I have been a county mediator in Florida for about 15 years, and most of my cases are credit card cases. A significant percentage of these cases involve debt collectors. Mediators are not allowed to advise people being sued, so in many cases, I can only watch as collections representatives intimidate people being sued, with the result that the defendants agree to onerous terms.

In some cases, the defendants shouldn’t even agree to any new payment option.

If you are summoned to appear in court because of an old debt, definitely appear on the date specified. Otherwise the plaintiff automatically wins and will obtain a judgment against you for the amount they are seeking, even if you do not owe the money.

When debt collectors buy debts from financial institutions, they pay pennies on the dollar. Therefore, they are in a good bargaining position. They can profitably accept lump-sum payments that are significantly less than the outstanding debt.

For example, assume you go to court and the debt collector informs you that the amount owed is $3,000. Of that, $2,000 is principal, $700 is interest and $300 is court costs. The debt collector did pay the $300 in court costs but probably paid a small percentage of the other $2,700.

Accordingly, the collector is likely to accept a substantial discount if you can pay, for example, half the $2,700 within 60 or 90 days. If you are in a position to pay that amount within that period, you should make an offer for a significant discount, but only if you truly owe the debt.

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If you are unable to make a lump-sum payment in a short time frame, the debt collector is unlikely to discount the amount owed very much unless you can pay in a relatively short time frame. The shorter the time-frame, the better the terms you will be able to negotiate.

In our example of a $3,000 debt, generally the debt collector would agree to a three-year time frame for monthly repayment. However, if you know that in a year you will have access to a lump sum that will allow you to pay off the debt, it is likely that you can negotiate a discounted payoff amount if you can retire the debt in 12 months.

Even if you cannot make a lump-sum payment now, you still have some bargaining power. If you agree to a monthly payment plan to repay the total amount, ask the debt collector to waive any subsequent interest payments. Debt collectors will generally agree to that provision.

If you truly don’t owe the debt, and the debt collector cannot provide documentation to you that you do owe it, then do not agree to any loan repayment plan. Insist on a trial. No debt collector wants to see a judge if he can’t prove you owe the money.

Every state has a statute of limitations for outstanding debt (See New York’s rules at nycourts.gov/courts/nyc/civil/consumercredit.shtml). For example, if your state has a five-year statute of limitations, and if you haven’t made a payment in five years, you are under no legal obligation to repay the debt. Unfortunately, there is no law yet that restricts the debt collector from trying to induce you to pay that debt anyway.

If you make the mistake of making any payment on the debt, even if the statute of limitations has run out, you would then become liable for the outstanding debt.

If you negotiate a settlement with a debt collector, get the terms in writing and be sure to follow them to the letter. If you miss a scheduled payment, the debt collector will be able to obtain a judgment against you for the outstanding debt.