If your credit card debt has been assigned to a collection agency, chances are you have fallen substantially behind in your payments. The collection agency’s job is to collect your bad debt. In a perfect world, the agency would like to collect your debt in full.

Recognizing how collection agencies receive payment for collecting debt is important to know. Agencies generally receive payment in one of two ways, either on a flat monthly fee basis or on a contingency basis. A contingency basis means the collection agency receives a percentage of the amount they recover.

If the agency gets paid a monthly fee no matter what, the agency may be more amenable to a settlement. If the collection agency only receives payment if they recover money from the debtor, the agencies may be less likely to settle.

The point is the philosophy of settlements can vary from agency to agency. Just because you are successful settling with one agency on a credit card debt does not mean the same strategy will work with another collection agency.

It is important to note that collection debt agencies only pay a small fraction of the amount of money they are trying to recover. Collection agencies will make money if they collect more money from you than what they paid for the debt.

Understand there is a statute of limitations for agencies to collect debt. This statute varies by state. If the statute has run, or time has passed for the agency to collect debt, the outstanding debt has now become uncollectable and the collection agency cannot bring any legal action against you for failure to pay. There are 5 steps you can take to try to settle your debt.

1) Negotiate your settlement in writing. If push comes to shove, oral agreements are your word against theirs. Verbal agreements are very difficult to uphold.

2) Do not settle for the first or second amount a collection agency offers. If a collection agency voluntarily offers to accept your debt for a specific amount, know that this is likely not their bottom dollar. They have left themselves some wiggle room.

3) Organize and retain all records relating to your interaction with the collection agency. Be sure to keep a copy of everything you send to the agency.

4) Do not rush into a settlement unless you are completely comfortable. Remember there are statutes of limitations for collecting debt.

5) Remember your goal is to settle for an amount less than the full amount you owe, but more than what the debt collection agency paid for your debt.