Should you get help negotiating settlements?

Most of the debt negotiation help requests and questions I deal with come straight to me from the person who needs assistance and answers. But occasionally I receive phone calls from friends and relatives about a situation with someone they know. Here is a recent exchange about stalled out debt negotiations, why that can occur, and when it may be a good idea to seek out help from a debt negotiator.

Ron writes: I have 6 credit card debts I can not pay due to lack of work. I sold some stuff around the house and managed to settle 3 cards. Two of my cards have now charged off and went to law firms for collection. I tried to settle one of those and they will not budge on the amount. Any help or any chance you think they will budge later before I get sued.

Can I get help settling my remaining debts, or should I wait and see if I can get them to budge?

It is important to know when you hit a wall negotiating and settling your own debt, and whether you can clear the hurdle, or should get help.

6 reasons your debt negotiations may stall out, and when to seek help.

1. Your creditor is not known for offering reduce lump sum payoffs.

There are some smaller local banks that will just not negotiate a bill or settle for less. Some types of creditors, like a furniture store, or a medical service provider, are just not going to discount the balance owed. It can help a great deal to know in advance who will settle, and what the typical amounts may be.

2. Your creditor has a policy of not reducing the balance you owe if your account fits certain criteria.

Your balance could be too low, the account you opened too new, or the amount owed today was mainly from purchases you made just before you stopped paying your bill. Some banks refuse to settle when the bulk of the balance you owe is from balance transfers or cash advances. There are some helpful work around strategies in these situations that I cover elsewhere on the site, and can cover in more detail if you post what your concerns are in the comment section below.

3. Your prior success settling your other accounts is catching up to you.

Debt collectors are paying attention to your recent credit history. Some will use programs that are designed to show the collector how good a target you are for payment. The higher the score, the more likely they can collect. Some interpret what they see about your having settled other debts recently as a sign that they should hold out for full payment. You can avoid this by negotiating as many of your debts as you can in a short window of time, say 30, 60, or 90 days.

Navigating this reality as it may apply to you is often better handled by a professional.

4. You look like someone who can pay the full balance.

Similar to number 3 above, but not because you settled other accounts recently, you look highly collectable. If you have a mortgage, car loan, or other secured loan payments being kept current when your other bills are not getting paid, it can impact how you are viewed by a debt collector. It is not at all helpful if you have other credit cards you kept current with, while selectively choosing not to pay a larger balance, or higher interest credit card bill, you look even more like someone who will pay in full (also can be a good profile for a debt collector to sue in court).

5. You said something in your initial negotiation efforts that triggered the hard line stance.

Debt negotiation in general does not require a recipe or formula to follow. Think of it like making an omelet, or a soup. Just about anything can go in those and have it turn out right. But there are times where negotiating your bills for less will be more like baking. Unlike a casserole where anything goes, baking often means the end product is highly dependent on how you follow a recipe.

I have picked up many a file and found that my customer told the debt collector something that would prevent me from giving the a discount too. Here are some examples of things you could say that are not productive to negotiating a good pay off deal with collectors:

  • I fell behind because I lost my job, but have a better paying job now.
  • I chose not to pay this bill because they would not work with me to lower my payments.
  • I have enough money to settle my remaining debts.
  • I am trying to qualify for a home loan (or refinance), but cannot because of this collection account.

You get the gist. You want to stick to discussing only elements of your situation and finances that support the collector accepting the limited money you have, or can pull from other resources, like a family member. Avoid discussing anything with a debt collector that would help them view you as someone who can pay more than what you are offering.

6. Time.

Ron is right to think about how it just may not be the right time to get a deal negotiated. If your negotiating with a debt collector right when they get your account, they are more likely to start with a “we do not settle and will only accept the full balance” position. But a month or two later, they may have a softer stance.

Waiting out a debt collector is best when you know it is less likely you will be sued. Now that Ron’s account is with a collection law firm, the reality of being sued is likely much higher. The strategy from here may be to make certain you are not sued, or be okay with it if you are. Much of what you do from here can depend on the balances on the accounts you have left to negotiate, who you owe, who the collectors are, and some other factors. Talking over strategies for dealing with collections at the stage Ron is at with his last 3 accounts would be extremely helpful.

I support people everyday with their DIY debt negotiations. But I also know there are people and situations that could benefit from hiring someone to do part, or all of the debt negotiating. Ron may be in a situation that could benefit from getting help from a debt negotiator to help resolve the debts he has left. You may be reading this while looking for help and answers too.

You can call the debt help hotline you see on the screen, and choose the option for a debt negotiator, and receive a no cost consult to see what getting some help will look like for you.

Anyone with questions or concerns about dealing with a collector who will not budge on settling for less is welcome to post in the comments below for feedback.


Share Button

Top 7 Credit Card Lenders Review the Best at Offering Debt Relief

There are many sources for rating credit cards using points, rewards, and fees as the main criteria. What follows is a debt relief version of “rank a bank” where I apply my experiences; feedback from people settling credit card bills on their own; trends for each bank that apply today; and each banks past offers for debt relief, as a ranking tool. Most people reading this will care more about what relief is available from these lenders today. But I have included some review of past behavior in order to better organize the list.

If you need debt relief and help from your credit card lender, predictability and flexibility are 2 major considerations for how the below list is ordered.

1. Chase credit cards take the number one slot.

This may surprise many readers due to how much Chase gets hammered in the press and media for a host of issues. The state of California has sued Chase for past collection practices. There is still a pending announcement regarding penalties against Chase at a federal level as a result of the same practices the California Attorney General is suing for. Chase even stopped directly suing their card members as a method for credit card collections, and has all but stopped selling their unpaid credit cards into the debt buying market. But all of that happens around policies and procedures for accounts that charge off. This review focuses on debt relief before credit cards reach 6 months late.

Predictability: Chase has been settling pre-charge-off credit cards with their card members for between 25% and 40% for years. While there are instances where settlements are higher, they are for predictable reasons.

Flexibility: Offers settlement with 94 days to pay (split the payments up) before charge off.

History: Even while suing more card members a few years ago, Chase card members were consistently able to get 35% to 40% settlements pre charge off, and even with post charge off accounts sent to Chase legal (sometimes even after a lawsuit had been filed).

Active page to discuss settling with Chase.

2. Bank of America could arguably be at the top.

Anyone who knows the debt relief market well enough to put together their own debt relief ranking list, could argue Bank of America should be at the top. Bank of America, like Chase, is no stranger to negative press, and for some of the very same issues. But here again, sticking with predictability and flexibility, Bank of America wins second place when it comes to settling your credit card debt yourself – directly with your bank – and before charge off.

Predictability: Bank of America currently settles credit card debts for between 25% and 40% before sending your accounts out to debt collectors and debt buyers after charge off.

Flexibility: Offers the 94 day settlement payment terms prior to charge off.

History: Had I been publishing this in 2008 and 2009, Bank of America would be at the top of this list by a huge margin. At the height of the recent recession BofA settled credit card debts consistently for as low as 15% of the balance owed. Prior to the recession, BofA remained fair and consistent with settlement offers you could negotiate with them on your own.

Active page to discuss settling with Bank of America.

3. Wells Fargo rounds out the top 3 for consistency not savings.

Wells may not issue as many credit cards as some of the banks that follow, but they could teach a couple of them about stable recovery policies.

Predictability: I have long estimated settlement percentages for Wells Fargo credit cards at 40% of the balance owed. I still do. But enough 35% settlements are accomplished by people settling with Wells Fargo on their own, that I find that to be a realistic target prior to 6 months delinquent.

Flexibility: Wells Fargo may not always offer the 94 day terms. There have been instances where the better savings percentage has come from lump sum single payments.

History: Wells has been one of, if not the most stable credit card banks over the last 10 years when it comes to working with their customers to resolve debts before they get dropped into the different collection buckets. The American Bankers Association ran a story recently about how Wells Fargo started tapering off selling charged off accounts to debt buyers last winter, and has now ceased all sales to debt buyers. This change won’t likely last long, and I do not think it will impact pre charge off settlements with Wells Fargo.

4. Discover Card debt relief reminds me more of a credit union.

Some readers could legitimately make a case for Discover being at or near the bottom of this list. But if you are looking for debt relief versatility and flexibility amongst major credit card issuers, Discover Cards delivers. Just in some unusual ways.

Predictability: Discover trends today are settling credit cards (on accounts that qualify) for between 40% and 50%. There are some limited instances where settlements have been lower. Discover tends to not offer the 94 days to pay on settlements, preferring to get a single payment when settling before they charge off the account and place it for collections. But Discover is one of few creditors to offer a 60/60 plan to some of their card holders. This is where they offer to reduce the debt to 60% of the balance and spread the payments on that amount over 60 months. Discover does not sell much to debt buyers. And they are one of the more aggressive creditors to place accounts with attorneys for collection after charge off. If the focus of this ranking and review were anything other than pre-charge-off settlements, I would not have them at number 4.

Flexibility: Discover provides a different type of flexibility like mentioned above. Where Discover may not offer the 3 month payment terms; the 60/60 plan; as well as some of the strategic ways I have helped people navigate a Discover settlement when juggling other accounts; combined with a good reduction on their balances; places them above the remaining banks for this category.

History: Discover has been fairly predictable with settlements for the past decade. They do tend to get stubborn with settling, and the amounts they will settle for, when your accounts are very new. They have long had the reputation for placing more accounts with attorney debt collectors after charge off, than other creditors.

Active page to discuss settling with Discover Card.

5. Citibank is a little bipolar with debt relief.

When it comes to settling with their card holders, it is hard to pin Citibank down for predictability, which is such a huge element for developing a successful DIY debt settlement plan. This fact combined with the other things I will lay out puts them near the bottom of my rank-a-bank debt relief review.

Predictability: Depending on the account, targeting 50% for settling your Citicard is the most realistic expectation to set. Citibank also services other credit cards like Sears, Lowes, and Home Depot. These branded cards can at times be settled for 40%, but often after they are placed for outside collections. When I put a debt settlement plan together that contains 3 accounts; one with BofA; one with Chase; and one a Citicard; I often target settling the Citibank card with a collection agency after charge off (if you had only enough cash resources to settle 2 accounts before charge off).

Flexibility: Offers to settle with the 94 day payment terms like other banks.

History: Over the last 10 years, I have watched Citibank go from being the most likely to sue; to offering to settle in a mailed letter for 35% at just past 90 days late; to offering great temporary hardship plans; to offering none; to settling at 60% as a floor; and even not offering any settlement at all. They do tend to sue for collection a great deal less than in years past, and due to the current collection environment, I don’t expect them to get more aggressive again soon. I do wish they would quit selling their debts to Unifund (a debt buyer), but I will save that commentary for the upcoming rank-a-debt-buyer post.

Active page to discuss settling with Citibank.

6. Capital One is not great for debt relief.

The offers to settle credit cards with Capital One have been on again off again. That is only part of why they are this low in my review.

Predictability: Capital one settlement percentages before they charge off your account are currently 50%, sometimes a bit higher, rarely a touch lower.

Flexibility: You do have opportunities to settle over a few payments like with other accounts, but there are instances where a single lump sum is all that is on the table.

History: Capital One is the most prone to sue for collections than any other credit card issuer on or off of this list. Recent reports by investigative journalists show that Capital One sues more in Hennepin County MN, and Cook County IL, than anyone else, and by a large margin. One of the biggest issues is with how they have reported settled accounts with a balance still owing on your credit report. I do expect that practice to be curbed due to the supervisory authority of the CFPB, so if you experience this, post about it and let’s bring more attention to that practice.

Special note: Capital One fills a void for people starting off with building credit, and they offer good products to those who need to rebuild credit. Last I knew, they offered the best discretionary income calculation to qualify their accounts into a reduced monthly payment debt management plan with a nonprofit credit counseling agency. If they could rework their recovery policies, and their compunction to sue, they would be closer to the top of this list.

Active page to discuss settling with Capital One.

7. American Express misses on debt relief.

AMEX lands at the bottom of this review for a couple of key reasons. Not the least of which is that you will rarely settle with American Express directly. The accounts that I have worked on as the negotiator (settling direct with AMEX), were done through a very small hardship department. That department had usually only been available when there were severe and sincere hardships – of a type that someone is not going to bounce back from. To their credit, the department has been wonderful to work with and extremely fair with the outcomes.

Predictability: Settling American Express accounts is a bit all over the map. The vast majority get settled with outside collection agencies and attorney debt collectors. The target amounts can range between 35% and 60% depending on who the account gets placed with, and how long the account has gone unpaid. There are instances where settlement is simply not on the table.

Flexibility: There are cases where settlements can be paid over 6 or even 12 months (after charge off). It will depend on who is collecting for AMEX. The lower percentage and best savings offers for settling tend to be when agreements are paid in a single lump sum.

History: American Express is a bit of an anomaly compared to all other credit card issuers in the US. To my knowledge, they have never really built out an internal collections and recovery department with long term goals. They have not sold charged off credit cards into the market. They maintain a black list of their account holders who default, making it more of a mistake if you ever get another Amex credit card product again. Their practices with business cards are odd too.

Active page to discuss? There really isn’t a dedicated page for settling with American Express. Settlements with AMEX are typically done with a collection company. You can type in the name of the collector in the search box at the top right of the page and click on the best result to join the discussion for that collector.

How do other credit card lenders rank for debt relief?

The above lenders combine to control more than 60% of the credit card market in the US. There are pages on this site with ongoing feedback and discussion about settling with many of the credit card lenders you do not see listed here. Use the search box to find more information about them. If there is no page on this site about your creditor, or a debt collector you are dealing with, you can start one by using the Ask Michael feature.

The above is provided for general information. You can use the predictability for what each creditor may settle for as a base line for your planning. There are reasons why you may be able to settle for a better rate, or not be able to settle at all. I cover these variables throughout the debt settlement section of this site. I will update this review with new information as trends change, which is inevitable. You can join the discussion for settling with each one of the creditors linked above, and are welcome to post in the comments section below for feedback.

Share Button

How to Call Your Bank and Negotiate Credit Card Debt Yourself

If you have been following the early tips I suggest for how to negotiate and settle directly with your credit card bank, you have already had several “just calling to keep you posted” conversations with your bank (I recommend you call your lender once a month, or every several weeks, up to month 5 of being late with payments). If you are late to the process, and are already between 150 and 180 days late on your credit card, the following debt negotiation tips still apply, but be sure to hit the quick review links below.

Before I get into how you can go about targeting the amounts you are most likely to settle at with each of your creditors during negotiations, I want to make something abundantly clear.

Settle your credit card debt for pennies on the dollar!

The internet is both friend and foe when it comes to looking for information about settling credit card debt. You will have no trouble finding websites, and offline promotions, of debt negotiation programs enticing you with claims that credit cards can be settled for pennies on the dollar. But if you define “pennies on the dollar” as 10 cents or less – it just does not happen.

There can be one off situations (mostly during the height of the economic downturn that began in 2007), where very low settlements could be achieved with some select lenders. But it is not the norm, and certainly not today.

If you have come across content or advertisements suggesting you can settle at these low- Low-LOW rates, you may want to forget anything else the source says about negotiating and settling. Targeting unrealistic settlement amounts is a good way to blow the opportunity to settle with your bank. Anyone leading you to believe that you can settle debt for pennies is more interested in selling you something, than giving you accurate expectations and information.

Soapbox interlude about debt negotiation content on line: Be careful of taking something you read too literally. Anonymous information is hard to verify, and information may be dated. While one national bank may have been settling for 40% in 2010, you may be able to target your negotiations with that same bank at 30% today. Conversely, a bank may have made settlements with many of their card holders for 15% to 20% at the height of the recession, but now rarely go below 30%, and more often will settle at 40% prior to charge off. It is far better to look for current information regarding your creditors and collectors. It is also best to not read too much into anonymous posters from yesteryear when it comes to negotiating settlements that impact you today.

Negotiating the amount you can afford to pay. How much will your bank settle for?

Each credit card lender will treat monthly payment reductions, collections, and negotiating settlements a little differently. But the similarities between credit card lenders policies for settling will generally take you as far as the amounts you should realistically target for each account.

Having reasonable and real time trend based expectations for how much of a savings you can negotiate each of your credit cards for makes planning and succeeding with your goals obtainable.

By now you should have a grasp of the fact that settling credit card debt is not rocket science. But there is a basic formula to follow in order to maximize savings and limit risks. The more creditors you have, the more important it becomes to strategically plan for which accounts to negotiate with first, and which would be better settled with outside debt collection agencies (after charge off).

How you develop your plan should be based on how much money you have available to settle for the best rate of savings – given your particular lenders policies at the time you are negotiating with them – set beside any credit cards you have with a lender that is more aggressive in collecting.

2 ways to get help targeting and prioritizing what to negotiate for and who to negotiate with first:

  • Post questions in the comments below, or better yet, search for your creditors name in the upper right search box on this page and find a page dedicated to that creditor and read through what others are doing and post questions in the comment section there.
  • Work with one of the professionals I highlight here who can help you negotiate your own debt

What phone number do you call to settle your credit card?

With your list of credit cards prioritized, and your timing set, making your calls to negotiate will start like prior calls I have suggested. Different creditors have different departments that handle delinquent accounts. In the first month to three of missing a payment, your calls may be handled by a customer service department. After 90 days of not payment calls are often routed to, or made by, a department that handles recovery. Your banks recovery team will be who you are able to settle with. The number you call when you are ready to negotiate the settlement could be:

  • One you received in a collection notice from your bank recently.
  • The number on the back of your card (you will get routed to the department handling collections and recovery).
  • Depending on the creditor, your account may be out with a collector even before the account charges off, in which case you may be calling a collector, are get routed to one when you call in.

What to say when negotiating your settlement.

If you have not yet read through the previous article in this section, read more about your bank turned bill collector. That article will help you with your frame of mind when making the call to negotiate and settle. You may start your negotiations with a simple restatement of your financial situation. If you have been making your calls monthly up to this point, your story of personal hardship is what you will repeat. This time however, and depending on what your notes say from prior calls, you can either:

  • Repeat an offer that may have been made to you in the past (early on a bank rep may have said the account could be settled for say 60%), or you may have gotten a piece of mail from the bank offering some vague reference to settling, or a hard number or percentage. In this case you simply start off by saying “I am following up on that earlier offer to settle. I tried everything I could think of to raise that amount, but fell short. I did come up with XXXX.XX. If that could be accepted as settlement I can pull that together pretty quickly.
  • Bring the subject of settling yourself by saying something like “I broke down and shared my situation with family/friends. They suggested they may be able to help me with a loan. They do not have much to give, but maybe enough to settle with. Is that a possibility?

There are many ways to bring up the subject of settling when you call in. When you are calling in to negotiate and are between 150 and 180 delinquent, you will be speaking with someone trained to help you with that. You should already have a good idea of what the bank you are calling to negotiate with will reduce the credit card debt to in a settlement. Your offers to settle should be NOT be verbalized as percentages, but as round dollar figures that are short of, or really close to, what that bank is known to approve and accept.

Be prepared to answer questions about your income and budget and other debts during the settlement call.

A few years ago some credit card issuers started asking a litany of questions before agreeing to a settlement. The list of questions is similar to what they ask in order to enroll you in a long term hardship repayment plan. You need to be prepared to answer these questions. Information about what your income and basic expenses should prove to them that you are in the red and unable to afford anything other than the settlement.

People working for your credit card banks internal recovery department, and outside third party debt collectors, have real time access to your credit report. During the negotiation call you may get hit with questions about other debts that are not being paid, and certainly about debts that you continue to pay (house payment, auto, and even other credit cards). How you answer questions about other debts that you are paying is often going to be common sense. Depending on the question asked, you may respond with something like:

“Of course I am making my mortgage payment. I would be homeless if I did not.”

“If I quit making the car payment, they take the car, and I have no way to get to work.”

“That other credit card is not getting paid by me. My brother needed help and he is the one that made those charges. He is the one with the money to pay that one.”

“That credit card bill is only $20.00 a month. That one is getting paid because I can afford that. I could not qualify for your lower monthly hardship payments, which is why I am willing to pool all of my resources, and even borrow money from family to settle if I can.”

Answering questions when on the phone with your original creditor; while trying to negotiate and settle your credit card with them; before they charge it off; and drop your account into the external collection pipe line; is normal and okay to do.

What if you call in and are told the bank is not settling accounts at this time, or that your account does not qualify for settlement at that amount, or at all? This can happen. Here are some reasons why it may happen to you:

  • Your math regarding how many months you are behind added up to the perfect time to call and negotiate, but the banks math says you are 1 or 2 months less behind than you thought. Ask how many days late you are to confirm this.
  • You just look more collectable. Sounds funny when you are not paying on time, I know. But if your balance is say 5k, and you are paying other credit card bills, your account may be flagged and can mean no negotiated settlement. You may have to settle with an outside collection agency in a month or three.
  • That specific creditor is just not doing any settlements. It happens. They are not required to settle with their card holders. Refusing to is their prerogative. It is not common to flat out refuse settlements in today’s economy, but it sure was 10 years ago. American Express is a good example of a bank you may not be able to settle directly with.
  • Sometimes you may be dealing with an original creditor who refuses to settle at 165 days late, but who is suddenly willing to negotiate when you call in and are 174 days late.

Credit card debt negotiation with your bank review.

You want to identify the types of accounts that are considered best targets for negotiating a balance reduction, and which are better left out of your debt settlement plan.

You should also recognize that settling debt can be viewed as being in a race. Your access to money over a short, or longer period of time, will dictate whether you are a debt settlement sprinter, or if you are more of a distance runner.

You know that the first and often best opportunity to negotiate and settle for the lowest payoff will be with your bank, and prior to your account charging off. The better you understand why you should target as much of your debt negotiations with your original lenders, the more strategic, committed, and proactive you can be in raising the money you will need. You will want to understand how and why to prioritize some of your accounts over others for earlier negotiation. You should also know that it is okay when some of your debts progress into later stages of collection. Some of your debt may in fact be best negotiated and settled in 2nd or 3rd stage collections.

Do not hesitate to get help and feedback when prioritizing the debts you will negotiate first, second, third etc. You can do that by participating in the comment sections below, or on any of the pages you visit on this site.

You should know that it is best to be prepared to pay your settlements from a separate bank account that you set up specifically for this purpose. Having your “set aside” account set up in advance is just good planning.

Negotiating with third party collections.

There are circumstances where your creditor will send your account out to a third party debt collector before they charge off the account. American Express is the best example of a creditor who does this. Nothing much is going to change in your approach to negotiating an account that gets places out for collections early, but that is still less than 180 days delinquent. There are a couple of subtle things to be aware of when negotiating with contingency debt collectors. The next section of the debt relief program will be dedicated to how to settle with a debt collection agency hired by your credit card lender, and the second stage of collection.

If you would like to review the way I rank the top 7 credit card lenders based on their historical and current trends of working directly with their customers, check out how these banks rate when helping customers resolve debts, and some realistic settlement percentages you can start your planning with.

Continue on with the Debt Relief Program – Settling debt in second stage collection (coming soon).


Share Button