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I enjoy the show “Shark Tank” and when I was watching a recorded episode last night, I thought it was pretty gutsy for an eleven year old boy to ask for more money when the Sharks made him an offer. The move almost cost the boy and his sisters (they were the business owners, though Mom and Dad were there too, and had financed the business to this point) a deal. The family ended up taking the initial offer, and when asked whose idea it was to ask for more money, because it almost cost them, the boy answered that they did get a deal, and that’s what mattered. And the boy was right, he did get the deal, and in fact I believe the Sharks respected the guts the boy showed. After all, the group of investors wouldn’t have massed billions between them if it weren’t for negotiating and taking risks. It does bring me to an important aspect of negotiations. As a general rule, don’t accept first offers.

Some people would insist that you never take the first offer, but I don’t like to say never, so I’ll stick with it being a general rule. There is a concern, like on the episode of “Shark Tank,” that if you make a counteroffer, they will refuse and you have given them a reason to back out of the deal altogether and you get nothing. And this is a valid concern, and could very well happen. In some cases, it may be that the person wasn’t serious about negotiating in the first place, and in others such as the above television show, the shrewd negotiators opened with their one and final option. That or they were just good at negotiation and knew their stance would make the family reconsider. Regardless, the refusal of the initial offer does have the potential to stop the deal. However, more often, the acceptance of the first offer will create the feeling in the initial party that they could have done better. Otherwise, why would you jump at the first offer so quickly? This feeling could turn to remorse and second thoughts, and they may want to change their mind about the deal.

This is especially true when negotiating products or services that are routinely negotiated upon. If you accept the first offer right off the bat, the other side may wonder what you are up to, and suspect that something is being hidden, or that they are missing something about the deal. An exception to this is when negotiating with an unsophisticated or novice negotiator. They may accept the first offer you make and you can just be happy they did so. But in most negotiations, it is not only normal, but expected, that offers and counteroffers will go back and forth until a deal is made. There will be less remorseful and suspicious feelings and both parties will feel better about the negotiated deal. So just remember, as a general rule, when bargaining is expected, don’t accept the first offer.

Did you know that when debts owed go into collections, they do not expect to be paid in full. Debts owed that go into collections can often be negotiated to a fraction of what was actually owed. In order to negotiate the best deal you must understand how the collection system works, the debt collectors mindset, know your rights and how to start off the negotiations.

Debt Collection System Explained

When debts go unpaid for several months that company normally negotiates with another company in order to get you to pay. This third party either purchases your debt for a fraction of what is actually owed, or they work for the creditor for a fee or a percentage of any money that they collect. The debt collector is in the sole business of collecting debts and they have many methods they use in oder to make individuals pay.

Debt Collectors Mindset

It is important to understand that it is the debt collectors job to make you pay. They get paid when you pay. Debt collectors deal with unpaid debts on a daily basis and they do not have the emotions that you may have about your debts. Debt collectors, from the nature of their business are most of the time aggressive and have no problem putting stress on you and pressuring you to pay.

Know Your Rights

When dealing with debt collectors you need to know your rights. Debt collectors normally will not tell you your rights and possibly will break the law when trying to recover debts. There are many rights you have, but a few of the most important ones are the following:

1. Fair Debt Collection Practices Act (FDCPA) – This is a federal law that requires debt collectors to treat you fairly. This law places limitations on the way they can collect. This act places limitations on when the collector can call, who they can contact, obscenities, amounts they are entitled to collect, suing in locations far from residence, threatening remarks, and many more. The following website gives great details on the FDCPA: Fair Debt Collection Practices Act Details. If you feel a collector has violated one of your rights, you should contact either an attorney or a credit company that can help with this.
2. Statue of Limitations – With all debts there is a time limit to how long creditors or collections agencies can sue in order to collect debts. Depending on what state you live in this time frame varies from 4 to 25 years. A creditor may be contacting you about a debt that is outside of these limitations and you may not be entitled to pay. This is important to find out before paying anything to a creditor because if the statue of limitations has expired and if you make even a tiny payment, this will restart the statue of limitations and you will now legally owe this debt. It is important to get detailed information about your debts owed with dates and amounts from the creditor.
3. Privacy – A debt collector is not suppose to tell anyone about the debts that you owe other than a co-signer or a spouse. They can call neighbors and employers, but only to obtain contact information and that is it. If they cross that line, you may be able to take legal action against them.
4. Harassment, False Statements, and Unfair Practices – This may be very common among debt collectors. They will almost say anything they can in order to make you pay. They are not allowed to make false statements or harass you in illegal ways. It is smart to keep records of what was said and if you believe something may be illegal, contact an attorney.

Debt Collection Negotiation

Once you have followed through on the debts and made sure they are all legitimate debts that you owe you can begin negotiations. The collector will of course demand full payment but in they know they will not actually receive this. They will negotiate as hard as they can and that is why you have to negotiate hard as well. A good starting place is offering about 20%-30% of the total amount owed. The easiest way to settle your debts is if you have some money and offer them a lump sum payment right away, still only for a fraction of what is actually owed. Be careful not to give in and agree to pay for anything you cannot afford. Most of the time, you will end up meeting in the middle. Before you are done negotiating it is important to try to get them to remove any negative items on your credit report that may be bringing your credit score down. This will help you save on future debts by allowing you to obtain a lower interest rate.

If you feel you cannot negotiate on your own there are professional companies out there that can help you. Most of the time these companies will give you a free consultation and let you know what they can do for you before you decide to use their service. What is good about these companies is that they won’t have the emotions you would have when trying to negotiate your own debts. Even after paying the fee, you will most likely still be better off than if you were to do it yourself.