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
I have a default judgement from Discover in NJ from 2010. I was not a resident of NJ at the time but had a PO BOX there. I was a resident of PA. I was served for a court date via return receipt letter. I could not make the court date and therefore a default judgement was issued. I tried to declare chapter 7 bankruptcy but could not come up with the $2,000 in advance to file.
I couldn’t get a decent paying job there since my layoff, so I moved to Texas and found one. I tried to settle my $7,900 debt with the law firm representing Discover for $5,000. They would only go to $7,300 as they say I now owe them $12,000. Should I hire a lawyer and see if I can get the judgement vacated? I do not think the judgement has any affect in TX. What do you think?
You were sued in the wrong jurisdiction, so yes, I think you should connect with a consumer law attorney familiar with debt defense and vacating judgments. This is an old judgment, so that could be a hang up.
If you need some help locating an attorney with the experience you need, post the name of the county the judgment is in, I will find one (or perhaps several) and email their contact details to you.
Thank you for answering so quickly. I haven’t really had the money to pay back the debt or engage an attorney until now. That would be Camden County NJ. I tried calling a few attorneys I found online left messages and never heard back. Thanks again.
So a recommendation or 2 on an attorney would be very welcome!
I sent you two to connect with in Marlton. Post an update with how you progress.
Dear Michael –
First a little background information before asking a few questions about debt settlement on a small business Capital One credit line. My wife has had an S-Corp small business since 1996 and in 2003 opened a line of credit with a credit limit of $45,000 and interest rate of 4.25% with Capital One. My wife is the sole owner of the business and is the sole guarantor for the credit line. The business drew regularly from the credit line as needed over the years, but the recession nearly brought business to a halt and it’s barely viable at this time. I co-managed the business for about 12 years, though we are in the process of getting divorced – no fault (New York) and my involvement in the business is minimal at this point. The balance is just about $45,000 and my wife has decided that default is the best option. We did not make the July payment (first missed payment since 2003) and will not be making the August payment. We’ve been through debt settlements with several personal credit cards and an Amex small business credit line and settled for less than 30% for the personal accounts and about 55% for the Amex business account.
I am 67, work part time and receive monthly social security payments. I do have stocks worth about $90,000. My wife has a small amount of money in an annuity (about $10,000) and is trying to continue and breathe new life into the business. We would like to handle the debt settlement process on our own, so here are the questions:
1) Is it best to let Capitol One know right away that we are unable to continue paying? Or, is there some advantage to stalling and letting them come after us?
2) Is it reasonable to assume a settlement amount of 50 – 60% of the outstanding balance (plus penalties and interest?)
3) We are planning a fundraising campaign in about a month to support business growth and to pay off at least some portion of the debt settlement. If, for some reason we are unable to come up with the full settlement amount would Cap One have access my wife’s annuity? To my stocks? (in terms of divorce law, NY is an equitable distribution state.)
Many Thanks!
I would target settlement with Capital One right at the expectation you set in your comment. I rarely see settlements go below 50% with them.
You cannot have a productive settlement dialogue until you cross a threshold with creditors. With some banks that will be 60 days, and others 90. I put Capital One in the 90 day category. You can call and let them know you are unable to pay, and that it is not your intention to fall behind, but circumstances are what they are, and you tapped everything out just to stay current for as long as you have. But you are looking for that notation to be placed in your file this early, not negotiating with them. With a business line of credit, you could look to negotiate with CapOne after 90 days, and hold out for the best savings from there.
In other words – be proactive in reaching out, and do not wait for them to come after you, but time your efforts for when you are likeliest to get the best result. Check in with them once a month to let them know you are still trying to figure out a plan of action (even though your plan is already set on negotiating a favorable settlement).
They would have to sue your wife; have that result in a judgment; and pull her in for an asset discovery hearing, in order to even learn about the stock and annuity. Even knowing about them, I am not sure they can force the liquidation of her annuity. And she would have opportunities to settle all along the way.
Hi Michael,
Thanks a lot so far for your great advice. I currently have a Bank of America credit card in collections for $5,400. It’s been passed on to a second collection agency now, and it’s been about two years since the account has been charged off by BoA but they haven’t yet sold the debt. (The collection agency that has most recently contacted me is collecting for BoA.) They have agreed to settle the debt, but for over $2,000. I finally want to deal with this debt now, but only have about $1,300 saved up for a lump sum. Do you think this is enough to pay them? What do you think is a reasonable settlement amount for this debt? Thank you.
1350 would be the lower end of settlement approvals I am seeing with Bank of America. Getting them to agree to something that low (25%) is not as common as it was a couple of years ago. 1600 to 1900 would be the more common low end target to hit.
How long will it take to raise any extra money if you cannot get the collections agent to agree to 2k?
Be sure you get any agreement to settle in writing. Follow this outline for settlement agreements: https://consumerrecoverynetwork.com/paying-your-credit-card-debt-settlements/
Michael,
Thank you so much for your response. I appreciate it so much! I have a few more questions, if you would be so kind as to help me further. I talked to the collection agent today and we agreed to settle for the amount she wanted (around $2,160) , but to split it up in three payments. However, I may have access to $2,000 total now. I want this whole debt ordeal to just be gone ASAP! Do you think they would accept a lump sum of $2,000 instead? I just want it all to be over!
Also, they would like to be paid via direct deposit. I heard that it is a very bad idea for debt collectors to have your bank account number. However, I bank online and it’s very easy to open up a new, separate account (for free), and then transfer the money needed from the preexistent account to this new one. Do you think it would be a safe option to just use a brand new online banking account to pay the collection company? Thank you again for your time. It’s wonderful how you spend time answering everyone’s questions on your website.
I would do just like you suggested… open the different account and use that for electronic payments.
If you do call back and offer the lump sum, that results in a slightly better savings, let them know you have a source for the money, not that its yours. It may change their mind about the settlement they already agreed to (not likely, but I have seen something like this occur enough times to raise the concern).
Hello,
I have a credit card debt with BoA that was sold to a collection agency. I am wondering if there is a way to get the collection agency to remove this from my credit report because BoA has charged off my debt.
Details:
Last payment 1/2009
BoA Amount $11,000
Collection Agency claims $17,000 is now owed
State of California SOL = 4 years
I have sent a DVL and contested this, which my credit report states. I am wondering if threatening to file a complaint with BBB and CFPB due to the SOL making the loan time barred. Any advice?
I don’t want to settle the debt because I don’t trust the collection agency and it’s almost 7 years, which means it will fall off my credit. If they try to sue me, I can get it thrown out due to SOL.
Thanks in advance,
Luis
Hi Luis. I responded to your comment on the other page about settling with collection agencies, and that page is more topical to your situation and goals. Lets continue the discussion over there.
Hi Mike,
In October of 2012, my wife and I made the decision to do a strategic foreclosure on the condo she purchased before we started dating. The mortgage is held with of BoA and as soon as it went into default, our credit card account with them was closed. The credit card account is up to date and we haven’t missed any payments. However, the debt is rather large (about 16,000). At this point in time, it seems as if we have paid the principle several times over and with the account officially being closed, it seems like it might be a good time to make a settlement offer especially since we will have enough money to make a lump sum payment in the next month.
What should our settlement offer be and would it be better to contact them in writing or via phone?
Negotiate with BofA and get the details worked out by phone, then get the details outlined in writing.
I typically target settlements for BofA credit cards at between 30 and 40 percent.
How many payments have you missed so far?
Edit – I see you have not missed any. You will find it is best to negotiate with original creditors like BofA when you are between 150 and 180 days late (try not to let it go 180 days late if you can help it). Continue reading the section of the debt settlement program guide that deals with settling your debts direct with your bank.
Calling now to talk about settling for a lump sum settlement is not going to lead to anything, and can be counter productive sometimes.
Mike,
I have debt with TD banks from a Target credit card. I am being sued by Cohen & Slamowitz LLP in Long Island NY. The amount I’m being used for $3300 . A summoned was served to an individual at my apt on July 4th . I want to settle with them. I had a shoulder and ankle injury and I was behind on some my accounts . Target would not work with me. I am going to address the summons ASAP . What is the best way to nego a debt settlement instead of going to court . I can’t afford the whole amount. Please advise.
Thanks ,
Chuck
You need to be able to convey your in a financial hardship, and have a realistic expectation of what you can settle for. Now that you have been sued, and because it is a Target account, you could need 60% or more of the balance to settle in a lump sum single payment. How possible is it to pull together that amount? How long will it take?
Hi,
If something is already in collections, does that mean that I can’t work out a settlement with the original creditor I owe to?
Maria
Once your account is sent to an outside collection agency, it generally means the original creditor tried to get you to pay for several/many months, and then gave up. They contract with outside agencies, or sell the debts off from there.
You can start your negotiation effort with your original lender. But if they refer you to an agency, then that is who your negotiations and settlement efforts will need to focus on.
There are instances where you would strategically choose to wait for your debt to get sent back to the original lender, placed with another agency, or sold off to a debt buyer.
If you provide more details about the debt, how long ago it was paid, who is collecting now, how much you are targeting to settle this for… I can offer more feedback.
If a debt I had with say Citibank has been sold 3 or 4 times over…how can I get all the debt collecting companies that no longer own my debt off of my credit report?
jd – Please provide more details by answering the following in a comment reply:
What are the names of all debt collectors reporting an entry for the Citibank account?
Which one (or more) of them is reporting a balance due and owing as of today?
Which deb collection agency did you last hear from, whether by phone or email?
When did you last pay Citibank?
I have been getting phone calls about a debt I owe to Capitol One, I haven’t received anything in the mail. I just recent got a phone call saying I need to call back and verify my address because Capitol One wants to take me to court to pay a debt I already paid. When I asked for a hard copy to be sent through the mail I was told they already did that but it went to the wrong address so they wouldn’t do it again. I gave my email address and haven’t heard anything until I got the phone call saying that I have to verify my address. It feels like I’m being railroaded into going to court and pay a debt that isn’t mine because someone dropped the ball and didn’t do their job correctly.
That very well could be (the railroading part). When was it that you paid the account off? Did you settle the debt, or pay the full balance? Did you pay Capital One, or a debt collector?
I paid $500 to Merchant Recovery Services a debt collector. It was a settlement because I think I owed more than that. the first payment was in November 2013 and the last payment was made in March of 2014. I do have the bank statements showing they took the money out of my account. If you need any other information let me know. thank you Christine
If you have no documentation, but know that the account was settled and paid consistent with what you agreed, I would suggest you file a debt collection complaint with the CFPB. You can file online here: https://www.consumerfinance.gov/complaint/
Before submitting your complaint, put together an outline. It would be good if you included dates, numbers called, people you spoke to, amounts paid, etc.
Post an update with what you hear back. It can take a week or three to get a response. If you talk to any debt collectors between now and then, let them know you are not going to talk to anyone about this paid account until you learn the result of your CFPB complaint.
thank you very much. I’ll file the complaint and let you know how it goes.
Hello! I’m 23, and I’m trying to fix my credit score (580) as much as possible after a couple screw-ups. I had a BofA credit card that I haven’t paid since 2012. I have a balance of $1,254 owed as of today. I received a letter from Gatestone & Co stating: “Your account has been placed by FIA Card Services with Gatestone & Co, a collection agency.” It goes on to tell me I have 30 days to dispute the validity or they will assume it is valid (which it is).
I have a few questions I was hoping you could clear up!
I have $500 that I have saved up to put towards a settlement possibly. I would love to pay a lump sum and just be done with it. Since this is a smaller debt, is the benefit of owing $0 and not being maxed out on the CC worth the negative effect a settlement will have on my credit score? and what type of offer do you think I can expect to get?
Also, if a settlement is an option, would I be better off calling Gatestone & Co or contacting Bank of America? I’m not sure if BoA is even an option, since I already received a letter from a collections agency..
Any advice or a point in the right direction would be sooo helpful! Thank you!
You would be calling the debt collector, Gatestone, to negotiate your settlement. You could call BofAto start, but they will refer you to Gatestone.
I would target roughly 40% of the balance owed today as my settlement amount. If I had time to go back and forth with the negotiations, and wanted to try to save maybe up to 10% more, I would make a lower offer, and call back about this time next month if I cannot get it approved.
Debt settlement is not bad for your credit reports. At least not in the situation you are describing to me.
How many other accounts do you have in collections?
Thanks for clearing that up! I have a Capitol One credit card that I owe roughly $600 on that I last paid in 2012. They haven’t sent any type of letters lately so I figured I’d start with BofA. I also have a T-mobile debt of $463 in collections from 2009 or so, but I haven’t received letters from them either so I’m assuming I should save them for last?
With settlements, are payments an option or is the whole lump sum expected up front?
Thanks again for the help!
You can often get payment arrangements along with the reduction of balance you negotiate. How many months will vary from one account and debt collector to the next.
How much money do you have to offer in a lump sum to settle the BofA account with Gatestone?
How much can you confidently afford monthly if you negotiated, say 6 payments?
Ideally, I would love to pay a first lump sum of $500 toward Gatestone, and be done with it. I’m not sure if that would be enough on it’s own though. Monthly payments, I could probably only manage $50 to be safe. I’m on a pretty tight budget.
Thanks for the speedy responses and all the help!
I think you have a really good shot at settling your BofA debt with Gatestone for that amount, or a touch less. You have to stick to your guns when negotiating and let the collector know that is all the money in the world to you, and all you have to work with. Debt collectors often have real time access to your credit reports, so they can see the Capital One and Tmobile in collections. Use that fact by referring to the other debts you can use this bit of money to resolve if they do not want to.
Hi there! I am looking to go back to school but owe an old college money from 2008. I had a loan that didn’t go through because a signature was needed. The school didn’t notify me until the semester was over and I was trying to enroll for the next term. I ended up dropping out because I couldn’t pay it and it went to collections. They will not release any of my transcripts until the collection agency is paid. I want to call the collection agency for details about how much I owe and if they will settle for less, but how can I do that without admitting it is mine and reactivating an expired debt? Any help will be greatly appreciated!!!
Tisha – What is the name of the debt collector? What state are you in? What type of student loan was it?
I owe $22,000 to Capital, Citi, and Bof A credit cards. If I was able to settle, what amount would I need?
I have 5 years to go before the SOL expires. I am behind almost 6 months now. The cards are in my name only, not my spouse’s. thanks.
LS – Those credit card banks vary in whether you can negotiate a settlement prior to charge off, and what amount they will accept as settlement in full. I could better target amounts if I knew the rough balances on each account. You can also get a general feel of estimates and ask questions in the comments after reading: https://consumerrecoverynetwork.com/review-top-7-credit-card-lenders-best-offering-debt-relief/
Hi Michael,
Thanks for all your wonderful credit repair advice. I have a charged off account with Bank of America for $5,400. It was my only credit card. It appears they passed on this account to LTD Financial. I’m unsure if BoA sold my account to them or just passed it on to collect for them.
In any case, I was scared and irresponsible and ignored calls from both BoA and LTD since 2012, when my account first became delinquent. I’m finally ready to take responsibility and try to settle this account. I have about $2,000 saved up. Do you think this is enough to settle?
Also, becoming paranoid about my credit score, I jumped the gun and recently got an unsecured credit card. It only has a credit limit of $300 and I’ve been making only very small purchases on it — nothing more than $20. I got it because I had no other credit cards to my name after the BoA card was charged off and I wanted to build credit. I know I should have waited to take care of my BoA debt first, but it’s too late now. I know you advise not making payments on any other accounts when you try to settle with a company. Do you think the fact that I’m making very small payments on my new, secured credit card affect my chances of settling with BoA? Right now, the balance is only $2. What if I pay it off so the balance is $0 and then not make any payments on it? Please advise. Thank you.
Mia – You can always call Bank of America and ask them if they sold or simply placed the account for collection with LTD Financial.
Offering 2k to settle a 5400 balance on a BofA account is a realistic target. You may even be able to get a bit lower.
Yours is not a scenario I would be concerned about, where you are paying other accounts, and not paying the accounts you are negotiating a settlement with. The balance is just too low, and if any collector brought that up, I would refer to it being a secured card with a low limit for identity theft protection purposes.
Hello,
I have two judgments against me one from Ford Motor Credit for about 7800, and one from a title company who botched a closing (while I was in Chap 13 bankruptcy no less) and then sued me for 4800 in a venue 600 miles away. I REALLY have a bad taste in my mouth even still from these crooks but I digress.
The title company judgement was made on 7/3/2007, and the Ford Motor credit judgement on 7/23/2008. I have made no effort to contact or make any payments whatsoever to either of them at this point.
I am wanting to get a mortgage, and need to resolve these debts. Given that they are so old what I can expect when I call them to negotiate? Is it dumb for me to even try when they are so close to dropping off the radar anyways? What kind of settlement should I offer?
I have found a house that I really want to buy, but am I being stupid in even trying at this point? I know I can be approved for the loan to buy the house with these paid.
David – The older the debt, typically the better savings you can target when negotiating your settlements. The more sophisticated debt collectors will use software and scoring models (not credit scores), that will rate how collectable you are. If more collectable you look on paper, the more convincing you may need to be about what you can afford to pay to resolve the debts.
After 6 or 7 years, I would look at 50% of the balances owed today as a realistic amount to negotiate, get documented, then pay.
Can you raise that amount of money to pay in a lump sum?
How many open accounts are on your credit report today that show you are current with payments?
I have two open accounts that are current. One auto loan, and one credit card. I also have 3 collections left to pay totalling about 1100. Although the debts are from the same time period as the judgements, the collection dates vary. The most recent one is 2 years old
Yes, raising the 50 % isn’t an issue. I was thinking more like offering 25% to start out. Is that too low?
Not too low at all. And if you are financially prepared to pay higher, while always targeting the better savings, I like your chances. Do not let on about any financial goals when negotiating. Just that you fell on really tough times, and that things are not easy now… not by an stretch. But you are trying to bounce back, never intended to not pay, have limited budget bandwidth, etc.
OK, thanks for your advice. I have left a message first thing this morning with the attorney but it is the end of the day now and they still haven’t called back. I don’t want to seem too eager, so I will wait until just before lunch tomorrow to try again. I can’t let it sit either, or I’ll loose the house I want which is the whole point of doing this now anyways. I’m guessing they are playing hard to get also heh. Anyways, kudos on a great site and it is great you help so many people, great job.
Thanks,
David
Just for anyone else who might happen by I thought I would share the end result of my “negotiations”. The attorney came back today and said FMC will not settle without having taken payments for a while first. Every call for the last week or so I was under a full court press for my employment, bank, and address information. The title company wouldn’t settle at all. Perhaps my experience is unique, but I believe I would have been much better off had I hired someone to do the negotiations for me rather than do them in person. I believe that at least in my case, having a third party shield me from the creditors would have been a major advantage. With this debt being so old I guess they figured why take a settlement, they have gone without the money this long if I need to settle (of course I never told them I needed to, but why else try after all this time?) then they want to make me pay. Not at all how I expected things to go. Thanks again for your advice, this has been an excellent learning experience, and a great place to learn from.
David
Thanks for posting the update David. Negotiating settlements as a form of debt relief can vary in results from one person to the next. Depending on the timeline of your goals, you may also want to reach back to try and settle this the following month, or even the month after that.
While it is pretty obvious this site focuses on what you can do for you, without hiring a professional negotiator, I do suggest working with a pro too. There are people that should start with, and keep to, that approach to settling debts (hiring a company or individual). There are people who can do some of the negotiations and settle some accounts, and only hire a company to work on some difficult accounts, or late stage debt collections (your type of situation). And then there are DIY debt settlement files.
I agree, and I certainly wouldn’t advise anyone who wanted to try on their own not to. However, my situation has changed dramatically from the times the debts were incurred (for the better). It was very unnerving to be grilled by the attorney for all my up to date personal info, and now I feel since I have contacted them it is possible they will pursue further action, when in the six years the debts have been out there I haven’t heard a peep from them. Secondarily, I think that had they been contacted by a third party, it would have seemed more “normal”, as opposed to what is this guy up to that he is contacting us after all this time. From everything I read, I thought this should be a slam dunk easy negotiation. Now, not only will I not be able to buy the house I wanted to buy, but I will be living in fear that garnishment or levies could be in my future. Your mileage my vary, and I encourage you to work out things on your own if you can. Just be aware if you have something to protect, you could be opening up pandoras box. My experiences are my own, and I do not offer them as advise, but merely as an example of how things progressed in my specific case. Best of luck to everyone here!
Hello,
Just wanted to let you know, the case was taken up by Kirschenbaum and Phillips PC. I got their contract fRom the Marshal’s office.
Hello,
What is my best course of action after my bank account has been frozen by a Marshall. My bank, Chase, called me today with that news. All but 1920 dollars is remaining as available purchase. The credit card in question was from Bank of America of in and around 6,000 dollars which has ballooned to 12,000 dollars. This is in NYC. I am a student and have no income, until I graduate later this year. Please advice.
Atanu – Were you aware you had been sued and a judgment entered against you? Who sued (name of plaintiff) if different than BofA?
How long ago was it that you last paid your bank of America credit card? What was the date originally sued?
Yes, I was aware that a judgement had been entered against me. This judgement was passed in Sept 2008. The name of the Plaintiff is Bank of America although they had taken the help of Worldwide Alliance or an agency like that. The last payment on that card was much, much before 2008. Unfortunately, I cannot remember. Wish I could give you more information, but I just don’t have them. The person I talked to at my bank ( Chase) gave me the number, case number and name of the Marshall I should call .
Okay, thanks for those details.
If the judgment is something you knew about, and it is from 5 years ago, I am not sure what your options are going to be for challenging the bank levy. You could talk this over with an experienced consumer law attorney.
What is your goal with this debt?
I have a student loan over twenty years. It wasn’t that much. I paid a year. Then I guit paying. For three years they have kept my federal tax money. I live in Greenville South Carolina. How do I find
Out how much more I owe on this loan. Thank you so much for any help. I’m sixty three will be sixty four in August. I make around twenty one thousand a year. I really could use that money. Please help me
Connie – Try this site for details on what to do in your situation: https://studentaid.ed.gov/repay-loans/default/get-out
You can call or email them for more hands on response too.
Hi I am wondering if you have any knowledge settling with a collection agency called MC Acceptance located in Phoenix, AZ
Nothing in my files with an MC Acceptance in Arizona, or anywhere else for that matter. Can you offer any additional details about your issue?
Hi,
I have a 2nd child on the way and want to clear out all my old debt before baby is born. There are 2 accounts where I have huge balances that I can’t afford and was thinking of negotiating a settlement instead (which I know they’ll knock off a huge huge chunk off of..about at least $6000) but a friend of mine said I shouldn’t do a settlement because it doesn’t look good. I mean at this point, my credit is bad already..both accounts are to stay on my report until October 2016 and March 2017. There’s no way I can afford both accounts.
I guess my question is: does a one time settlement make any difference on my report versus just paying monthly until it drops off after 2016 and 2017 (and stop paying after it drops off)? And what happens if I don’t pay both accounts? Can the bank i owe decline me from ever opening an account with them or will they not be able to see that I had this debt with them 7 years ago? I’m asking because in case I want to get a home loan in the future. Thanks!!
TY – Have you already stopped paying these accounts? If so, settling would be better for your credit than having unpaid debt on there. What credit would you expect to apply for (home loan, auto, other) between now and March 2017? How soon is the future you reference above?
Paying collection accounts the full balance using long term monthly payments is not as good a plan as settling with them and getting it over quickly. Paying accounts that are still with the original lenders, even if you have been late a time or two in the past (30 and 60 day late appear on the credit reports), is the better way to achieve your credit goals, but takes longer in order to get your income and expenses aligned with affordability.
Post how late you are with payments, and who the creditors are, and lets go from there.
Hi,
I’ve been making monthly payments to these collection agencies since about 2012, in very small amount automatically deducted from my account each month. Some were paid off, some settled…i have about 3 more small ones that I can pay off easily in full and the 2 large ones mentioned where i would have difficulty paying in full. The 2 big ones are Citi and BofA. All of these accounts went into negative back in 2009/2010 after something happened in my personal life. So they’re pretty old and not with original lenders anymore.
I don’t intend to take a loan with my significant other until probably all that has dropped from my report..possibly in 2017 but if i could do so earlier, I would like to (home loan). I am aiming to have all these closed by the end of this year so that my credit score can take 2015 and 2016 to slowly recover (if it will at all, since they’re all technically still on my record). Most of my negative records will drop by the end of 2016 (and 2 in early 2017).
TY- Thanks for the additional details TY. Now that I have a clearer picture, I would suggest settling the Citibank and Bank America accounts. The target I would aim for in those settlements is going to change depending on the name of the collection company you have been making those small payments to. Post a rounded balance for the Citibank account and who is collecting, likewise for BofA. Also include how long each collection company has been debiting your bank account monthly.
Your friend would be incorrect about negotiating a debt settlement on these collection accounts not looking good. It is often better for your overall credit goals to settle collection accounts that are late enough to be paying debt collectors, and not your original banks and lenders.
Hi,
Citibank is with Associated Recovery Services but it looks like they’re using ARS to collect the money, it’s not sold to ARS. I stopped making payments as of Aug 2010 and it says charged off as of Dec. 2010. I believe March 2012 was when I started doing $50 monthly payments. The original balance was $11,116 after all the interest tacked on. My current balance is little less than 10,000. I spoke to them already about a settlement offer and the last offer they’ll accept was $3000 which is good but i was hoping for a little less because I also have to take care of BofA. Citibank due to stay on record until March 2017.
BofA was sold to Asset Acceptance. Stopped making payments to BofA as of January 2009 and it was closed/sold to Asset Acceptance in September 2012. I started making payments to Asset on December 2012 for the amount of $100.00 each month. Original balance was $8,908. On October 2013 (current balance then was around $7,900..they also removed some interest so it was a little less than that), they told me that if i can up my monthly to $125.00, they’ll cut my balance down to $4000 something so I did and am now making $125.00 a month. Haven’t called them to make a settlement yet but I feel they’ll be a little more lenient than Citibank. And by paying this one off first, it’ll give me more cash flow to pay off other smaller debts BUT BofA is due to drop off on October 2016, 6 months before the Citibank one..which makes me think, shouldn’t i take care of Citi first since it’s on my record longer?
Thanks a million, Michael!
TY – I would not get hung up on the credit reporting aspects of this. It is best to focus on the math and the best use for your available dollar at the time you settle each account. Asset Acceptance is not charging interest, but Associated Recovery Services may still be charging any contractually allowed interest on the citibank account. If that is the case, knock out the settlement with Citibank first. The 3k offer to settle a 10k balance is quite good for a citibank account. I would not expect ARS to go any lower using today’s trends. Can you pool together the 3k right now and still be able to meet your other bills and obligations? If so, and if I were in your shoes, I would knock that down.
Settling with Asset Acceptance will be a bit different. Do you have the cash flow to wrestle with this one if you can negotiate a good settlement?
Can you give me a rough outline of the smaller debts you have, who paying, any late pays, etc?
Hi,
I don’t think Citi is accruing interest. They send me monthly letters to give me the updated balance and to tell me $50 will be deducted and i haven’t seen any interest tacked on. If you mean something than this, please explain as I’m probably not understanding correctly.
If I pay 3k to Citi, which i’d have to borrow a little from my 1st kid’s savings, it would probably take me awhile to pay for BofA. I might not be able to save enough for BofA until end of the year or until next. With 2nd kid coming, i have to enroll my 1st kid to preschool early which will cost about $1100 a month or a little more and which will also mean, I wont even have a penny to save until he’s out of preschool (2 years).
The other debts are to Nordstroms (i haven’t even contacted them yet..i know the balance is $2000+ and they’re willing to settle for a few hundred according to their letters), Chase (owe about $800 left..$50 paid monthly) and HSBC (also about $800 left.. $40 paid monthly). I was thinking if i paid BofA first, i could tackle these with the $125 that i normally pay BofA monthly with.
Oh sorry, for the 3 smaller ones..Chase also uses ARS to collect like Citi and HSBC sold to Portfolio Recovery. Nordstrom..i think is still with Nordstrom. Unsure actually.
Negotiating a settlement with Asset Acceptance for the best savings can sometimes require payments be stopped. You risk the account being placed with an attorney who could sue in court to collect. Same thing applies to the HSBC account, though that balance makes it somewhat less likely that Portfolio Recovery sues.
If it were me, I would stop payments on all of them, and start settling them off one by one, and as quickly as possible. By order of priority:
Citibank and Associated Recovery Services
Asset Acceptance for BofA
PRA collecting on HSBC account
ARS collecting for Chase
Nordstrom Visa
I would set a realistic expectation that I could be sued on one of these with how long it may take to continue to save up, then settle the next debt… save up, then settle the next. But if you clear those first 3 quickly, you will limit those risks.
I had actually called the smaller ones before in attempt to stop monthly payments so that I could focus on each one individually first. The HSBC one said that because it was originally with an attorney already, they said i shouldn’t stop payment on that account because it’ll go back into the chances of being sued (even though for that small amount, it’s unlikely).
Also if i stop monthly payments on all and do them one by one, i dont know when i’ll save enough to clear the bigger ones, therefore leaving the smaller ones unpaid for a while. BofA also said if i stop payment with them, i’ll start accruing interest again. Such a headache.
I was actually thinking of settling smaller balances first and then work on the bigger ones (while still paying monthly for the bigger ones so i don’t get sued…until I can come up with enough cash to settle..which i understand is like paying more than I should). Totally opposite from what you suggested though.
TY – You run higher costs, or higher risks either way. It is a matter of choice. You will be making an informed decision.
I would have started your file from the outset a bit differently, but would do as I suggest if I woke up in your shoes today. PRA is a loose cannon in this. I say nice things about them on the posts I have dedicated to them, and because they are consistently pleasant enough for consumers to work directly with to solve accounts. But they can do some damage too (using the courts overly much).
It will boil down to what you are most financially able, and comfortable with doing. If you can power through the settlements inside of 12 months, I like your chances of avoiding major issues.
Hi Michael,
Thanks for the response. I think I will call Asset today and see what’s the lowest they can go. At least get one of the bigger ones out of the way, then see how much I have to work with Citi. And possibly even call the others to see what options I have and go from there. I’ll update you and will let you know if i have any further concerns. Thanks for your input!
Hi again (sorry to bother you),
I just noticed on my credit report that 2 different bureaus have different drop off dates for Citibank. In fact, everything’s slightly off by a month but Citi bank is off by 6 months or so between Transunion and Experian. Is there a way to dispute the one with the later drop off date?
You can dispute the Citibank entry on your credit report. Send your dispute to the credit bureau that has it wrong, and to Citi bank. Keep a copy of your letter and send certified mail return receipt to both. You may need a record of this later on.
I would not dispute collection accounts on your credit report, for the reasons you would, before I have negotiated and settled the account. I would wait until after the settlement.
I made a very naive mistake a few years back and lent my card to a family member. I live in NY, they maxed it out an AMEX at about $10,000.00, maintained it as long as they could then defaulted.
I’ve been dodging a lawyer about it for a while. Recently, I had a few unexpected knocks on the door, (I didn’t answer) so I believe I’m being served a complaint or summons.
I have a bank account, but don’t make regular money, I work freelance. But I don’t want them getting a default judgement and freezing my account nor do I want his thing hanging over me forever. I have other cards that are well maintained though.
My plan A, so far is to try and see if there is indeed a complaint or summons pending and to answer. Just try and make them prove I owe anything at all. Then if they don’t drop it, or I lose, my plan B is to just file Chapter 7. Plan C is see if I can lay my sob story out for the court and try to get it lowered or dismissed. Not sure if this is a good idea.
In the end, I simply can’t afford to pay for this thing, I barely get by as it is. I realize I might lose by having broke the contract already by lending my card. And so you know, the person who charged up the card is not abel either to reimburse me. How can I unwind myself from this?
Steve – Plan A will buy some time, but there is little to argue with AMEX about proving the debt. They do not generally sell debts, so it AMEX suing, and they have all the documentation to prove the debt.
Plan B will put this to rest quickly, as well as any other debts that are unmanageable.
Plan C is a nonstarter. You can pluck a few cords in court, but it will not change a thing. The court is not there to determine whether a debt is affordable in this situation.
Talk to an attorney about the benefits and drawbacks of chapter 7 bankruptcy, and how that applies to you.