amount that exceeds your ability to pay
Regardless of the time frame you feel is reasonable to repay your debt, the collection agency will ask you to shorten this period.
Tell them that to start, you’ll make the monthly payments you are proposing. But offer to review your budget and the monthly payment amount in three months. This will show that you are taking your responsibilities seriously and really want to repay your debt.
The agent’s first instinct will certainly be to object. They will probably ask you to reduce your expenses further to repay your debt more quickly.
If your budget is reasonable and you have already reduced your expenses, hold your ground. Do not agree to make payments beyond your means.
Step 6: What to do if the collection agent is unreasonable
If the collection agent is unreasonable, ask to speak to their supervisor. Assure them that you are repaying as much as you can afford at this time.
If the supervisor does not cooperate, explain that you will follow the payments as established in your repayment plan. Tell them the date on which you’ll make your first payment.
Explain to the supervisor that they should not telephone you again as long as you respect the payment agreement you have proposed. If you keep your commitments but the collection agency does not respect your wishes, you can file a complaint against it.
Step 7: Get free help
Are you struggling to establish a budget? Do you need advice before speaking to a collection agency? If so, you have a few options.
- Contact your local Association coopérative d’économie familiale (ACEF) (Quebec)
- Contact a Licensed Insolvency Trustee office, such as Ginsberg Gingras
Avoid resorting to payday loans or instant loans if you don’t have the means to repay the loan on time. Often these short-term solutions cause more trouble in the medium and long term.
Essential things to remember if you must deal with a collection agency
Collection agencies have a job to do. The vast majority of them do their job within the framework provided by the law and in respect of your rights (website only available in French). But to protect yourself against the rare exceptions, you have to know your rights and the rules governing debt collection.
With the right knowledge, you will be able to keep control of your situation. You can also negotiate a payment agreement that works with your budget.
For more information, please contact us at 1-855-442-2433 or complete our online consultation form.