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Payment Plan Negotiations

Originally published: August 2011

The Secret is Taking Control

When it comes to setting arrangements for a payment plan with the debtor, time and again I hear new or novice collectors begin negotiations on the wrong foot.

For the sake of this discussion, assume that a given debtor has a legitimate reason to try to set up an arrangement for installment payments.

So, what am I hearing that’s so offensive to my bill collector’s ears?

"Mr. Jones, I can appreciate the fact that you can’t pay the full amount now. But can you pay half now and half later?"

Oh my aching back! When I hear something like that it goes through my spine like a steel spike.

I have a very simple rule when it comes to any form of negotiation:


If a debtor tells me he can’t come up with a full and immediate payment, my response is always, “How short of the full amount are you?”

The point is to extract from the debtor the amount he claims he is capable of paying. If you give him a figure, you could quite possibly be violating my basic negotiating rule - Never bid against yourself. Once you do that, you've lost control of the situation. Also, be aware that, no matter what figure or term he may offer, you can take for granted that it's understated.

Once the debtor lays his cards on the table, always counter with something like, “I may consider that offer, if you can make it more palatable by including a series of postdated checks (or a promissory note or personal guarantee etc).

While the debtor on the other end of the phone may protest your suggestion, you are now in control.

You can make it clear that you’re not a banker offering loan terms. If he wants to make payments, he must come to some sweeter means to meet you half way. By drawing him out, you've put yourself in a position to either obtain a shorter term or possibly improve the legal status of the debt with a more favorable instrument. And that's good negotiating.

Once you reach an agreement with the debtor, always confirm payment arrangements in writing.

And, remember Never – never ever – bid against yourself.