By the time an account gets to collection, the costs of administering it have gone up a lot and most collection agencies would welcome a quick debt settlement. However, they have little incentive to compromise if you are only prepared to negotiate installments, rather than a lump sum payment.

From the collection agency's perspective, they will still have to hound you for payment, and statistically most debtors stop paying after only a month or two. And if you are able to include in your negotiations a clause to remove the debt from your credit report, it will go right back on your report the minute you stop paying.

If this is absolutely your only option - you simply can't afford to make any kind of lump sum payment - then go ahead and agree to an installment plan. If the creditor won't remove the debt from your credit report right away, approach them again after you've made six months of regular payments.

Get your final agreement in writing, along with a confirmation letter that the settlement will satisfy your entire debt and it will be stricken from your credit report upon final payment. Make payments either by cashier's check or money order directly to the collection agency. Avoid letting the agency know your checking account number if you can. Don't pay the original creditor unless the agency instructs you to do so in writing. Get a signed receipt if you make cash payments, and keep all documentation for at least four years.

Realize, that oftentimes, collection agencies are willing to settle on a lump sum payment for much less than the original debt just to get the matter over and done with. While they want to maximize their return, they are often more than happy to settle on whatever you're willing to pay to be done with you. Their primary objective is to get you to pay as much as possible as fast as possible so you will no doubt pay less if you can come up with some kind of lump payment. They really don't want the hassle of drawn out payments.

While creditors and collection agencies alike are flexible in negotiating debt settlements to get delinquent accounts off their books, they always look for the quickest, surest resolution. You will have more bargaining power and leverage if you can settle your debt with a lump sum payment, rather than pursuing an installment payment plan.