Here’s Why You May Want to Talk to That Debt Collector Before Tax Season Ends

Here’s something your may not know: Tax season is like Christmas for debt collectors.

In fact, as a past-president of a national debt collection company, I can tell you some agencies will collect as much money from February through May as in the remaining eight months of the year. Why?

Well, the first reason is a bit obvious: Many consumers in debt will receive a tax refund and go on to use that money to pay off their delinquent debt. Second, many debt collectors are good at what they do and want to help consumers resolve their outstanding liabilities. They’re willing to work out or negotiate a payment plan the consumer now has the ability to repay. (And, yes, that means the debt collector who’s been contacting you may be willing to settle up for less than what you owe.)

So who has the upper hand when it comes to getting debt repaid during tax season? If the cards are played right, both the consumer and the debt collector come out ahead.

During this time of year, consumers are generally going to come across two types of debt collectors. The first is a debt collector who understands a consumer has access to a limited tax refund — and is potentially trying to pay off a multitude of debts. This collector will be looking to help the consumer resolve as many debts as possible with the funds they receive back from Uncle Sam. The other type of debt collector will hold their ground, knowing the consumer has funds to pay off a singular debt, and will ultimately refuse to negotiate payment for a lesser amount. Odds are consumers will run across both types of debt collectors during this time of year.

What Drives a Debt Collector’s Settlement Stance?

If you have an outstanding debt, it is important to understand the delicate balance collectors face during tax season. Several factors determine what debt collectors ultimately are able to do for consumers looking to settle a debt for less than what is owed.

The main factor is the client whose behalf they are collecting on. Settlements live and die with the requirements of a client; either they authorize the debt collector to offer a settlement or they do not. If the client allows for settlements, it is dependent upon the agency as to when, where and/or how they offer one. Some agencies may only offer settlements for accounts on file for 60 days or more, whereas other companies will offer settlements on the first day the account gets to their office.

The Odds Are in Your Favor

It is more probable than not that during tax season a debt collector has the ability to offer a settlement. Contrary to popular belief, debt collectors do not like to turn away money, especially this time of year. While one may hold firm for a while, when approached with a reasonable settlement offer, they will generally do what is in their power to get it approved. They may be willing to waive excess interest, late fees and other non-principal-related charges before tax season is up as well.

On the flip side, consumers should not expect a debt collector to take “pennies on the dollar” to settle accounts. Even if their agency did directly purchase the debt — which happens less frequently these days — the debt collector you’re dealing with isn’t the person who directly bought the debt, and they are going to be required to follow the guidelines set forth by their employer. You can find more tips for negotiating with a collector here.

The Bottom Line

Tax season can be a mutually beneficial time for the consumer and the debt collector, so if you’re hoping to shore up an outstanding account and/or are looking to strike a deal, now may be the right time to do so.

Just keep in mind, if one side tries too hard to “game” the other, an opportunity to resolve a bad debt will likely fall through and that bill will remain delinquent. At the end of the day, if consumers and debt collectors engage in a professional and respectful dialogue, it’s likely they’ll reach a resolution that benefits all parties.

[Editor’s Note: A collection account can wind up hurting your credit score. To see where yours stands, you can view your free credit report snapshot, updated every 14 days, on Credit.com.]

This story is an Op/Ed contribution to Credit.com and does not necessarily represent the views of the company or its partners.

Image: filadendron