With bankruptcy it depends on what is there, after the feds and state get paid, and proportionally distributed by amount owed to each creditor.

Ignore the phone calls for about a year, gather up about half owed, call the collection agency and tell them this is all you got, and it’s all you are going to get to settle this account. They may bicker 100 bucks one way or the other. If you don’t like it hang up, and call back in a month, and do it over. Hell I have had them even send me unsolicited offers that reflect the above scenario.

I used to run a collections department for 8 years, we had over 20,000 accounts, with local districts, HMO’s, Veteran’s Affairs and private citizens, guess how many people worked there? 4. The stress of legitimizing an amount is not worth the payoff because that debt is really purchased for maybe forty cents on the dollar, at most. Sometimes they use a fee based collection system where a flat fee is taken for each account to see it through litigation beginning to end. Those are usually just as willing to deal before it goes to court.

Another method is setting up a payment plan, or just start sending them small amounts every month in order to keep out of court.

Here’s a great letter for responding to collection agencies, making them legally put EVERY thing in line is a great way to get them to drop the debt all together. I prefer this when I feel like I am getting screwed. Either way.

Today’s Date

Your Name Your Address

Collector’s Name Collector’s Address

Dear {insert name of collector or company},

I am writing in response to your (letter or phone call) dated {insert date}, (copy enclosed) because I do not believe I owe what you say I owe.

This is the first I’ve heard from you, or any other company on this matter therefore, in accordance with the Fair Debt Collection Practices Act, Section 809(b): Validating Debts:

(b) If the consumer notifies the debt collector in writing within the thirty-day period described in subsection (a) that the debt, or any portion thereof, is disputed, or that the consumer requests the name and address of the original creditor, the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt or any copy of a judgment, or the name and address of the original creditor, and a copy of such verification or judgment, or name and address of the original creditor, is mailed to the consumer by the debt collector.

I respectfully request that you provide me with the following information: (1) the amount of the debt; (2) the name of the creditor to whom the debt is owed; (3) Provide a verification or copy of any judgment (if applicable); (4) Proof that you are licensed to collect debts in (insert name of your state)

Be advised that I am fully aware of my rights under the Fair Debt Collection Practices Act and the Fair Credit Reporting Act. For instance, I know that: (a) because I have disputed this debt in writing within 30 days of receipt of your dunning notice, you must obtain verification of the debt or a copy of the judgment against me and mail these items to me at your expense; (b) you cannot add interest or fees except those allowed by the original contract or state law. (c) you do not have to respond to this dispute but if you do, any attempt to collect this debt without validating it, violates the FDCPA;

Also be advised that I am keeping very accurate records of all correspondence from you and your company including recording all phone calls and I will not hesitate to report violations of the law to my State Attorney General, the Federal Trade Commission and the Better Business Bureau.

I have disputed this debt; therefore, until validated you know your information concerning this debt is inaccurate. Thus, if you have already reported this debt to any credit-reporting agency (CRA) or Credit Bureau (CB) then, you must immediately inform them of my dispute with this debt. Reporting information that you know to be inaccurate or failing to report information correctly violates the Fair Credit Reporting Act § 1681s-2. Should you pursue a judgment without validating this debt, I will inform the judge and request the case be dismissed based on your failure to comply with the FDCPA.

Finally, if you do not own this debt, I demand that you immediately send a copy of this dispute letter to the original creditor so they are also aware of my dispute with this debt.

Signature here Your Printed Name