I've never had personal experience with a debt collector, though I've known and counseled many people who have. Overall, I don't have the greatest opinion of debt collectors -- the profession often seems to attract people who are, let's say, less than ethical.
Here's an interesting piece from Money Central that gives us insight on how to deal with debt collectors and debt collection services. The first thing I found extremely interesting was the way the debt collection business works and how these companies make money. Consider the following:
Usually, if a collections agency can collect 20% of the money you owe, it comes out on top. Frequently, agencies collect much more. So they're going to harass you (within legal limits) and offer you settlement deals. For example, they might say, "You owe $5,000 on your credit card, but with accrued interest, it's $7,000 -- and we'll settle with you for half, or $3,500." Of course, if they bought the debt for $200, even after you factor in their costs, they're making decent profits. However, they still want to settle and usually will settle for even less than 50% of the current balance.
Very interesting. Knowing this is a great advantage for those who have debt and are being contacted by a debt collection agency. Using this information, it seems like it would be pretty easy for you to get them to agree to accept a lesser amount than the total you owe (after all, they want to make a good profit and move on) -- probably a substantially lesser amount.
The piece then offers some guidance on the best ways to pay off your debt:
Your best-case scenario is to be able to negotiate and pay the collections agency a lump sum. Next best is to have a reasonable monthly payment that you can afford and that will let you pay off your debt. After that, it's time to start thinking whether bankruptcy is a viable option so you can start fresh.
Big questions people often have are "How do I get the money to pay off my debt? How can I make even small payments when I'm getting deeper in debt every month?" I recently wrote How to Get Out of Debt: Eliminate Credit Card Debt to answer these questions. Check it out if you'd like some thoughts on how to get ahead of your debt, start paying it off, and eventually getting free from debt altogether.