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. I have a debt of $4231.83, originally of Citi Bank which is currently being handled by the Razor Capital, MN. I have myself contacted them via phone after I came to know about them when I called CIti in response to which they sent Citi statement of this amount by email. They told me to pay via check or money order with my id written in the memo.
Last payment made was in March 2012. I was out of country since then and just returned. I want to clear it asap.
How should I pay them — via check or MO? Thet told that they accept only these two modes if payment. They have emailed me saying that they would send a letter of “closing account” with account paid in full once payment is cleared. Do you suggest anything that I NEED to be cautious of, at this. I reside in MA while debt was originally in GA.
Are you paying this in full or after negotiating a settlement? Do you have anything in writing other than an old Citibank statement? I would want something from Razor Capital that stated the amount you are sending resolves the debt. Check out this article for more about what to look for in a settlement or pay off letter.
Hi Michael,
I came across your website and it has been very helpful. My current situation entails unsecured credit card and personal loan debt to the amount of approximately $71,500. I can provide a recap of accounts below:
Security Service FCU Personal Loan; $6,231
PayPal Extras MasterCard: $3,228
Amazon.Com StoreCard: $2,069
Chase Freedom Credit Card: $15,957
Capital One Credit: $9,400
Discover Credit: $2,800
SSFCU Credit: $7,478
Furniture Row (Cap One) Credit: $4,667 (60 mos/0% interest)
Conn’s Synchrony Credit: $4,981 (60 mos/0% interest)
Chase SW Credit Card: $15,027
I have recently agreed to enroll with National Debt Relief in an attempt to get these debts settled rather than my payments being eaten by interest charges every month. After facing some serious concerns about debtors coming to my home, calling my work, being sued, etc. I decided to do another (deeper) dive into researching my other options such as negotiating direct with my debtors to see if I can make a feasible plan.
I am currently in graduate school and will be enrolling in a doctorate program after the completion of my current degree. I would prefer to handle this debt without seeing major impact to my credit score if possible and I would like to stay out of delinquency.
What might you suggest as the best path forward?
It was good to speak with you Joshua. Please update this post with what you learn about consolidating through one of the nonprofit’s. It will help others who are doing their homework about whether to settle debts or not.
Michael,
My wife had forgotten about a $25 balance on a Kohl’s Charge Card that has since ballooned to $357.33 before it was charged off. I had tried to negotiate with them along the way but they were not willing to put anything in writing before I made the payment nor were they willing to reduce any late fees before my payment. I didn’t trust that they would stand by their word so I declined the deal. After many more months, they contacted us again about the debt of $357.33, and I again attempted to explain that that was a ridiculous amount based on the original debt. They stated the lowest they would take is 60% ($215). I countered with $100 to which they held tight to their 60% as the lowest possible. Now, they have given JC Christensen* the opportunity to collect on their behalf. I attempted to negotiate with them as well and they held fast to the 60% line as well stating this was all Kohls would allow them to offer. I have found several recent Kohl’s settlement letters online showing 40%, 45% settlements, After speaking with Kohls again, the 60% number came up and that is basically where the conversation stopped. What, if anything, can I do to break through this amount? I’m not unwilling to settle the debt, but given the fact I tried to take care of this before it spiraled out of control, I think the amount they want now is unreasonable.
Small balance accounts often do not settle for the best savings. Not just with Kohl’s, but most debts. Check out this article: https://consumerrecoverynetwork.com/credit-card-debt-to-include-in-settlement-plan/
So in the current charge off state, from a credit report standpoint, would it be better to pay it in full or take the settlement? If I do take the settlement, how long will that appear on my wife’s credit report. We are working to pay off all debt and close all credit accounts.
Thanks for the help.
Once you get to the point you are dealing with JC Christensen you will get no benefit from paying the full amount. You could not pay 10 times the balance and get anything other than a resolved collection. I typically recommend negotiating the lowest pay off possible. That results in the same thing… a resolved collection.
The negative will fall off her credit up to 7 and one half years from when regular payments stopped. But the negative will lose potency quickly once you resolve it.
We spoke yesterday about Debate Settlement with Navy Federal and One Main Financial. After reading information on your site, I really need to talk to you. I am interested in debt settlement.
Hi Deborah – I tried to reach you at the phone number I have for you. I could not leave you a message. Try me back when you are able.
Micheal ,I wish I can upon your website sooner. Its made me feel a bit more assured my wife and I made the correct decision .
I recently signed up a Debt Settlement Company (FDR) and established a plan to pay off our unsecured debt. of 61K over a 4yr time frame .
My wife and I are 67 and 70 years old and collect SS and I have a company pension. Our combined income is 60k a year. We still have a mortgage for another 15 years .
Unfortunately we are over our head and just getting by to cover all the debt and annual living expenses. Up until we decided to enlist in the Debt Settlement Program we have NEVER been late or missed a payment to anyone.. However In order to continue this method we needed to turn to credit cards over the past several years to fund family assistance and unexpected and non budgeted expenses.
Based on our situation to believe we made the right decision opposed to the other alternatives such as Bankruptcy?
Thank you for your website and time
.
In order to determine if settling those credit card bills is better for you, I would start with a bankruptcy consult about chapter 7. Check out this article about finding the right bankruptcy attorney for you. Get one or more consults under your belt. If you can qualify for chapter 7 without losing assets you want to keep, or that can be sold privately to fund your settlements, than bankruptcy will often prove to be the better solution.
If you can only do a chapter 13 bankruptcy, settling credit cards instead is often a better alternative, but I would not use the longer settlement programs that most companies sign people up for. Look for ways to fund your settlements much quicker. Post the credit cards and balances you owe. I can offer some more feedback about settling if you cannot do the chapter 7.
Hi MIchael,
I have a $11,834 credit card debt with Bank of America- the account has been charged off, but I am being sued. I called the agency 2 times to settle the amount but they offered to settle for %75 so I didnt accept that and I went ahead and took a court date- which is in 2 days- on wednesday, Aug 3.
Yesterday the law office (collection) sent me a letter saying call us to settle before court.
My question is- should I try again, or just go to the court? Do I have a chance to settle at a better rate at the court? I stopped paying the card about 2 years ago.
I would really appreciate your advise. Thank you!
You can sometimes settle prior to court. I would target 50% of the balance owed as realistic. Can you pull that together in a lump sum?
Thank you for your response.
50% would be really hard to come up with. I have 5,000 maximum.
So you definitely not advise going to the court?
My court date is tomorrow- I have about 51K credit card debt all charged off (long story, used by my (now seperated) husband. I have a 2,5 year old daughter to take care. If I cannot settle it today with the collection lawyer that BoA has, what is my chances to settle at the court- full amount? may be installments?
Also- do I need to open a separate bank account to pay them?
Definitely show up to court. You would not need a separate bank account to pay them, though that is something I encourage when you have more time to prepare and be deliberate.
Who are the other creditors you owe? This could just be the first of several lawsuits. Have you looked at how chapter 7 bankruptcy can apply to, and help you?
You can settle judgment debt later, but I would be more likely to want to try to delay this in order to regroup and focus on the right solution and not rush into settling just yet. It is possible sometimes to delay court.
Call me for a consult at 800-939-8357, ext 2, or reply to the email address you are getting these notifications from with your phone number and times that are good to reach you and I will call you, or reply with some alternative times if I am not available.
Hi Michael
Love your YouTube channel and website, THANK YOU! great information that takes the sting out of this kind of stressful situation.
Here is my circumstance. I have had an outstanding debt with JP Morgan/Chase since 2014 when my medical practice went bankrupt, I couldn’t meet my personal account monthly payment and CHASE did an account charge off in Feb 2014.
The current debt collector holds the remaining debt and I’ve been making payments since then. I’ve recently had major medical bills and am experiencing further difficulty making payments to the debt collector but haven’t missed a payment yet. My home was just refinanced this month to help lower that payment and better meet our medical bills.
I think I could pay 70% to 80% of the remaining debt if the debt collection company agrees. What are your thoughts and what concerns should I have about settling my CC debt. I am concerned about the taxes and how to calculate and plan for this. Any suggestions?
Settling your Chase debt for less can lead to tax implications, but for most of us, I say so what. Your saving money, and the tax you pay on cancelled debt (not all of us will have to), will still not add up to the full amount, so you come out ahead.
You should be able to come out way more ahead than settling for 70 percent of the balance owed today. Call me for a quick phone consult at 800-939-8357, ext 2. I will ask you some questions to see why you should not be targeting a much better deal.
Dear Michael,
this is Marya again – I am back after speaking with a bankruptcy attorney and then credit counseling. And ultimately, I feel that I just need to save enough to settle with at least my credit card debts and then move onto the loans.
My question is which accounts I should approach first and at about what time after delinquency.
Here are the suggested settlement amounts you sent to me before:
Nordstrom: $2400 (22%) 40%
Chase: $7166 (18.24%) 20% to 40%
Chase: $1444 (0% and then 23.24% after October 16) 20% to 40%
Discover: $5398 (0% right now, but I am not sure when it will be 25%) 50%
AmExpress: $3818 (20.49%) 50%
Dell: 992 (24.42%) NO
Crate and Barrell: $600 (22%) NO
Bloomingdales: $809 (25.49%) NO
Amazon: $3217 (26.24%) 40%
Citibank: $4359 (16.24%) 35%
BestBuy: $4039 (0 for 2.5 more years) 40%
Paypal: $3394 (not sure I think it’s above 20%) 40%
NIH Federal CU Loan: $16,194 (i think it’s 8%) 50%
LendingClub loan: $14,452 (10.38%) 40%
LendingClub loan: $12,185 (13.25%) 40%
Prosper loan: $6894 (14.97%) 40%
Barclay: $2433 (22%) 40%
TD Bank Loan: about 19000 (5 or 6%) 50%
I will be setting aside $2k per month starting at the end of July,so in 6 months I should have $12K.
This should take care of all/most of the credit cards.
But should I try to settle with any of them before 6 months (180 days)?
And if yes, which ones should I approach first?
Thank you!
You will want to call in for a consult Marya. I am at extension 2 when you call the toll free number at the top of the page. I am going to go over some strategies with you to include the loans at the same time as the credit cards, and lay down some priorities the way I would if these were my accounts.
I an not on the phones today (Sunday), but am in tomorrow at 7 am pacific time.
You can also email me to set up a time to speak on the phone. Just hit reply to any of the comment notifications you get from the site. That will come to me.
Hi Michael,
I will call you on Wednesday. Thank you!
Marya
Hello,
I am 24 years old grad student living in Canada, but I am USA citizen. I am just attending grad school in Canada because it is a lot cheaper. Anyways, I have 7 credit card total debt about $20K and personal loan at Discover $13K. Before being grad student I worked as a teacher. I quit my job and went off the grad school without thinking how much I owed… I managed about 6 months to pay my credit card with my saving and working a little. But now… I am at the end… I was thinking to do debt management plan and somehow I stumbled upon your site… so I am very confused where to go for help. Reading over your site made me think a lot. None of the options are appealing to me… I even thought of stop paying my debt and never move back to America for at least 10 years…. I won’t be jobless forever but I don’t know when I will be able to pay back all my debt… also, once I am out of grad school I have college loan to pay off… What can I do? Past few weeks I have been praying to win a lottery… I sinceely need your advice. Thank you.
Post a reply with who you owe, how much, and the interest rate. I can help you with some pros and cons about each debt relief option from there.
Thank you for your quick reply.
1. Amex- $2,000 (20%)
2. Amex- $4,000 (20%)
3. Barclays- $1,800 (0% until August 2016) (after Aug it is about 23%)
4. Capital One- $7,700 (20%)
5. Discover- $4,000 (15%)
6. Discover personal loan- $12,000
7. US Bank- $900 (20%)
Is debt management plan better? Or bankruptcy? Both options are not appealing to me….
past few hours I was thinking to pay some and toss some out… not smart idea but i have no way out… unless i hit jackpot and pay all at once.
Also, what is time-barred debt? From my research it is saying 7 years then the debt is gone… does debt ever disappear?
Let’s say I stop paying all my credits (or pay few) for 7 years I live aboard … then I come back America would my credit score very low….?
Anyways, I will be waiting for your reply.
Thank you for taking your time to help me out.
With your debt total of $32,400 assume your debt management plan would be 583 a month. Can you consistently afford that? If you are confident of that, read this series about working with a nonprofit debt consolidation company.
With those credit cards and balances, were you to stop paying and later settle each account, assume you will need 14k to get through it all. How long will it take to put together 14k? Most people save it up over time and settle one account at a time. But if you have a way to bring the money together quickly, you can mitigate risks. You are already reading the series about settling debts with creditors (the above article is part of the series), so continue on to the next piece linked at the bottom of the article.
If you can pull together $1,500, than chapter 7 bankruptcy will make a ton of sense for you. You can consult with an attorney about this more, but read this piece about finding the right bankruptcy lawyer first.
You do not have to file BK now. You could wait until you are done with school and back in the states, even though you may stop paying your credit cards.
Time barred debt is generally described as when the statute of limitations to sue you in a specific state has expired. California has a 4 year limit for example.
Negative items drop off your credit report after 7 and one half years.
If the debt is time barred, and also too old to be on your credit reports, it does not go away, but there is little that debt collectors can do to get you to pay at that point, even though they can still contact you.
Which option is better? Debt management or settle with debt collector later.
Some sites said debt management plan is helpless because credit score is messed up even after I pay the debt on time. But not paying all and pay later with the debt collector is still going to mess up the credit score.
Out of the two options, which one is better for long-run? I am only 24 years old So, I will be needing a good credit score in the future.
Also, will it affect getting gov’t student loan later?
I am not sure where you read about credit counseling messing up your credit score like debt settlement, but that is not true. Read more about how I compare the debt management plan with debt settlement.
If it is affordable and your income is stable I would look at consulting with a credit counselor and getting a monthly payment quote for debt management plan first. If it is workable, it will preserve your credit and should not impair your ability to qualify for federal student loans.
Settling for less can impair your ability to qualify for new credit until all the debts are settled. I have seen people get student loans with a few unresolved collections.
Michael,
Also pertaining to my previous question regarding the $13,000 debt to WF.
What do you think the approx.
Settlement offer should be?
Thank you,
Lee
There are different ways to negotiate with original creditors. Sometimes you start low and know you are not going to get this done in one phone call. Other times you target what you know the bank generally approves settlements for and get things done a little more quickly.
Your target to settle will likely be between 35 and 50 percent. Take that into consideration with the approach you use.
Michael,
The 3 loans my 27 yr old daughter has with WF are
1-5,263 104 days delinquent
2- 4,456. 46 days delinquent
3- 3,3354 45 days delinquent
I think the Third delinquent loan for 3300 is a credit card that she has had for four or five years the other two are only about a year to 2 years old.
She only has one other card for a little over a thousand to Chase she can manage that and a small balance on a Kohl’s card.
If Wells Fargo does not offer us a reasonable amount to settle…
My daughter wants to file bankrupt I hate for her to take this route at the early age of 27.
Due to these three delinquencies her credit score is at 540 right now.
With her rent , car and general living expenses she does not make enough money to pay these bills.
I am not in the position to help her financially.
What are your thoughts on any options that she might have?
Thank you so much for your time and help!
Lee
She should be okay. I am not a fan of bankruptcy either, but because of the amounts involved, not her age.
Assume she can settle with Wells Faro for 40%. That means filing chapter 7 over what could amount to roughly 5k.
She should look to save up money as fast as possible and settle with the recovery department at Wells Fargo once the loans and credit card are 7 months or more past due.
So…You do not think WF will turn the debts over to a 3rd party before at least 7 months?
Does WF typically turn debts over to 3rd party or do they keep their debts in house?
Correct, I do not see Wells Fargo doing early debt collection placement (before 180 days nonpayments) right now. They used to, and they could return to doing some of that.
Wells Fargo stopped selling debts more than a year ago. At that time I also saw them keep more accounts in their internal recovery too. This should change int he future as well.
Michael,
My daughter has 3 separate unsecured loans from Wells Fargo.
Total is, $13,000
She cannot afford to pay the debt.
2 loans of $5,000 ea. AND One at $3,000.
So far one of the loans is about 100 days delinquent when should we call the bank to try to negotiate a settlement offer on the one that is already 100 days delinquent and at that time should we try to negotiate on the other two or will we have to wait until each one of those are at their limit for the negotiation settlement time period?
Thank you!
Lee
Wells Fargo can be a bit difficult these days. I have seen them be tough to negotiating with for under 50% and also seen some deals get closer to 35%.
The later you get with payments the better the deals get (some of the time).
Wells Fargo is one bank that historically like to settle all of the accounts on file no matter if the other accounts lag in delinquency, and sometimes even if there were current. If you are prepared with the money to knock all 3 down at once… great. If they will not approve that then keep that money aside for when they do.
How recent are the loans with Wells Fargo? Has she been carrying the balances for a long time?
HI Michael,
Thank you for the help your providing and I have also seen your you tube videos. I am currently around $80k in debt. Just got into some bad investments and bad credit card purchased. I recently met with a bankruptcy attorney but a chapter 11 (did not qualify for Chapter 7) would be pretty much the same payment (minimum) I am paying now, I will only save $500 with fees. I am looking for a debt consolidation possibly or settlement. I spoke to Freedom Debt Relief but I am scared of getting sued. I have read some bad reviews on them. I am willing to pay the debt if I could only lower the monthly payments to half or less. My job is stable and could make payments.
Thanks,
Give me a call for a quick consult about your situation Rolando. You can reach me at 800-939-8357, option 2 rings to me. You can also fill out the consult request in the right column of any page on this site.
I can help you determine how low your monthly payments can be set, or how much risk there is if you opt for the settlement path.
Hi, my wages are being garnished $508. why would the debt collector not tell me who owns the debt. I did a little searching and it’s another collector / attorneys in another state, the collection agency says their client wont accept my payment plan offer. I tried calling the owner of the debt and they wont talk to me, said I need to speak with the collection agency. just so frustrating. I know I might be doing wrong. asked to speak to the collector’s supervisor, told her to offer a little more, said they will call me back with answer from their client. I have provided information of three loans I have. I had asked for (2)of my car payments to be moved to back of loan and I need to pay with this paycheck my car and insurance. after I pay only things I now owe. I am left with $100 for rest of month. should I do the exempt paperwork. I do not have children.
Debt collectors are not typically flexible when they are garnishing. I would definitely contest the garnishment as causing a hardship. If you are successful with this in the court, whether fully or partially exempt, you could then seek a better resolution to the debt. You might even try to do that right after you file to contest it with the court, but before the hearing.
Hello, I consider myself at a bit of a crossroads with one old credit card hanging over my head from college. I reviewed my credit report and the card has a status of closed-charged off. I have a remaining balance of $868 and it also lists a late payment amount of $350. The date of the first delinquency is 07/2011. My last payment was 05/2012. I am receiving letters now from a third party debt collector to settle this debt for less than the balance owed. I am wondering how to handle this situation. I understand that this card will likely be off of my report in 7 years. Which if it is calculated from the date of first delinquency would be in 2.5 years, 07/2018. Is that the correct calculation? If that is correct, which would have more positive or negative impact? Me settling the debt for less than the amount owed or me letting the debt hang around for another 2.5 years? I am in the process of repairing my credit and I feel like this is the greatest blemish but because of the age I am not sure what’s in my best interest. Any advice you can provide is greatly appreciated!
If that first delinquency was a blip, and you brought the account current after having missed a single payment, the date to count from would be later than that, and perhaps the May 2012 date. You will want to work with the assumption that the negative will stay on for 7 and one half years.
You can wait for the collection to fall off your credit reports without resolving it. Your score will increase and you will be able to make progress on financing goals. If you settle the collection for less now, that will get updated to your credit reports, but may/may not move your credit score up immediately. Your credit score will improve in a short while. The main reason to settle now would be to achieve certain financial goals, like getting a home loan.
Are you looking to improve your credit to accomplish a specific goal in the next 3 or so years?
Thanks for the quick reply Michael! I would be looking to purchase a home in the next 1-3 years. Surprisingly enough I recently got a car loan from my long term bank with 3% interest. So I am assuming this blip didnt hurt me too much with them. But the auto dealership sent apps off to other banks and I received a couple of denial letter referencing this account being an issue in their decision.
If I was to apply for a mortgage is it important for me to have this settled and not exist in the current status?
You definitely want to have the charge off showing as settled before you apply for a mortgage. If it were me I would settle it. It boils down to a few hundred dollars that will stand in the way of buying a home.
Hi MIchael,
I came across your website while googling debt settlements and followed a link to this site. Here’s my situation:
– A Citi card credit card with a balance of $6916 – charged off 07/15, I received a letter from United Collection Bureau on 9/15 offering to settle for $3000
– A Citi card credit card with a balance of $1966 – charged off 08/15, I received a letter from United Collection Bureau on 2/16 offering to settle for $865
– A Barclays credit card with a balance of $4131 – charged off 12/15, I received a letter from Northstar Location Services on 2/16 offering to settle debt for less. (Doesn’t give amount)
– A Barclays credit card with a balance of $1416 – charged off 12/15, I received a letter from Northstar Location Services on 2/16 offering to settle debt for less. (Doesn’t give amount)
I believe both agencies are working for the credit companies and have not bought the debt.
I haven’t answered any phone calls or mail from them, and the calls seem to have dropped off.
Besides that I have a car payment due on the 16thof every month for about $345 that I try my best to keep up with. I live alone in NY and have a mortgage of $2500/month, student loan of $122/month a discover card with $2358, I’m current on making payments of $60/month. I’m still employed and bring home $4000/month after taxes, but basically I have been out from work for 2 years do to a progressive life threatening medical illness and treatments, which is why pretty much all the credit cards I fell behind on are charged off. My credit score is all ready low 500’s,
My tax return this year should be about $10,000 and want to use that to try and deal with the collection agencies.I have been all over the internet and reading the crazy debt forums, I’m not looking play the Validate debt dance or pay for delete or dispute charges. If I could deal with credit card companies directly on this I would, and I would try and pay it all off and re-establish my credit. But if I have to deal with collections, I figured just try to settle and keep some money in case of emergencies.
Basically I know my credit score is all ready low and every thing is recent I just want to clear this stuff up/ avoid any lawsuits and move on, to be honest. I don’t expect to be around anyways for when it comes off my credit report.. I was wondering if you thought settlement was the way to go, have you dealt with any of these collection agencies before and what should I reasonably hope to shoot for and will the collection agencies deal with multiple accounts at one time or do I have to do each one card separately. And when I do call these collection agencies, I was wondering if I should keep my illness and it’s situation to myself, I’m not sure if it would work for me for settling or make them go to courts faster.
Thank you very much in advance for reading my lengthy comment and responding.
If I were working your file as a negotiator I would definitely make reference to the medical hardship. It plays to your strengths (hard to believe I know). I think you can get a little lower with UCB, maybe 35%. I would target 35 to 40 percent with Northstar on your Barclay accounts.
You will be dealing with the debt collectors. I would wait to call until you have the money in your bank account.
You can negotiate both accounts with each collector at the same time, but the agreement letters they send will often be separate.
Get your settlements in writing.
Use your bank account to pay the settlements if you like.
Hi Michael, I just called Citibank to verify who has the debts and apparently the larger citi bank card $6916 is now with United Recovery System, haven’t received any info or letters from them. I was just wondering if you have dealt with them before, n if it changes the settlement % you told me to shoot for?
I appreciate any input you can give, hope you have a Happy St. Patrick’s Day!
My target would be the same now that you are going to be negotiating a settlement with URS.
Hi Michael, just called Barclays to verify who has the debts and immediately switched over to Enhanced Resource Center in Fla., they verified correct debt amounts and ending account numbers. Went into a little about my hardship but did said I was employed, and asked them to send me letters concerning the accounts, do to my lack of good hearing from treatments. I gave them a number to reach me at and verified my address, they have had the account since 3/1/16 wouldn’t say how long they have the accounts til, no offers or anything made by me or them on the phone. Does this change on what to shoot for % wise for settlement?
Not really. The longer Enhances Resource Center has the account, the more reasonable the settlement outcome may become. But try to knock the deal down before they lose the account. I would try to work something out by end of April or May.
We had a foreclosure on our house by BECU on 2010, due to the 2008 crisis. We have a judgement, and arranged payment plan for 15 years for about 45K. We have paid about 8K of it in 3.5 years according to the plan. So we have 37K left to pay by 2027. We have no other debt. We would like to negotiate a settlement because the weigh is just too much on us, but we are not in a situation to pay the full amount.
What amount can we shoot for? I know the credit unions are not open to negotiation, but I assume they would want to have a lump sum pay than waiting for another 12 years.
Settling with BECU on a judgment can vary. I cannot offer a very optimistic target when someone is showing the ability to make payments like you are. If you stop paying you risk the extra collection efforts judgment creditors have… that we all would prefer to avoid.
Do you have any other unpaid collections out there?
Are you paying other bills, like credit cards, or a car loan on time?
Can you raise half or more of the balance owed quickly?
Thanks for the prompt reply Michael!
We have no other unpaid collections, We use credit cards, and pay the full balance at the end of the cycle. We are leasing a car. The house was on my husband’s name only. We can raise the half of the balance, but not the whole amount, as we are living in the most expensive area in the US. We don’t want to stop payments, but settle the debt by paying a reasonable amount. The house was on my husband’s name, but the judgement has me as spouse (as far as I understand WA law includes the spouse). His credit score suffered due to bank’s reporting; I have excellent score.
I think I was using the term wrong, We want to close the debt. Because we already had signed an agreement to pay it in full in 15 years, and have been paying a fixed amount the last 3 years.
Give me a call to go over some additional details and I can offer more direct feedback. You can reach me at 800-939-8357, option 2 rings to me. You can fill out the “talk with Michael” form in the right side bar too. That will allow us to communicate through email.
Hi Michael,
I came across your youtube videos (which are very informative!) and followed a link to this site. Here’s my situation:
– A Bank of America credit card with a balance of $3246.37 – since October (various people from) Sunrise Credit Services, Inc. in Farmingdale, NY have/has been sending me correspondence.
Mail dated Oct. 7th “When You Receive A Collection Notice…” from “Mrs. Silva” gives info on what happens next, no payment options detailed.
Mail dated Nov. 19th from Joe Thomas, offering to accept $200/month if I respond within 90 days.
Mail dated Dec. 8th from Regina Tabone, offering to accept $50/month if I respond within 90 days.
I haven’t answered any phone calls or mail from them, and the calls and mail seem to have dropped off.
– An American Express (Costco) credit card with a credit limit of $1,000.
Mail dated Nov. 22. A notice from “Central Credit Services LLC (Formerly Veldos LLC)” in Ramsey, NJ stating that they’ve been requested by AmEx to assist them in the collection of $1,024.64
Credit card statement from AmEx. Statement closing date Nov. 24 with a $1,073.93 balance (previous balance of $1,024.64 plus a $38 late fee on Nov. 19th and $11.29 interest on Nov. 24th – the statement close date).
Mail dated Jan. 28. A settlement offer from American Express. Balance owed: $1,160.39, settlement offer: 60% of balance owed, $696.24. The expiration date for the offer is/was Feb. 22 and I meant to send them money before it expired. They’re asking 60% of the balance owed over the next 6 months which would be $116.04 a month.
– A Wells Fargo credit card with a total credit limit of $5,100. I’ve been a member of Wells Fargo since 1994 (when I was 7 and my parents opened account for me), and I’ve had this credit card since I was 16, over 10 years ago. In March 2015 someone stole my wallet and used every single one of my cards. I reported them all stolen and got most of the charged refunded. My Wells Fargo credit card was one of those accounts. But the bank itself wouldn’t reverse the $975 charge to my debit card/checking account (which overdrafted my account and all of that fee ended up coming from my credit card anyway), so after being told I’d have to pay that amount, I decided I didn’t care about paying down the balance, which was foolish of me. Every so often I would send them a little bit of money to appease them, which I now realize was also maybe not the best route to go. Before this fiasco I legitimately owed about $3,790. I currently have an outstanding balance of $4,735.08. I paid $158 on Feb. 1st, am past due $155 which was due Feb 15th (and have since had interest of $66.01 and a late fee of $35 added – I’ve gotten a late fee every month since March 2015), and they’re asking for $304 by the next statement close on March 11th.
Besides that I have a car payment due on the 3rd of every month for about $401 that I try my best to keep up with. I had only about $250 income for all of 2015, and for 2016, I’ve been making and expect to continue to make about $500/month.
Thank you very much in advance for reading my lengthy comment and responding.
Can you raise money to offer lump sum settlements on one or more of your accounts? Here is what settling with BofA, Wells Fargo and AMEX might look like:
The collection agency with your BofA account will often settle for 30 to 40 percent of the balance owed. Done correctly, and given the right set of circumstances, it is possible to settle this account for less than 30%, you can call for a consult and get into the details of how that might work.
It is unfortunate that Wells Fargo treated you the way they did with your debit card. I would typically suggest you file a complaint against Wells Fargo with the CFPB. If it were me,and the credit damage from Wells Fargo had already begun, I might move in the direction of settling with Wells Fargo, for say 40% of the balance.
I would call Amex and let them know you want to make a settlement deal, but cannot raise that much (or commit to that high a monthly payment toward the settlement), but could work with them if the amount was, say 10 percent lower. Get that newly negotiated deal in writing before you make a payment.
You can only do what you are capable of financially. If you cannot raise the money to fund settlements, it just is what it is. You will be dealing with different debt collectors along the way, and there will be opportunities to settle these accounts and rebuild your credit as you go.
I likely have a page up about any debt collector you may here from moving forward. Use the search box in the upper right to find those pages and read up on what settlements and negotiations are looking like with each. Post comments and concerns and get feedback along the way. If you cannot find details about a specific debt collector you are hearing from you can start a new page about them using the Ask Michael feature at the top of the page.
Given the relatively low amounts involved, and your age, I would not suggest bankruptcy right now.
If you want to find out if your accounts can be consolidated to a lower monthly amount, with fees and penalties waived, call 800-939-8357, press 1 when you here my voice start in with the menu. That will connect you to the largest nonprofit in the country who can consolidate your bills in many situations. The call is free and friendly. You are mainly looking for that monthly payment quote in order to determine if it is affordable.
I just talked to chase to make arrangements to pay my credit card debt. I have 2 cards with chase totally 20,000. The only option they gave me was pay the full amount over a possible 60 months. They wanted to do an application over the phone but I refused because I can’t pay the full amount because my payments would be almost as much as I am paying now. I am 60 yrs. old and cannot pay that amount in retirement. I can’t afford to pay any amount in retirement. I wanted to pay it off at a half the total amount in 3 years. They said they didn’t have that option.
How many months late are you with your payments to Chase? From the sounds of it you are not behind enough for them to discus settlement options.
When you do get to the point of being able to negotiate, Chase indeed has no plan that allows for a reduction of the balance and 3 years to pay. But there are often going to be settlement targets far less than 50% that will play into your planning. Call in for a quick consult if you like. You can reach me at 800-939-8357, option 2 rings to me. I am on the phone a lot, so be sure to leave a message and I will return the call.
I am not late on any payment. I have not paid any principal on one of my cards in several years. The balance has been the same. My concern is that I definetly will not be able to pay my minimum payment of $256.00 in retirement in the next 3-4 years. I believe their 5 yr. payment plan will be even higher.. My balance is 13,000 on one card and 6,400 on the other. I have already paid about 9,000 in interest in 9 years on the 13,000 card. My interest on that card is 129.00 a month and 95.00 on the other. I cannot pay a lump payment settlement either.
Watch this video about entering into retirement with affordable debt that I published last month.
Post your thoughts in the comments of that video, or in this comment string, and lets go from there.
I am currently $42,000 in credit card debt. I have a special needs son and was recently diagnosed with SLE and lost my job. We pay a $1,000 a month in payments if not more… we are currently current. I was thinking about stopping payments… and then starting to settle one card at a time with that payment money. In a few months the promo interest rates will go up and we will no longer be able to afford them. I do not want to file chapter 7, I want to do what I can to pay off this debt. Is it better to let them go into default first?
It is typically not a good idea to let accounts go into default if you can avoid it. You may still be able to, but call me for a consult about your over all situation at 800-939-8357, option 2.
If settlement is your path to resolving your credit cards, than yes, you have to be in default several months before you can typically have any meaningful discussion with creditors about them accepting less than what you owe as payment in full.
My family had a bit of hardship which ran up my cards and I was unable to make min payments. It was a capital one card and my balance is almost $23.000.00. About a month ago I was telling them that I was going to get some money and could possibly make a payment. The wanted to settle for 13300.00
I have come up with 12,000 but now they have sold my debit to theBureaus Investment Group Portfolio No 15 LLC and they are using Stoneleigh Recovery Ass. LLC to collect. When I called the first time the person on the phone told me the best they could do was like 16,500.00. So I asked them to submit my offer of 12,000.00. I was told to call back the next day which I did and now I am taking to account rep that is assigned to my case has told me the best offer is 19,000.00. I owe other creditors money which none of them I am late with. Should I use my funds to pay other creditors since they dont want to give me much of a setttlement? f they were to sue me what is likley the judgment amount will be the entire balance.
Unfortunitly this account rep and my wife went round and round as they made there first call to her before I had called them. They were trying to stong arm her and she does not take that from me or anyone. He used bad lanuage which she returned. So I am woundering if this may have turned a little personal. So looking for advice on how to handle this matter
I am optimistic you can still settle the account for half. But you do raise a good question about whether you should focus on resolving other debts. Give me a call to go over your creditor specifics and I will help you prioritize your accounts. You can reach me at 800-939-8357, option 2 rings to me. I am on the phone a lot, so be sure to leave a message. You can also email me directly and set up a time to talk. My email is the address you receive these comment notifications from.
I could not find a coment notification in my email to email you. I am still struggling with collection company. They have moved me up to speaking to a supervisor who wants a call back from me tomorrow. The offer is now 18,000 and I can spread it over 6 months. I have stuck to my inicial statment that I could pay 12,000, but they will not take that offer. Of coarse they are getting reall pushy about me sending them a payment which I have refused to do. In my last post i told you I had other creditors that although I am current on i do have a sufficient balance. Do you think using the other creditors as leverage, is a good stratgie to tell collections that maybe I will pay them with my 12,000.00 to help push them to make a deal.
I am thinking taking the 50% to 60% settlement as my credit has already been hit for late and non payment. Is there any advantages for me to pay the entire balance to collector at this time as I have already done the damage? My thinking was to take the settlement as it will help me get out from under this debt I have got myself into.
I have to call the collection agency back tomorrow and just not sure what to tell them.
I only use other unpaid debts as leverage when negotiating. Bringing up credit card bills that are current does not have the same affect. It often makes you look like more of a collection target.
I put up a video about settling charged off debt while trying to limit credit report damage a couple weeks ago. Give that a watch as it will answer you question about the benefits of paying in full, or for much less.
I would target a much lower settlement. I am available to call at 800-939-8357, option 2 rings to my desk. The email notifications only come if you check the box to receive them before you submit any one of your comments.