When jobs are lost or emergencies strike, even diligent bill-payers can find themselves dealing with collection agents. If it happens to you, don’t panic. Simply follow these steps, and you may be able to negotiate your way to big savings while avoiding an unpleasant bankruptcy.

Prioritize your  debt
“Not all debt is created equal,” says Mark Silverthorn, a lawyer and author of The Wolf at the Door: What to do When Collection Agencies Come Calling. For taxes or Canada student loans, the government doesn’t cut deals and rarely gives up. Secured debt, such as mortgages or home equity lines of credit, is tough to get out of too, but credit card and other unsecured debt is open to negotiation.

Find out who’s calling
Most creditors try to collect their debts in-house for the first six months or so. After that, they generally farm the work out to collection agencies. After a year or two the creditor may sell the debt to a debt repurchaser for as little as half a cent on the dollar. Keep in mind who you’re dealing with: creditors want full repayment, but collection agencies receive a commission and want the most they can get as quickly as possible. Debt repurchasers are often content with smaller payments.

Could you get sued?
Collection agencies routinely threaten to sue, but this is often a bluff. Only the original creditor is likely to go to the effort. Silverthorn says the slim commissions earned by collection agencies mean fewer than one in 10,000 consumer accounts end up in court. If you haven’t been served papers within six months of missing a payment, odds are you never will be.

Handle the calls
Creditors have the right to remind you that you owe them money. But only to a point. In B.C., Alberta, Ontario, Quebec and Nova Scotia, you can legally request that collection agencies stop calling you at home. Some provinces also have rules on calls to your workplace. Plus, you can screen your calls, hang up or get an unlisted number.  “You should speak to collection agencies when it suits your schedule,” says Silverthorn.

Cut a deal
If your debt is more than a year old and you’ve avoided a lawsuit, it’s time to bargain. Silverthorn cautions against making token “good faith” payments on bills, as this restarts the debt clock. And credit counseling usually requires that you eventually repay all your debts in full. Instead, try to get your creditors to accept 30¢ to 65¢ on the dollar, less if its been more than two years. But first get it in writing.

Repair your credit rating
Unpaid debts show up as R9 on your credit report: the worst possible rating. This will stay for six or seven years, depending on your province, and have a significant impact on your ability to borrow in the future. But any debt settlement—even for pennies on the dollar—will eliminate that debt and instantly boost your credit score. That’s why negotiating a settlement is generally a better option than declaring bankruptcy.