Short answer
Debt settlement is negotiating a payoff for less than the total balance you owe, which the creditor or debt collector agrees to document and accept as payment in full. It works for the right person and the right situation, and it does not work for the wrong one. This guide is built to help you tell which you are.
Key points on this page
- A settlement is a lower payoff amount, documented and accepted as payment in full, paid either in one lump sum or over time under a term agreement.
- The three common solutions in one line each: credit counseling is “what can be paid should be paid”, debt settlement is “paying something is better than nothing”, bankruptcy is “what cannot be paid will not be paid”.
- Most people looking at settlement are in the middle. They cannot fully afford the debts they have, can afford something, and would rather handle it outside bankruptcy.
- Settlement is a way to resolve a debt for less at every collection stage: the bank’s own recovery department, a collection agency after charge off, a collection attorney, or a debt buyer that bought the rights to collect.
- Most of what happens is controlled by the policies and procedures your creditor or collector has set. Knowing them in advance lets you plan the money for the settlement opportunities as they come.
- Credit cards are the most common debt settled this way, but the same guides apply to business debts, medical bills and personal loans. CRN has provided this education and these services since 2004.
Welcome to CRN’s Debt Settlement and Negotiations Guide. This guide makes up the largest portion of the debt relief and credit guides published on this site. That’s because debt settlement does not fit into a tidy package like consolidating credit cards, consumer credit counseling, or bankruptcy. I thought it important to have an introduction to debt negotiation due to the amount, and variations of content, you will find here.
The concept of settling unpaid debts, like credit cards, is not overly complicated, though it is certainly something that cannot fit on a single web page. And once you introduce the different stages of debt collection; and how to negotiate with debt collectors vs settling with your bank; or outline what you can do when settling collections in the court; the content for the debt settlement guide grew larger, and continues to expand.
Credit cards are the most common type of debt that can be negotiated and settled for less than the total balance owed. Much of the debt settlement guide focuses on this from of unsecured debt for that reason. But there are many other types of debts that the guides can be applied to. You will find guides related to settling business debts, medical bills, personal loans, and more, throughout the site.
Get the Most Out of This Debt Settlement Guide
We highly recommend you read through the debt settlement program in order. This will allow you to gain the maximum level of understanding of what credit card debt settlement is, how it will work in your specific situation, when settling debt works best, or even why you might want to avoid debt settlement all together. This recommendation includes any of you reading who may have committed to settling credit card debts that you stopped paying some time ago.
Following the recommended outline for settling credit cards is suggested because:
- Debt settlement, as it is explained by the media, and what is probably more than 10,000 websites, often does not scratch the surface of the topic (it cannot be explained sufficiently in a single article).
- A debt settlement company selling their program to anyone who will listen will often fail at giving you a detailed outline of what they are trying to sign you up for. Opting instead to put profit or sales commission goals in front of your need to be adequately informed.
- You should understand the fundamentals of settling debt so you can weigh the benefits and the drawbacks with clarity – before negotiating and settling debt yourself, or hiring a professional.
Following the way we have laid out this section, no matter what stage of collection you might be in (and especially if you are still current with payments to creditors), puts you in the best position to succeed with debt settlement.
Once you complete your review of our debt settlement guide, you will know more than the majority of sales people who are the front line for selling debt negotiation to the public.
Before You Jump Into Debt Negotiation
CRN advocates settling credit card debt as a personal financial solution. We have provided debt settlement education and debt negotiation services since 2004. We are good at it. We have made our customers, members, and readers good at it. We are also not your Aunt Mildred’s debt settlement company (no offense Mildred).
We have decided to create and publish the online debt relief program for many reasons. We may fully lay out more of the reasoning in a later update to this section, but for now, here is some of the considerations we have in doing this:
Debt settlement works for the right person and the right situation. Debt settlement does not work for the wrong person, nor does it work well for the wrong situation.
We decided to create and publish this guide so that you can tell the difference between whether settling credit card debts is right for you, and if it is, when, why, and how much of your money to put into this method for resolving debt. We hold nothing back. We offer our support freely to the public through dedicated feedback in the comments on virtually every page of the site, and on our DebtBytes YouTube channel.
If we can save you from making uninformed debt and credit decisions that can hurt, rather than help you, we want to. If we can save you money when you settle credit card debts, we will.
What is Debt Settlement?
Debt settlement is what happens when you negotiate a payoff for less than the total balance you owe on a debt. The lower payoff amount will be something the creditor or debt collector agrees to document and accept from you as payment in full. The lower negotiated amount should be something you can afford to pay in one lump sum, or over time if it is a term settlement agreement.
Negotiating and paying a lower amount to settle debts you are already late with is very common. There are elements to settling some types of debts that you can set your clock to because the process can be highly predictable. And there is both safety and comfort in this predictability.
Settling credit card bills, and other debts you cannot afford to keep up with paying, is a pretty straight forward concept. And so is determining whether settling with creditors and collectors is right for you. Let’s start by narrowing down the basic principle of the 3 most common debt solutions to one sentence each.
- Consumer credit counseling and payment consolidation is based on the principle of “What can be paid – should be paid”.
- Debt settlement is based on the principle of “Paying something – is better than nothing”.
- Bankruptcy is based on the principle of “What cannot be paid – won’t be paid”.
If you are looking at debt settlement as a way to deal with problem bills, it is likely because you are in the middle. You cannot fully afford the debts you have now, but can afford something, and would prefer to manage the situation outside of bankruptcy.
How Debt Negotiation Works
Each of your credit card lenders will have a policy for how they handle collecting on accounts that go delinquent. Some of these policies include:
- Getting you back on track by offering reduced payment hardship plans that may be temporarily extended to you for 3 to 12 months, or applied over the life of the balance in a 5 year payback schedule. Read more about credit card hardship payment plans.
- Debt collection efforts internal of the banks own recovery department.
- Charge off your debt as noncollectable and place your account with a collection agency who will bug you over the phone and through the mail to get you to pay.
- Placing your account with a debt collection attorney.
- The legal rights to collect from you could be sold to a debt buyer.
Debt settlement is a method to resolve unpaid credit card bills for less in every one of the scenarios above. That’s as complicated as the debt settlement process will ever be.
It’s the “how will debt settlement work for me” and “is debt settlement even for me” questions that make for the details.
Is Settling Debt Right For You?
Ahhh… the details. Yes, getting the best deals, and the most from settling debt, is in the details. And the details when negotiating and settling can change from one creditor to the next; from one collection stage to the next; and most certainly from one personal set of financial concerns to the next.
The majority of what happens in the process of settling credit card debts is controlled by the policies, procedures and protocols that are set up by your creditor or outside third party debt collectors. Knowing the policies and procedures for each of your accounts you will settle, in advance of the settling, is a huge benefit. You simply plan ahead financially for the settlement opportunities that will be presented, and make the right moves along the way.
You can use this site to help you settle your debts on your own. We offer upfront education about the debt settlement process, supplemented by on the ground and “right now” details provided free in the comments section of this website. And you can get one on one dedicated professional feedback by requesting an expert debt settlement consult over the phone.
We know that many people are freaked out by the concept of negotiating and settling credit card debts on their own. You also have access to professional debt negotiators, and often at the most reasonable cost found in the industry. If you would like to talk to me, Michael Bovee, about that, you can reach me at 800-939-8357, choose option 2.
In the next section I will bluntly outline who debt settlement is right for and why debt settlement is a race. You may already be in the race and not know it.
Continue on in the debt settlement guide to How and Why Banks Settle Credit Card Debt with You.
As you will see throughout the site, I respond to reader questions and comments throughout the day, so feel free to post below for feedback.
This Debt Settlement Guide includes:
An Expert Guide to Credit Card Debt Settlement (you are here)
How and Why Banks Settle Credit Card Debt with You
Types of Accounts to Include in Your Debt Settlement Plan
Why Settling Credit Card Debt is Like a Race
How to Settle Credit Card Debt Quickly
How to Talk to a Debt Collector
How to Negotiate Credit Card Debt Successfully Yourself
7 Largest Credit Card Banks and How They Settle Debt
Get Debt Settlement Letters and Agreements from Collectors
Paying Debt Collectors After You Negotiated a Settlement
Hi Michael,
Regarding the Citi Bank issue that is posted several times above:
They had made a settlement offer of 50% and would only snail mail an agreement letter. I was right up against the charge off date but I didn’t want to give them any money without first seeing that letter. Therefore, I made a “stabilization payment” to delay charge off for another 30 days, with the hopes of getting a better offer early in the next billing cycle and to get a full 90 days to make the final payment, plus to allow enough time for the letter to arrive in the mail.
This all backfired on me. I called today to submit new offer (which I believe is mandatory for them to spit out a number) and they raised their offer to 65%. I asked to speak with a manager. He told me I could try again and that the deals can change day to day. This contradicts what I had been previously told which was that the offer probably would not change within the same billing cycle. I can’t afford 65% so I’m not sure what to do at this point.
Any thoughts??
Use an end of cycle strategy where you know their policy is to let the account go, and be prepared to settle without any delay. Record the call if you hit the settlement number you are shooting for, but cannot wait for the written agreement to arrive. Tell them you are recording and why. Save the recording and proof of payment. If the letter never comes, and you have them saying they would provide one in the recording, post an update and lets go from there.
You also will have an opportunity to negotiate a settlement with whoever Citi bank places the debt with for collection. You need to be able to let go of trying to get this all done with Citibank if they are not going to agree to an offer you can afford to pay. It is okay, and more common actually, to settle with debt collectors.
Hello Michael,
I have 4 medical bills that are there on my credit report, which were a result of doctors visiting me while i was hospitalized in 2009 for illness. The hospital charges were waived off as i was a student, but the charges for personal visits by doctors were billed to me. I was unaware of these bills and now my credit is bad. I have some money saved and want to settle and close these accounts by making a one time payment. How do i negotiate with these collection agencies.
The 4 accounts on my credit report are as follows:-
a.) CAC FINANCIAL CORP (800) 319-2676 – $563
b.) I C SYSTEM INC (888) 735-0516 – $500
c.) NRS/RECEIVIA (800) 776-4600 – $892
d.) GULF COAST COLLECTION (877) 827-4820 – $399.
What are precautions and safeguards to take while negotiating with them.
I want to negotiate a settlement and pay it off.What are precautions and safeguards to take while negotiating with them. My credit score is 540 and i really want to make that good, but don’t know how. I do not have any credit cards nor do I have any other debts.
Please advice me. I need help.
Thanks
Rony – Before I go into particulars with my feedback, what amount of money do you have to put toward all of the settlements? And when you say you have no credit cards, are you saying you have not established any type of credit in the past?
Yes I havent had any type of credit in the past. I contacted one of the collection agencies. They agreed to a one time payment of $337 to close an account that orginally was $563. But they just want me to write a check or pay it asap and are not ready to give it in writing. The total amount of all the 4 accounts put together is $2354. I want to have all these accounts closed . Please suggest me what should i do.
I have saved some $1200 for this purpose. But if it is settled at a lower amount then that will be great. I am a student and struggling with this.
Thanks
You are going to be contacting them one by one to negotiate the settlement, and probably real similar to what you experienced with the debt collector you reference above. Be ready to pay as much as 70%. You will want to wait 30 to 60 days to have any debt collector reporting to the credit bureaus update the account as paid. If they are not updated by 60 days after you paid the settlement, post an update and lets go from there.
You can use some of the tips I outline in the video on this page for negotiating with debt collectors: https://consumerrecoverynetwork.com/my-credit-card-account-just-charged-off-and-a-debt-collector-keeps-calling-me/
Read over this report about getting your settlements documented. In a pinch you can record the call and agreement made over the phone. Just let them know you are recording the call and why. You want to cover the same elements in the phone call that I cover in the linked report. Keep everything, including any recordings, in a safe place.
Post questions in follow up comments as needed for feedback. Once you are done, it will be time to talk about how to establish credit. Having none will keep your score low too.
so should i send them the check by writing across as paid in full. Or should i call them again to get at least some written assurance or what. I can follow your tips with other debt collectors. the lady i s poke to did not let me talk and hung up after saying that i have until 11th to pay it. So what should i do now.
rony – I would not count on a memo section of your check saying paid in full. If it were me, I would try for a written agreement, and record the call with the collector as an alternative (I would tell any collector I am recording the call and why even if in a “one party state” – but that’s me). If they hang up on me again I would circle back and deal with that account after I dealt with all of the rest. If any of the debt collectors at that place still have a bad attitude, I would consider finding a guy like me to tell my story to on and off line 🙂 so a guy like me could write about the collection agency, and the specific collector, and the billing company/medical service provider – all in an effort to prepare other consumers who may have to deal with them, and for training purposes….
Hey Michael,
I called a couple of them and all of them are ready to provide the letter stating that the account is paid in full, only after i make the complete payment. They say they will send out a statement only after they receive the payment. I am not sure how to get them to send me a document stating the terms of settlement before the payment is made. What do I d now?
Call them all and record the conversations, making sure that all of the issues I cover in that article I linked to above in our comment string are past of the conversation. Let them know you are recording because they will not release a letter with the agreement details prior to payment. Keep the recordings and the letters they send later in a safe place.
Post about hiccups you experience if any occur.
Hey Michael,
I know this might sound silly but none of the apps i have tried can record calls. I’m in Florida. So i haven’t had success in doing as advised by you. Can you suggest something please.
rony – You can use some older technology and land line using some items you can pick up from radio shack. Do you have access to a land line?
Hey Michael,
I do have land line, but it is majic jack(internet phone). I am not sure how to make use of that to record conversations. I called the toll free settlement number of this website to get help with negotiating debts,but was told that they don’t handle a small amount as $2400. Can you please guide me on what to do next in regards to the settlement and documentation of negotiating process.
Thanks
rony – I think you can set up a google voice number and record with that. I am not familiar with magic jack to know if the little 12 or so dollar devices you can pick up at Radio Shack, to record using a regular desk top phone, will work or not.
If you want to talk about getting someones help who will work on accounts this small fill in the consult request on the right side bar on the site. I get those and will forward to Steve (CRN specialist for years). You guys can connect at a time that works for both of your schedules.
Hey Michael,
I did fill in the consult request which you said will be forwarded to steve so that someone can work on my accounts and negotiate settlements. I still havent recieved any call or email from anyone. can you please help me resolve this as my credit is hurting bad.
Thank you,
Rony
Rony – I did find the form you filled out. I missed sending it to a specialist somehow. I sent it to Steve, who you should now hear from. I will call him to bring the email I just sent to his attention as well,
Hi Michael,
How familiar are you with LHR? I have made arrangement on most of my old debt. The last one lingering is an old First National Bank – Legacy Visa that I had. The last payment was made on 5/25/2010 ( and I live in Texas) so I think the statue of limitations is approaching. My credit report shows a balance of $780 to LHR for this. I am not in a position to pay it all off… and I am wondering if I leave this one be or if they have a history of suing not. They have not contacted me lately. I think a year or 2 ago they sent a little..but I am not 100% of that. Would love to get your thoughts on what you would do.. and what you know about them.
Shannon – I could better put this in perspective for you, using my experience, if I knew how prepared with money you are to settle, and what your credit goals are in the next, say 24 months?
Michael,
The immediate goal to make sure I don’t get sued: -) I would love to clean up my credit over the next year or two but paying them even half now probably isn’t an option since I have recently started paying on a few other old debts. My plan was to pay off the ones I am working on now and then try to call LHR and negotiate with them. If there is a chance they will sue me before the statue runs out I could borrow the money from family….but I really really don’t want to do that unless I have to. I can probably pay them off in 6 months or so. How does the statue of limitations work on credit card debt in Texas? Is it 4 years from the last payment or 4 years after it was charged off? What are the chances LHR will sue over $800?
Shannon – Lewis Hastie Receivables, or who ever they may be collecting for (if not themselves), has probably started contacting you again due to your comment about getting other bills caught up, or negotiated and settled. I do not think LHR is likely to sue, but people are sued for these lower dollar amounts, so it is a legitimate concern.
If you get relief from other debts that are more pressing, and approach LHR with your settlement offer in 6-ish months, you will probably be okay. But I am all about getting this stuff knocked down as quickly as possible, so would encourage you to consider all of your options to take care of the remaining debts like this as soon as possible.
Thanks Michael,
The “stabilization” payment was their idea to buy more time to see if a better offer might come forth in the next billing cycle. They did say that that payment could go towards a later settlement agreement.
Do you think this is a wasted effort on my part and that I will likely end up with the same offer next month…or is there any potential to this. Would I have better chances in 1st tier collections?
Thanks – Richard
Richard – I think the chances of getting a 5 to 10% better settlement after citi drops the account into the collection pipeline are better than negotiating that same outcome with Citi. The problem here is that settling direct with Citi removes the risks associated with aggressive secondary collectors. What I think we are really talking about here is the price of that.
Hi Michael,
Just wanted to followup on the above post regarding the 24K Citi Bank account. It’s now within one week of charge-off and I called to make a higher offer at 40%. The person I talked to, who said she was a supervisor veteran, told me that a new offer could not be submitted in this same billing cycle that the other offer had been submitted in. She refused to try it saying the result would be the same – 50%, claiming that was an exceptional offer. The only way I can submit a new offer is by making a stabilization payment to to buy 30 more days to prevent charge off. Then I can make the offer in the new billing cycle. It had been suggested I may get a better offer in the following month.
One issue with this account, aside from it’s size, is that I borrowed 4500 on it within the last 12 months. The account is very well seasoned but I’m wondering if that will make it difficult to get below 50%.
Any thoughts????
Richard
Richard – Creditors do come up with strange policies. Another large bank will not honor any counter offer if there was a mailed offer with an expiration date… until after the expiration date. Citi is one of the more process driven banks when it comes to internal recovery practices. That said, I do think that the 50% is more (or all) related to how your account is flagged. Here refusal to try is what I find the most consistent with this observation.
I am skeptical of the stabilization payment as it does nothing of the sort. Only bringing the account current, or agreeing to payments that reage, would do that in a banks view.
I am sure you understand what it means to have citi drop the account into one of the three collection buckets. It boils down to cash flow and/or risk reward in a situation like this.
Hi, my name is Jessica and I have actually paid my debts in 2011. I started receiving letters from a collection agency requesting payment from me and I keep calling them and telling them I have already paid the bill. my problem is that I never received a final receipt from the collection agency whom I paid in full. I have tried to call the agency but their # is disconnected and now I have no way of getting that specific letter. I do have the initial letter stating what I was to pay and when and I have my bank statements showing the payments. what can I do in this situation?
Jessica – If you are confident of the deals you made, and given the documentation you have being sufficient to back you up in a he said/she said match, you could send a brief request to cease communication to these recent debt collectors, and include a copy of the debt settlement offers, and the proof of payments made prior to expiration. Send out certified mail return receipt requested, and keep a copy of all you sent along with the green return card you get back in a safe place. If you are contacted again after you know they received your letter, post an update and lets go from there.
At least… that is what I would be likeliest to do.
Hi Michael,
I’ve successfully settle two of my accounts with the help of your team. I’m working on the last one and
wanted to get another point of view. This one is with Citi Bank with the current balance at 24K. There are 2 weeks left before charge off. Interestingly, they have never once called me about this account, though I have been checking in with them every month.
I initially offered a low amount (5K) 2 weeks ago in order to see what they would come back with, which was 50% / 12K. I submitted a 7k offer last week but they were still holding tight at 50%. I was told on the phone that $345 would stabilize the account for another 30 days and that I might get a better offer in that next billing cycle. I asked if the $345 could be used towards this settlement even though a deal was not in place. I was told it could be and I made the person repeat that for the recording!
Due to my funds, I need to be more at 40%….. 50% is not totally out of the question, just much more difficult. So my questions are:
1. Do I stand any chance of getting below 50% pre charge-off? If so, is it best just to make a 40% offer in the final week or is there another option?
2. If a 24K amount charges-off are they more likely to give it to a lawyer rather than a collection firm? If they lawyer-up will I be kicking myself for not taking the 50% deal and end up with a larger problem.
3. Is the $345 “stabilization” payment, in the hopes of a better deal next month, worth considering or is this merely a red herring they’re using?
One last note…I would much prefer to avoid a charge-off / R9 ending up on my credit report.
Thanks for all your help so far. My CRN specialist has been fantastic.
Richard
Richard – I am glad to hear you are working through the debt relief program with some coaching from a specialist. That ongoing professional support really makes a big difference.
I would be inclined to offer up to 45% leading into the last week if it is something you can fund. If you cannot do it financially, it is what it is. You can circle back with a similar offer once you know where the account lands. Don’t get overly hung up on charge off trade line reporting. You have other accounts that went south in order to settle, so the cumulative affect hammered your credit. If you settle this last large balance with Citibank in the first collection bucket, and get it to show zero balance owed on the credit reports, your recovery time credit wise is not going to change much.
Once a collection file is placed with an attorney who regularly sues in order to collect, and depending on how collectable you look, you could certainly look back at the 50% offer and wish you had jumped on it. Do not let that response coax you to the offer on the table if that is not something you can manage with confidence. There are three buckets that creditors drop charged off debts into. The lawsuit prone collection attorney is one of, and the smaller of the three. It is just a reality of collections.
Thanks Michael,
So bucket one is a collection service ,with the account still owned by the bank. Bucket two is the attorney…..what is the third bucket??
Currently my income is from Social Security and a pension and I don’t currently own any property. There are a couple of non-retirement accounts that have what I consider a modest amount of money in them. I assume an attorney would not be able to access info about those balances without a court order. I would think I’m not that collectible but does the prospect of a 24K bounty make it worth their while to try and get a court order.
What were your thoughts about the “stabilization payment” scenario I mentioned above.
Richard
The other bucket is the one creditors sell their debt into. Debt buyers are investors that purchase the legal rights to collect on unpaid bills. It is a volume business, as far, far less than half of the accounts purchased, will ever see a dime return.
The stabilization payment referenced by Citi bank collection is not a scam, per say, but it can (not always) buy you a months time from your account meeting one of the buckets. I generally have encouraged this only when needing the extra weeks to gather additional funds to settle an account.
Hello Michael,
I have about $45,000 in credit card/personal loan debt. My minimum monthly payments are about $1,250 and all accounts are current at this time and I have not been late except for a couple of times that I paid a day or two after the due date. Unfortunately, my circumstances are about to change drastically – my income will be decreasing about $800 in the next couple of months due to losing some extra work I’ve been doing (the man I’m doing the work for is retiring), and on top of that, my expenses will be increasing because a member of my household that has been contributing to those expenses will be leaving soon. It won’t be long before I can not longer make those minimum payments. I’m wondering what’s the best option for me. Should I go ahead and contact my creditors and let them know what’s going on and see if they will accept some sort of settlement? The problem with that is that I don’t have any cash to settle with and no way of coming up with it in the next few months. The only thing I could do is make monthly payments. My creditors are Discover, Capital One, Chase, and American Express. I do have a few smaller department store/gas cards that I could probably pay off in a few months. I don’t want to file bankruptcy, but if they won’t work with me, I don’t see what choice I have. And I’m a little nervous about using a Debt Settlement Company since I’ve seen so many bad reviews. What do you suggest? Do you think it’s possible that any of those creditors will work with me to get to a monthly payment that I can afford? I’ve been trying to find ways to increase my income, and I hope that will happen, but I have no idea if or when it will, and I don’t want to go into default and start having them call and harass me and adding to the stress. Any advice is greatly appreciated!
Holly – Discover is the only credit card you have that has shown any interest in reducing both the balance and the payments. And that has always been on a limited basis – more like a pilot program – and for those who qualify. You may not.
Other than that, you are looking at credit counseling to reduce the monthly payments. Best case scenario there is 765 a month for up to 60 months. But that rate is reserved for severe hardships usually, and probably not a realistic thing to expect from all of your creditors, so assume an estimated monthly payment of 945.00. The best way to get a direct and accurate quote would be to talk with a credit counselor. Its free to call, so take that time. At worst you walk away far better informed, and will know why you ruled it out, and why you are then limited to bankruptcy or settlement. Talk to a counselor at 888-317-8770.
If you are adverse to creditor and debt collector calls, settlement is not a great option for you. You could hire a firm, but that will add costs to the process that you can do on your own. Not everyone wants to do this on their own, so one on one coaching could help. If you want to know more about the program I developed for CRN members to do that, call and talk to one of the specialists I work with at 800-939-8357.
Hiring a full fledged debt settlement company is not that big a deal, just do it with eyes wide open. If the company does not charge advance fees (as most don’t any longer as a result of federal law changes in 2010), they cannot get fees without earning them first.
You also owe it to yourself to full understand bankruptcy, and that is not a good idea to do just from online review of the process. Consult with an experienced BK professional in your area. If you can qualify for chapter 7 without giving up too much, it will trump all other options.
Please post comment updates to this thread as you progress. Post questions, get answers, estimates on settlements with those creditors etc.
Michael,
I just settled a judgement but I am getting the runaround on who notifies the court that this has been satisfied. I went to the county clerk and they said the plaintiff (debt collector) must notify the court. The collector says I do. I cannot get a straight answer. Any thoughts?
Chris
Chris – Can you offer more details?
Who was the judgment creditor? The attorney you settled with? How old is the judgment? Do you have any documentation outlining the agreement you made to settle?
Palisades Collection. Settled with Fulton, Friedman and Gullace. The judgement was made in 2007. As far as docs, they would not give me anything until I agreed on a payment. I sent them emails that they would not respond to. So I had to call. I did record all the calls though. They sent me a copy of the release of Judgement that their attorney drew up. That was January 10, 2014. But as of today it has not been recorded to the county clerk.
Chris – It is common for Fulton/Friedman/Gullace to file the satisfaction. I would expect that to have happened after a month, but have had some files take 60 to 90 days too (even one that took much longer). You can file a motion with the court too, but I would encourage you to talk with an experienced consumer law attorney in the area about that first. If you want a referral to one let me know the name of a large city near you.
Dallas, TX
I sent an email to you with a half dozen or so experienced attorneys. One of them should offer affordable help with the motion and filing.
Michael
I posted questions in November of 2013 regarding debt accounts that were re-aged and increased by almost 25% from original charge off letters. Currently, in reading through Debt Settlement sections (note my browser could not find debt settlement and timing section) I have a question. As I have not worked in several years, have not income or assets, but do have 2 debt accounts I want to settle and pay is it likely the debt buyer (Midland) will negotiate at less than value on these debts, and if so what percentages can I negotiate?
Dee – Sophisticated debt collectors like Midland will assign a collectable score to your account. The less collectable you look on paper, the better I usually target your savings from settling with them. I target between 40 and 60 percent on non judgment/non attorney placed collections with them. There are instances of documented hardships that have allowed lower settlement approval.
Do you have open and positive accounts on your credit report right now?
Michael,
No open accounts on my credit report other than the collectible debts mentioned above.
My positive accounts were closed in good standing back in 2010.
Dee – Settling your debt in later stages of collection like this, and with no income/assets, and with those other collections on your credit reports, I would target 40% in your negotiations as realistic. With how uncollectible you look, if you are not in a hurry, you can stage your calls and negotiations over a period of weeks (even months), and sometimes see better reductions.
Please do post updates as you make progress, or if anything pops up in the process that you want feedback on.
Michael,
Thank you for your feedback. I will keep you updated as I make progress, and may request feedback as I go through this process.
Michael,
We want to offer a settlement on 2 credit cards that we have, due to unfortunate circumstances life has thrown us the past 3 years. We have never been in a situation like this before and would like a bit of advice on getting these cards settled.
1) We owe Capital One 5056.00. The last payment we made was September 7, 2013 for 115.00. Prior to that we had not made a payment since May 2013. The account has been charged off and is with First Source Advantage. They are servicing the debt for Capital One and have not bought the debt. I talked to a representative today and he sounds like he
would like to settle as much as we would. I told him I would call him back after discussing things with my husband. He offered us a settlement for 4046.00. That is approx 80%. I told him there was no way we could do that because we are gonna be using our tax refund. He told me for us to come up with an amount and he would run it by his supervisor. He asked if we were prepared to get this thing settled this month if we come to an agreement and I told him we were. I was hoping to settle for more on the lines of 25%. What do you think?
2) This credit card is Bank of America. We owe 12,500.00 on this card. It has been charged off and now Northstar Location Services has the account. I don’t know if they are servicing it or if they have bought it. We have not made a payment on this account since June 2013. Any advice would be appreciated….
Thanks, Kim
Kim – I reviewed a Capital One settlement for less than 50% last week. But I just do not see enough of them to encourage anything less than 50% as a realistic target. If you offer low to start, and are prepared for the 50%, you are in better shape. Just try to avoid a situation where you go back and forth 5 times in 5% increments if 25% is turned down, and you have to get to 50%.
On the Bank of America settlement with Northstar Location Services, is BofA showing a balance still owed on their credit report trade line, or does it show zero? Is Northstar Location services on your credit report? If not, is anyone else reporting? I generally target BofA accounts for 40% settlements, but still see enough come in under, or at 30% to suggest lower targets are still realistic too.
Answer those questions and lets go from there.
I’m trying to help my fiance clean up his credit. His credit went from good to bad when his wife passed away in 2004, his health declined and his business went under. He lost his health insurance and in 2011 i found myself taking him to emergency at USC Medical the outcome a triple bypass.
He is now on Social Security Disability and Medi-Cal. His benefits are only $1,000.00 per month and family is helping him with his house payment. I help with other bills as well.
He has so many past due all have gone to collections even one has a judgement. I have power of attorney and called the judgement one and they would not talk to me even when i offered to pay half of it as full settlement the girl was rude and no. They tried to collect from a bank acct. he did not even have. I filed paperwork back to the court that no money can be collected from any government benefits whatsoever. They tried to collect again and so I re-filed again some kind of exemption amount which exceeds the debt anyway. There are duplicates on his credit report one from the credit card company and another from the ones they sold it to.
He has tax liens 3 of them from LA County, Ca. Its a mess. Im afraid to call because I dont want to start statute all over again. There are some he does know at all. What do I do first?
We have no money to pay these completely off but I can come up with something.
Some say ”charged off” and sold to another company. Is this worth pursuing is it too far gone?
Thank you
Judy – Who is collecting the judgment debt? How much is it, and when was the judgment entered?
Duplicate entries on the credit report are standard. The original creditor may be appearing with all the late payments leading to a charge off. But if the creditor sold the debt they should be reporting zero balance owed, and the debt collector who may later report would report the balance owed to them.
If your only goal is the credit reporting aspects, than it may be worth negotiating and settling the debts. I can offer better feedback when you respond with answers to:
How long ago was it that each of the outstanding debts stopped receiving payments?
What are his credit goals for the next few years?
Can anyone explain to me? I am a married independent taxpayer. Although I am married, my husband never support me financially. So, in 2010, I borrowed money from 2 banks for schooling about $15,000. From 2010 to today, sometimes I got job. Sometimes I lost my job. But I have paid the debts down. When I lost my job, I wrote letters to them to tell them I am able to pay at a reduced amount given by my mom from the other country. So, i have paid them down to $5,600 (for both credit cards). Last year, I had 5-month contract jobs and I earned around $25,000. Two banks said that they will send 1099-C to me. Now I have been unemployed for 6 months. Can anyone please tell me whether I have to pay anything to IRS? If they send 1099-C, will I have to continue to pay them? What if I have enough money from my mom to pay off, should I tell them not to send 1099-C to me?
Who are the 2 credit cards you are dealing with? When did you last send them payments?
I just set up a debt settlement with FDR and I am anxious if I have done the right thing. My situation: $135,000 in credit card debit ( 5 cards : BOA, AmEx, Chase, Barclays). It has build up over a 10+ year span and has reached a point where it is no longer manageable and I can not handle the monthly payments. Balance transfers and relying on a big quarterly bonus is not working anymore. I researched my options and decided on debt settlement using Freedom Debt Relief. Putting in $1698 per month for 53 months. I had never missed any payments or been late. I stopped payments in Dec 2013 to the credit card companies. I hate the idea of not paying my bills but I have to think of getting this behind me for my kids sake.
Bill – Do you have any specific questions I can answer about your situation? All I can offer is my general feedback based on what you shared so far, and that is – Make every effort you possibly can to set aside more money much quicker. 53 months to settle credit cards like yours is just too long of a debt settlement plan. That type of debt relief program would be more consistent with credit counseling.
How much more do you suggest? I may be able to add more to it in the next several months. And should I add it to the Escrow Freedom Debt relief set up. Did I make a mistake choosing Freedom Debt Relief – should I have gone to an attorney?
Bill – Add as much money to your set aside account (escrow/other) as possible, and as often as possible. If you are working with a settlement company like Freedom Debt Relief, than yes, deposit into that account. The settlement company needs to know you have the additional money as soon as it is available. That way they can target the next credit card debt to settle.
Freedom settles debt every day. More than any attorney I am aware of. If you need an attorney in order to settle debt, it is generally when you have been sued, and not necessarily then if the goal is to settle the account.
Dear MIchael, I sent you a long letter last night. I know you got it because a lawyers name showed in my e mail today. I ‘ve been looking for my letter and some advise on your site and don’t see anything. The lawyer you recommended is like an hr away. I see you answer people, I was hoping for you to advise me also. Thank you, carol smith
Carol – I posted a brief reply to your comment and questions about Cach that you can read here. If you want to be notified by email when someone replies to your comments, or when a new comment appears on a page, you need to check the box to subscribe to comments, or subscribe to the RSS comment feed.
The attorney contact information I sent you is what I found closest to you for someone with debt collection defense experience. You should call and consult with them, and if distance is an issue, ask for a referral to someone with that same level of experience nearer you. Few attorneys are experienced with debt defense. Those that are tend to be a pretty close knit group and know each other.
I got a pretty good deal…The are sending me in writing our arrangement…is it normal for me to have to sign the consent to judgment form. They said the Only way to set up a payment t plan now is to or tto wait and let it go to court for judgement. Thanks
Tom – It is not the only way to get an agreement done, but it may be the only way they are willing to do this one. It is absolutely common to consent to judgment in order to get the monthly payment you can afford once sued.
If your happy with the deal that’s what matters.
Michael, what’s a good source to find out how much i owe in collections? Not sure how much i owe. I do know i owe about 6k for two usaa loans. What’s a good settlement for usaa?
stephanie – What other accounts do you have in collection besides USAA credit cards? How long ago was it that payments were made on those debts?
Your credit report is the first place you can look to in order to establish a base line of what your collection balances are. You can also call your original creditors and ask about the balances, and who they may have the account out to collection with, or who they may have sold your debt to (if sold). Any calls that result in connecting you to an agency, or the creditor themselves wants to start talking about settling, or negotiating payments, just let them know that you are still struggling financially, and cannot commit to any type of path to resolve debts quite yet, but are just gathering information in order to formulate a plan.
USAA settles for 40% or a bit more. Sometimes lower if the situation is right. What types of accounts are you trying to negotiate with USSA? Do you have other loan products or bank accounts with them?
Hello, I have been served a civil summons for a debt I owe from discover.the debt is for 1900. I want to settle this debt before a judgment but I cannot pay the full amount.I have many unpaid debts at this time.I would like to set up payment would the attorneys at smith debman narron saintsing and Myers do this. I am in north Carolina
Thanks
Tom – You can typically set up some form of payment plan at this stage of collection, just know that payments more often than not means paying the full balance back plus attorney fees, so not negotiating a debt settlement.
Would it be possible for you to raise about 60 to 80 percent of the balance in order to settle with Discover? If so, how long would that take?
No, can’t get the funds until March/ April…but can pay monthly till then…how much is the attorney fees normally run…I am fine with paying the full amount, being that it is what I owe
Okay. Attorney fees vary, but you can expect a few hundred being tacked on at this stage of the process.
Call the Smith Debman firm and see what you can work out for payments. Just be sure not to agree to something you are not completely confident you can afford.
Hi –
Like many others did when the real estate market was hot, I opened a Heloc line of credit. Using much of it to complete the home we built and a lot more when I had loss of income and my wife had cancer, we are now not only underwater on the HELOC, but almost so on our original mortgage. We are current on original mortgage.
As we sought out uninsured cancer treatments, I had to prioritize paying other things, and stopped paying the underwater HELOC. It was charged off in March, collection attempts were made by the lender (RBS/Citizens Bank) for a while, then it was assigned to an out-of-state law firm for collections. I had little contact with them, and they have now assigned the debt to a law firm in my state.
I’m not worried about them foreclosing on an underwater HELOC, but I am concerned about being sued.
Question: I read somewhere that a junior lender cannot sue in leiu of foreclosure in most states. Is that true?
Facts:
1st mortgage $350,000 current
Home Value $375,000
Heloc $90,000
Last payment 08/12
I am hoping to settle this and have read of a lot of people who have settled for 10-20% of the Heloc debt. I might be able to raise this amount by borrowing it. I just received the dunning letter from the second law firm.
Question: Should I approach them to settle, or should I wait until they contact me?
ed – You are on the front end of what I expect will be a consistent theme regarding HELOC affordability for the next few years. Banks are going to develop more SOP for loans like yours, and beyond the standard mortgage work out and foreclosure prevention plans. Here is a recent piece about the larger issues: https://www.nakedcapitalism.com/2013/12/big-banks-about-to-start-booking-second-mortgage-losses-they-can-no-longer-extend-and-pretend-away.html.
You should consult with an experienced foreclosure defense attorney in your area about the frequency and risk exposure for a second suing to collect in lieu of foreclosure. You want feedback from someone in that trench. Post the name of a nearby larger city and I can email you contact info to attorneys with the experience you would look to speak with.
Settling a Heloc is very doable. Some settle for the type of savings you read about, some don’t. Who is servicing the first? Are home values in your area showing value appreciation? If so, by what amount, and when did that trend begin?
Does the attorney letter you received reference any other company than RBS or Citizens bank?
Thanks, Michael for your very detailed response.
I read the article you referenced and do agree that this is a huge issue that has not yet been properly addressed. I’m not sure if I fall into the same category since my loan has been charged off for about 8 months already.
In regard to the questions you asked:
Rbs/Citzens is the only one who is listed on the letter from the Law Firm.
My first mortgage is serviced by Chase.
Prices have appreciated in my area by about 7 % in the last year, a trend that started in 2012. They seem to be leveling out, but are expected to grow 2% in my area according to Zillow. My home might actually have around $50,000 of equity by now.
I live in Chicago and would appreciate if you would indeed forward the name(s) of an experienced foreclosure defense attorney.
Thanks,
Ed
Ed – I sent you an email with contact details to several attorneys in the Chicago area. Any one of them would be able to advise you on your issues. Some will undoubtedly have professional experience in dealing with RBS and Citizens bank HELOC’s, and probably the attorney trying to collect on the HELOC too (if you are dealing with a seasoned collection attorney).
The separate servicing from the first mortgage to the HELOC can make settling a little easier in some cases.
Price appreciation metrics can matter, but not all collectors take a sophisticated approach using that data.
It would be great if you posted updates as you progress through this. Other readers can benefit and learn from you.
Thanks again, Michael –
I did receive the list of attorneys, contacted 3 of them and connected by phone with one of them. He believes that the collector/law firm can sue for breech of contract and they would probably “get around to it”. For now he said what I was doing was the best thing.
What I’ve been doing is that I reached out to the collector law firm and made a settlement offer of around 10%. I talked to two agents there. The first one just took my offer and said that she would submit it and that if I didn’t hear from them in a couple of days to call them again. I didn’t hear from them so I called them and spoke to another agent who said that they would need financial information from me in order to consider any offer less that 95%. I wasn’t comfortable with that so I politely terminated the call.
I’m hesitant to provide financials for 2 reasons:
1) I have a decent income which believe that is all that the collectors will look at. BUT, because of my wife’s cancer I have huge debt. I don’t think submitting my financials will help my case but hurt it.
2) I don’t trust the collectors to not use the information they get against me in some way. It’s like I would be allowing them discovery without any guarantee that they will approve my settlement offer anyway.
Instead, I wrote a letter requesting that the law firm verify the debt (it was within 30 days). I realize that I had made an offer and that might be construed as an admission that I owe the debt, but I never did say that I agreed with the debt, and in fact had stated that I disagreed with the amount. I’m hoping that by doing this I will be able to find out if they have anything like the original contract, or if they are just working off some statement they got from the previous collection law firm.
I’m writing all this because you had asked met to let you know about this process so others can learn from it and to see if you have any additional feedback or advice for me at this point.
Thanks!
ed – From what you have shared so far, you appear to be dealing with a debt still held by its originator, not a sold debt. The attorney that has the account, if working for the original creditor, will not be working from an excel sheet containing only the most basic of information. The attorney should have no trouble getting the needed info to validate this debt, and will have instigated that process after having received your request.
I think you may benefit from some help with strategics and implementation. Call in and talk with a CRN specialist at 800-939-8357 for some good feedback on negotiating and settling from here.
Hi Michael,
I have a personal Student loan of about $20,000 from about 4 years ago that is in default and has gone to collections. I have so many different student loans that this one, even though its a big one, got missed. I would like to try and settle it, how much do you think they would settle for?
My husband and I would like to buy a house within the next year but need to get this off of our credit.
Thank you!
Sarah S
sarah – Is the student loan in question a private loan? Who is the loan with now?