Short answer
A verbal agreement is not a settlement. Get the deal documented in a settlement letter, check that the letter contains the items that protect you, and only then send money. Paying off a settlement without a written agreement is a mistake you will regret if the account resurfaces later.
Key points on this page
- No deal is a real deal until it is documented and then paid in line with the terms in the letter.
- A settlement letter should show the creditor or collector name, the date, your name, your account number, the amount accepted as settlement, the payment terms and due dates, and wording that the account is settled or satisfied in full. If any of that is missing, ask for a new letter.
- Never release payment information to a debt buyer, or to a collector working for a debt buyer, without documentation in hand.
- Some large banks will not release a letter until payment arrangements are set up in their system. That is sometimes acceptable with an original creditor, and only in limited cases with a collector working for one.
- Schedule the first payment far enough out for the letter to reach you, 10 days or longer. If it has not arrived 72 hours before the payment processes, demand a fax, and be ready to walk away with the funds out of the account.
- Keep a copy of every settlement letter, including the deals a professional negotiated on your behalf.
We just discussed how to negotiate debts successfully on our own, but that doesn’t close the deal…yet. Negotiating debt and paying the new agreement requires a settlement letter. In the wacky world of debt collection, debt buying, and credit reporting, paying off a debt you settle without having a documented agreement, is a mistake. And one you will regret later on if the credit card you thought was settled (other types of debt too) resurfaces in a way where a written agreement to accept less could show the account was resolved, instead of the headaches you may go through without one.
NOTE: This post is part of our Debt Settlement Guide. If you’ve missed any of the previous content, or would like to start at the beginning, please see the links at the bottom of this page.
Reaching the point where you have a verbal agreement to settle and pay off a debt for an amount you can afford is exciting, and a relief at the same time. You must be careful not to lose sight of what are still critical concerns before celebrating your success. This information will help you focus on crossing the debt settlement finish line with confidence – when your success is documented.
A Verbal Agreement is Not Enough
When you’re negotiating directly with creditors, your settlements are generally going to be reached verbally first. The verbal agreement will be for a set amount of money either paid all at once, or paid by making several installments over a set period of time, until the settlement agreement is met. It’s important that you understand the deal is not done until it is documented and fully funded, consistent with the terms and payment timelines laid out in a debt settlement letter.
Verbal communication with creditors and debt collectors are a necessary part of the debt negotiation process. How and when to communicate with creditors and debt collectors to negotiate with them is covered extensively throughout this site. Ongoing communications over the phone with your original creditors and debt collectors can progress until you have the money you need to settle.
You should not attempt to negotiate an account, or offer a settlement amount, until you have the targeted dollar amount you need to fund an agreement. It makes little sense to start negotiating a settlement amount if you don’t have the money to pay. Just making calls to “feel out the situation” wastes everyone’s time and could hurt your efforts later.
Your targeted settlement amounts will be different from one account to the next. If you’re working with someone in the network, you’ll be able to set realistic settlement percentage targets, timelines, and goals using real-time data about your creditors and the debt collectors involved.
If you are a DIY reader, be sure to participate in the comment sections of relevant page topics in order to get feedback about timing and targeting for your debts you are looking to settle. The comment section at the bottom of this page is the perfect place to post questions about a settlement letter you have received, or what you could do if you’re having a hard time getting one sent to you.
Reviewing Your Debt Settlement Letters
Reaching a settlement agreement can take one phone call, or it may take several calls over a period of days, weeks, or even months. When a deal is struck, you know that no deal is a real deal until it is documented, and then paid in accordance with the agreement.
Debt settlement letters with original creditors and debt collectors are typically a standard form that will consist of the following:
- The creditor and/or debt collectors name.
- The date the letter was drafted.
- Your name.
- Your account number.
- Outstanding balance owed on the account (this is sometimes missing and is not a deal breaker).
- Amount that is being agreed to as settlement and satisfaction of the debt (less than the full amount owed).
- Terms and amounts of payments to be made – if you are settling the account over a period of time – instead of with one lump sum.
- Date your payments must be received by in order to have met the settlement agreement.
- The settlement letter must reference that the account being satisfied in full i.e. “settled”, “settlement of this account”, “accepted as settlement in full”, “paid in full”.
The letter will have other general information, such as disclosures about settling debt. Creditors and collectors put this information in to cover themselves. The bulleted items above are what you want to see in a settlement letter to cover yourself.
Settling with a third-party debt collector means you must get the above details documented before remitting any payment towards the agreement. If the above bulleted items are missing from your settlement letter, you should request a different letter be sent to you that meets the above specifications.
Watch this quick video about debt settlement letters:
Setting Up an Agreement Without a Letter
Some of the large banks will not release a settlement letter to you until your payment arrangements are set up in their computer system. They will request that you give them specific electronic or ACH payment information over the phone first. Should you agree to this? Yes, in some instances.
If you’re experiencing a creditor or collection agency holding back sending you a settlement letter, be sure to post about that in the comments below to get feedback about how each one of your creditors deals with this prior to settling, or negotiating your agreement and setting dates for payment. This way, you know what to expect beforehand, or can navigate the negotiation and settlement process of a specific account with more confidence.
Schedule your first (or only) payment for a future day that gives enough time for the settlement letter to reach you by mail. 10 days or longer would be best.
- Make payments on the settlement from your bank account that you set up specifically for saving and funding the agreements.
- If you do not receive the settlement letter within 72 hours of when your payment is scheduled for processing, you can call and demand the letter be faxed to you, or the funds will not be available in the account.
- You should be prepared to walk away from a deal if you do not have documentation in hand before the payment date. As a caution, be certain you don’t have the funds in your set-aside account on the date you set up a payment – if you are walking away from a deal.
Providing information and setting payment dates in advance of having received a settlement letter is usually only an option I consider when dealing with original creditors, and in some limited instances, debt collectors working for your original creditor.
Do not release payment information to debt buyers, or debt collectors working for debt buyers, without documentation in hand.
There are some instances where I will recommend you record a phone conversation about agreeing to settle a debt. I always encourage you to tell the debt collector that you are recording the call and why (they refuse to send you the agreement in writing before payment is set up).
Receiving Debt Settlement Letters Via Fax
Technology has provided many conveniences and cost savings when communicating important details that require documentation. Documents can be emailed with the click of a mouse. It may surprise you to learn that banks and collectors do not readily take advantage of technology advancements. You will find that many internal recovery specialists (bank employee debt collectors), and outside debt collectors working for collection companies, are not allowed to email anything to you. One way to work around the delays of getting settlement letters mailed to you is to get them faxed to you.
If you do not have access to a fax already, you can set up a virtual fax service. This would give you a 10 digit fax number that others can send documents to, and you can receive the faxed documents as attachments to an email, or receive an email notice a fax has been sent to you to log in and download, or print.
One of the services I recommend to receiving debt settlement letters via fax is eFax.com. The cost of an efax account, or similar virtual fax services is low. Setting up a way to receive faxed settlement letters is worth the cost when dealing with time-sensitive communication and funding of settlement agreements you’ve made. Getting the settlement letter faxed the same day is especially handy if you follow some of the “end of month”, or “end of collection agency contract” strategies that I lay out on this site, and other personal finance sites.
Working with a debt settlement company, or a professional negotiator, should not mean you let your guard down about getting settlement agreements documented and in your hands. Just because someone else is handling the heavy lifting doesn’t mean you should not be concerned about having copies of all settlement letters. Be sure to get a copy of all debts that have been negotiated and funded from any professional you work with as each of your debts are being settled.
With business trends for electronic data storage, and the fact that computer systems can crash, physical documents this important should always be in you possession.
Conclusion:
Negotiating and agreeing on an amount you will settle a debt for is primarily going to be done over the phone. Once you have a verbal agreement, it must be followed up with documentation. The settlement letter should meet certain requirements before you remit payment in full, or make a partial payment. If you do not receive a settlement letter, or a letter does not include what is standard information to protect you, it’s okay to walk away from the deal. You can receive settlement letters via fax and mail (sometimes even email). No settlement letter means you don’t have a deal. Keep all settlement letters in a safe place with all of your other important documents.
Almost done. The final step in our Debt Settlement Guide is paying debt collectors after the negotiations are done.
If you have questions about your settlement agreements, please comment below for dedicated feedback, or call 800-939-8357, ext. 2 to reach me directly.
This Debt Settlement Guide includes:
An Expert Guide to Credit Card Debt Settlement
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 (you are here)
Paying Debt Collectors After You Negotiated a Settlement
Also, $3,000 is less than the balance owed although the amount garnished and the $3,000 offer would be close to the amount left on the original contract. I do not know how much they sold the vehicle for but there was a credit on our account of $2,500 or so. The balance owing is interest and attorney fees to the best of my knowledge.
Okay. If I were in your shoes, and had already paid the attorney to progress this far, I would hold tight. If the deal is not completed in the next week or so, post an update.
Are you under the gun with a closing date or anything like that?
Hello. My husband and I are trying to buy a house but before we can close we have to settle and release a judgment. We hired an attorney who drafted an agreement that included a signed agreement date and deadline for release. Our attorney said the other party accepted our offer but the deadline has passed and we have not received a signed agreement. In the meantime, we are still being billed by our attorney. Do we walk away from the deal?
By the way, the judgment is 7 years old. My husband is 71 and I’m disabled.
Michelle – Who is the judgment creditor, and did the deal involve a single lump sum payoff for the judgment that is less than the balance owed?
Fireside Bank was the original creditor for a vehicle we voluntarily had repossessed in 2007. We lost our home and vehicles because we lost half of our income. Cavalry Portfolio filed a judgment against us in 2007 and has since garnished my husbands wages for approximately $8,000. The garnishments stopped and we thought it had been settled at that point. When we tried to purchase a home, the judgment could not be released because Cavalry did not report any payments and refused to release because they said we still had an outstanding balance. We hired an attorney to get a lump sum settlement which in an email, they agreed to accept. They did not sign the agreement letter served to them by our attorney which had a deadline of January 29, 2014.
I have an old utility bill that I would like to pay off. The date the first delinquency was reported was 4/2009, the account has had no activity since then. However on my credit report it is showing as an open account and the date it was last reported was 12/6/2013 (it’s hitting it every month). My question is this…I contacted the utility company directly and they offered me a settlement of 20% off my balance. I currently owe roughly $900.00, with the settlement offer I would owe $771.00. I asked for an agreement, letter, statement, etc. stating that once I paid the 771.00 my account would be settled. They stated they did not and could not provide any documentation once I settled my account. I don’t feel comfortable paying this much and not receiving any documentation, I’m not sure what to do.
Janel – Who is the utility company? What state do you live in?
I have a debt that I’m trying to pay off. I offered them the amount in full if they would remove it from my credit report entirely – they said they couldn’t. I then offered to pay off the bill in full if they would list on my credit report “paid in full”. They said that they would do this, but that they could not send a letter agreeing to it before hand. I’ve read everywhere that you need to get it in writing before making the payment. They said they would send the receipt after the payment, but that was all. They said they were under regulations and could not send out the letter. The amount is for a medical bill for roughly 3,500.00 and was collected 4 months ago. What should I do?
Will – I do have feedback to offer, but want to be sure I understood what you shared. Did you pay the 3500.00 4 months ago, or you have made no payment at all, but are ready and willing to?
I have made no payments but I’m ready to.
Okay. Do not expect any benefit to your credit report from making monthly payments on the collection. But you mentioned being ready to pay in full, and taking that route, any furnisher is required to send only accurate, current and complete info to the agencies. They are not doing you a favor, they are doing what is required. It can take a month or two for all of that. But you want proof of payment and a letter agreeing to same (or a receipt). This way, if the collection agency does not update the credit reports, you can do that with your own dispute.
I have the money to negotiate the collection balances and have called, but the company is unwilling to negotiate a reduced rate. I didn’t expect them to but now I want to know if I do pay it in full, how will it get removed from my credit report or how will a “collections paid in full” status effect my score? Is it worth paying it off if it will stay on my report for another 7 years. Or should I try to get them to remove it? Thanks for the advice.
Alicia – It would really help to know more details about the type of debt you are trying to negotiate and settle (credit card, medical bill, deficiency balance), how long the bill has gone unpaid, etc.
Paying an old debt in full does not generally get it removed from your credit reports. But anyone reporting must furnish accurate, complete, and current information. That means updating the debt is now zero balance. That is often as good as it gets. But it does not give a new 7 year clock to the negative info. And some credit scoring models no longer factor in paid collections (Vantage has one model, hoping FICO offers a similar model soon too).
Thank you for the response. I have one collection balance since 2008 for $667 (unwilling to settle or negotiate), another is a cell phone bill of $305 and is a year old, dish network for $366 that is 3-4 months old and a medical collections for $100 that is 4-5 years old. I plan to pay them off soon and have the money to do so, just wasn’t sure how the collections paid in full would effect my credit score. Once I pay the bill off can I ask for a letter that the collection balance has been paid in full and what should be an acceptable time frame for me to rec’v such letter? Thanks for your help.
Alicia – You would get the most from paying the accounts that went into collection in the last couple years. You should be negotiating your settlements and payoffs first, getting that agreement in writing, before sending payments of any kind out (in most collection cases like you have). If there is any debt collector you struggle with, post an update comment here for feedback.
Thanks again, I will visit the credit union and pay the amount due next week. It will feel right to pay them what they are owed and move on. I will look into the required form for the title and work on that. If I’m able to sell the car, I hope to donate the proceeds to charity after reimbursing myself.
Will it take 7 years for my credit to improve?
Yolanda – Negatives like this car loan tend to have the biggest drag on your credit report when they are fresh. If your credit looks good besides this loan, than the sting to your credit score should diminish in the next 12 and 24 months once you resolve the balance being reported to zero.
Thank you for responding, good advice is hard to find.
Ok, so I can make an offer of 65-75% of the $2100 with this amount satifying the debt but not deleting the info? That would be fine, I just want it to show paid and move on by starting a to improve my score. My score is currently at 697. I checked the value of the car, which is currently at $7,500.
I paid the mechanic $800 and renewed the tags $65. I gain possession of the car 3-4 months ago. The co-signer agreed that I should have possession if I paid mechanic. The mechanic contacted me after he held the car in a demantlrd state for so long. I have a signed notarized document from the co-signee. Is it legal?
Thanks again!
Yolanda – I tend to target settlements with credit unions at a higher rate in general. Given the debt is secured by the car, and they have title, settling this and getting title released could mean getting them to accept the balance owed, but waiving fees and the like, is as good as it gets. It is not like you can dig in and work to show the car could not be sold for what is owed. They can estimate the value and see that repossession in this case likely means getting paid the loan balance, the fees, and repo costs.
You should not have any problems with the cosigner docs, though you may need them to sign off on something more state DOL conforming, but that is for titling after the credit unions security interest is removed. If there is something unique to be done by the credit union when sending title, they would be able to speak to that, or you could call the state department of licensing and run down the scenario and ask them what you will need.
Sorry, the credit union was never able to repo the car because it was dismantled. Now, it’s back in working order. Is there a way I can request the title released to me?
Yolanda – You will not be able to get the title released to you with a balance still remaining due on the loan. Depending on the circumstances, you would not be able to get it released to you at all, as the cosigner.
You will not be able to offer the money in return for the removal of the late pays on your credit report in most instances like you have described. Often the best you can do is to resolve the debt and get the fact that zero is now owed updated, and then let time heal the credit score.
Do you know what the cars value is today (regardless of what is still owed on the loan)?
Hello,
I co-signed on a car loan, and, it defaulted. I contacted the creditor and found the amount owed is $2,700. My credit report shows $2119 as the amount due, but the original amount defaulted was $1800 but the account incurred fees. I want it to show paid on my credit record without paying the $2,700. The creditor has been posting a FP monthly for the past 12-16 months and I didn’t realize this. The credit union has not made an attempt to collect. I called them for the balance. What is a fair amount to offer? I have no special financial circumstances other than I didn’t feel the debt was mine and failed to think of the affect on my credit. Please offer your advice!
Hi Michael,
I came across your website and actually settled with LVNV this afternoon. They transferred me to Northland Group to do the settlement and I did ask for a letter to be emailed before I pay the settlement. The letter lists all the information that you mention except it does not say paid in fill. However, it does say that a letter will be sent stating that this account has been resolved. This is a one paragraph simple letter that looks like it was typed by the gentleman that I spoke with. Is this letter ok or should I have them add the” paid in full” to it?
Thank you for your time!
Chelsea – Reference to being paid in full is not necessarily something to get hung up on. Does the settlement letter from Northland Group reference that you are settling in anyway shape or form?
Hi Mike,
Your post have been really helpfull. I have a question , I am trying to setlle a debt. The debt is with cavalry and a company called Glass mountain Capital called me and mentioned that cavalry is thier clinet. They sent me a settlement offer letter by email. It has my account information and it lists cavalry as thier client. First of all can I work with Glass mountian capital if yes is this letter through email good enough or should I get a letter faxed to me?
I will be happy to share the letter with you if you want to review it.
Thanks
aflac – You can send a copy of the letter to the email address you get this comment notification from. I will post my feedback in a comment reply on this page, or may email you with additional questions.
Mike,
I sent you the copy of the letter. Please let me know
aflac – I sent you an email this morning with my feedback. Great settlement offer with significant savings. Glad you are in a position to take advantage of it.
Hi Michael,
The payment was made on time and Glass mountain capital has sent me a letter showing a $0 balanced due. Wanted to get your opinion on this. Would you please mind reviewing the letter?
Thanks
Aflac
Sure. You are welcome to email me, or call me direct at the number in my sig line from our prior emails.
I have sent you a copy of the letter.
Thanks Again
Aflac – I reviewed the Zero Balance Letter you received from Glass Mountain Capital. The letter looks fine to me. It is becoming more common, and even standard operating procedure, for collectors to provide those types of letters after an account is resolved.
It is worth mentioning, at least for future readers, that I see your experiences with Glass Mountain collections (the parts shared with me) as exemplary of fair collections practices.
There is a great deal of change coming to debt collection in 2014 resulting from CFPB rule making that is yet to be fully outlined. I expect legitimate collection agencies and debt buyers practices – regarding documenting settlements and payments – to be much more consistent with your experience.
Thanks so much again for your advice and time. Now I need to make sure that my cavalry balance shows up as zero in my credit report and I will do it
I typically suggest waiting up to 60 days to check your credit reports to be sure Cavalry updates the balance they are reporting due as zero – unless you have a loan product pending approval – in which case you can expedite the correction with the bureaus.
If your credit reports do not get updated, post a comment and I can offer some action steps to consider from there.
Michael,
I want to expedite the correction process. Should I write to the reporting agencies directly?
Thanks
Karthik
Yes. You can include a copy of the agreement and proof of payment with your letter requesting the correction. Send through the mail certified return receipt. Save a copy of every thing in the event you need to fall back on that later.
Hi Michael,
Thanks for the information. I negotiated a settlement with a debt collector and got an settlement offer letter. Here is what is says
” Please be advised that XXXXXX, LLC will accept $xxx as settlement on the Balanced Due for the account referenced above.
Upon receipt of verified funds representing $xxx of the balance due XXXXXX, LLC will close the account.”
Is this good enough?
Thanks in advance
Sam
sam – What you shared is pretty standard verbiage in a settlement agreement. If you are up to it, you can send me a copy of the letter by fax or email and I can review it with you. No charge.
Post a comment reply if you want take me up on the offer. I will send you an email with my contact info after that.
hi, i was planning on buying a house and a debt showed up on my credit resport. I called the creditor and told them i would pay in full just so as long as they send me, fax me a written agreement as to the date, how much i agree to pay as well as it saying “paid in full” and removed from my credit report. Im very hesistant in sending money because its happen to me where another debt surfaced on my credit report even after i paid and they claim they never received anything and i cant make that same mistake especially with a large amount. The creditor’s name is Amsher collection serv. but told me i had to call their law offices, in whom i spoke to. They will not provide a written agreement until they receive payment but every forum ive read said i need that! ive tried to negotiate twice now in paying full in return they provide that letter before i send them payment. The second time i called they refuse that written agreement until i paid than proceeded to say their hanging up now because i said “i know it will help you guys out in the long run but how do i know you this agreement is correct on your end” i dont know what to do?? if they wont negotiate! i really need to buy a house. if you do suggest i pay anyhow how do i pay? with my bank account? a personal check?
maria – How soon are you looking to purchase a home? Is there an offer or loan pending? That will change the feedback I have for you.
I need to prequalify first, the mortgage broker needs me to at least pay the debt before they can even think about trying to get me prequalified. I know my score is low because of this debt. I would like to get purchase a home by the end of this year. Please advise me on how to deal with creditor? My credit score is low and I know it’ll take time to get up I need at least a 620 and because of this debt I have a 571. Please help
Hi there, I really need help on what to do. I was in debt with BestBuy/Capital One who I called to confirm if they did sell my account. They confirmed that my account with them for $1500 was sold to Collect America. I called Collect America and they told me that my account is assigned to Scott P. Lowery Law Firm. A lady at that Law Firm was professional in the start. I think my mistake was I agreed to settle for $1200. I was also paying another “supposed collector” for a payday loan I took out because this guy Detective Patrick said I would be arrested. I later found out it was a scam. Back to Natalie at Scott Law Firm..I gave her my account number. However, after realizing I was scammed, I went into the bank and reported it and changed all my accounts. I called Natalie to inform her but she was not in the office. I asked the guy If I can talk to him as it was important but he hung up on me. So I called Natalies line and left a VM for her to call me back regarding important information. I called back the next day and told her I changed my account. She got mad and said I went behind their back to do that and it is against the law. I explained to her I did not go behind their back but she wouldnt listen. I also told her I do not want to pay using my checking account but I am willing to send money via western union or have my bank send them a certified check. She said she will write me off as refusal to pay. I called again to work something out and agreed over the phone to settle for 500 now and 500 later total 1000. Again they said the only way I could pay was by checking account. Today I called again and she offered me a settlement of 1267.00 where I can pay before 10-31-13 of 226.00 and the remaining on November 15, 2013. I agreed to that settlement and asked her to have it in writting and she got mad and said why should she have it in writing if I “lied” about my checking account and did not pull through on my first agreement for 1200 settlement. I asked her to also email me the settlement agreement and she said no. Then she told me to email her supervisor to give permission to email me. Then she turned around and said the deal is off. I asked her why she kept changing the deal and she said because she knew I wouldnt pay it. I asked her why she gave me a deal she thought I cant pay and she did not answer. I told her I had to go as I was going in to work and she said if I hung up on her I will get it. I asked her if that was a threat and she said “yes I am threatening you”. I know my actions show that I am not in good faith to pay but I am. I was scammed so I changed my account number not because I was avoiding them to take money from me. And after reading that I do not want to pay using my checking account and I do not want to pay until I get the settlement agreement in writing. My actions may say otherwise, I know. What do I do??? I want to pay what I owe, I just got a steady job and can afford to pay little but she wont agree to anything when I ask for a letter of settlement agreement. Please help me?
Kimberly – The collector for the Scott Lowery firm is making this a good amount more complicated than it should be. They collect debt and struggle to contact people that are both willing and able to pay. You are both. I would try to simplify this and connect with her supervisor. Not to complain, but because you are having difficulty communicating with the Natalie. Be polite and keep a business tone, but firm in the fact you need documentation of the settlement. Once you have a settlement letter, it is fine to pay via your account and over the phone, but I also understand the reluctance. Using a certified check issued by your bank, and from your account, is fine. I never recommend using Western Union to pay a settlement.
If you run into any difficulty please post an update to this comment string and lets go from there.
Hi Michael,
I recently settled a debt and received in the mail as promised, a letter indicating such so I may send it to the 3 credit bureaus. Obviously I don’t necessarily want to ‘contest’ the debt; my intent is to update the ‘status’ if you will. What are your suggestions on facilitating this? My concern is having to make several attempts and requests to get this done.
Gwen – I do have feedback about sending your settlement letter and other doc’s to the credit reporting bureaus, but a couple questions first:
Who did you reach your settlement with (original creditor, collection agency, debt buyer)?
How did you pay the negotiated agreement? Is the settlement fully paid (not a series of payments over several months)?
What do you mean by “recently settled”? Was this completed in the last 30 to 60 days?
Post a comment update with answers and I can offer a better detailed response.
Hi Michael,
I settled the debt with Dynia & Associates, LLC which upon information and belief is a debt collector. The original creditor was Juniper and current creditor, Jefferson Capital. I paid via check by phone in one payment. The original debt was around $1,275 and after negotiating with Dynia, the final payment arrangement was $550.00. The one lump sum payment transaction occurred on July 30, 2013. I didn’t receive their letter in the allotted time and once contacted they then sent the letter which is dated September 12, 2013.
Thanks Gwen. I generally suggest waiting 60 days from the date a settlement is made and paid before sending letters to the credit reporting agencies to update accounts as paid and zero balance. If you are in the middle of a refinance or home loan approval you could be proactive earlier. It sounds to me like your file in there system did not get updated until you received the settlement letter, so you could wait a couple more weeks, or send your letters to the credit reporting agencies now.
Sending a letter to correct your credit report could be as simple as:
“I am writing to inform you that you are reporting inaccurate and incomplete information. I have included a copy of your credit report with the inaccurate item at issue highlighted, along with a copy of the written agreement with the named creditor and proof of payment. This account has been paid. The creditor has failed to provide you with this new information, or you have not taken care to update your files appropriately. Please fix your records and send me a copy of the corrected report.”
You would also want to send a copy of the letter to Jefferson Capital (I am assuming that is who is showing on your credit report).
The responsibility to investigate and update their records is on the credit reporting companies. You do not have to send a copy of the settlement letter from Dynia/Jefferson Capital, or proof of payment. But your concern about expediting the correction is often better served by sending in supporting documents.
Hi Michael,
Thank you for your quick responses… I can’t keep up with you Jefferson Capital is not on my credit report; however, that is not to say they are not on there now. The last report I purchased which was a 3-in-1 report was April 24, 2013. By way of further background and information, since May I have settled many debts by way of paying in full or settling with some of my other creditors. Those creditors by routine, excluding Jefferson Capital, would contact and report to the 3 credit bureaus within 30 days of the date of our transaction. Additionally, they also each sent me within 7 – 10 days their standard letter in the mail stating same. Essentially, I am doing the legwork for Jefferson Capital. Additionally, I have a personal statement on my report from years ago I want to remove. Can I ask in the same letter to remove that statement? Per your previous response, you suggest to wait a couple months to send letters to the bureaus. Since Jefferson Capital is not showing on my credit reports, I can only assume I have to purchase my reports again? On the other hand, can I use the 3-in-1 report I have now to contest other settled debt… then the bureaus will in turn send me a new one for review… then I can review if Jefferson Capital appears on it? Hope this makes sense.
Thank you!
If Jefferson Capital is not reporting there is no need for the letter. But you may need to send one on other items if they have not been updated. You have resolved debts since obtaining that 3 in 1 credit report, so you should pull another and work from that. You can also get one free one every 12 months from the 3 majors through https://www.annualcreditreport.com. Have you run your free ones in the last 12 months?
Once you pull a current report, locate anything you have questions about, and lets go from there.
You can request a consumer statement be removed in any of your correspondence, or in a dedicated request.
Hey Michael,
I negotiated a settlement with a local attorney who’s collecting credit card debt for a credit union. The letter matches with your suggested criteria but I’m a little worried about the settlement sentence. The phrase reads:
“We agreed to settle the claim for $4,200”
I guess I would prefer to see “settlement in full”, “settlement of the account” or something similar but I wanted your take on the issue or whether I’m just being silly. What do you think?
Joey – That verbiage is still synonymous with your needs. and would help you correct any issues later, should they occur. Attorneys have a habit of using certain terms. Question though – were you sued?
Covering your back side in a collection event is NEVER silly!
Hi Michael,
No, I was never served and/or sued. I’m assuming they used the same template letter they would in that circumstance.
Just wanted to be sure, as that would raise additional questions. I would be good with it.
I have been communicating with Stern & Associates PA out of Greensboro, NC (I live in VA) about a $220.00 debt. The gentleman that I spoke with offered a settlement over the phone which I would love to do and get it over with but he refuses to send me something in writing. I’m not comfortable with this and not sure where I should go from here.
An alternative to the written agreement to settle would be to record the call where you cover all the details. Be sure to let them know you are recording the call and why. Keep good notes of date and time, who you spoke with, the number called etc.
Stern and Associates is an established collection firm. They would have many a letter template to use for settlement agreements. It is just silly not to provide one. You could, of course, stick to your guns and not proceed until you have a letter.
Hi Michael, in March of 2013 I was being hounded by a Debt Collector, called Apex Recovery holdings. They had all my personal information as well as the information for this payday loan I had taken out over the internet. They were threatening me telling me I was going to be arrested, taken to court, they were going to call my employer and tell them I committed fraud. They told me the original debtor would settle for $1700. i asked him for something in writing from their company. He e-mailed me the information, so I made a payment plan of $175 per pay. The last payment was in Aug. 2013. They told me they would send me a letter showing the debt was paid in full, I call there all the time and they tell me they would e-mail me, but to date I have nothing to show debt was paid. On my credit report and with the original debtor the debt is still showing open. What do I do? How do I know that I gave money to a debt collector and I wasn’t scammed. I try to google the phone number but the company doesn’t come up.
Judy – I do have real concerns for whether you were a victim of a debt collection scam. Legitimate debt collectors do no threaten you with arrest. I would like to talk to you about your situation first,and then recommend some state and federal regulators for you to contact. If you are up to speaking with me, post a comment and confirm. I will email you my contact info.
Hi Michael,
Thanks for responding. I have yet to receive a paid in full letter. He said I would have one emailed and mailed to me. This collector was from area code 716. Now that I paid this off I am getting calls from someone claiming to be from a lawyers office telling me that I owe this debt. I closed my checking account in the meantime. But 1700 is a lot of money to me. I just got another email from acs stating they are going to have me prosecuted for a list of reasons. I have outstanding payday loans as I got stuck in this cycle it was costing me more than 800 per pay. I got myself in a big situation. This other company is giving me a different name but is also from 716 area code. He even had someone calla me and tell me he was from my county and he was a process server and I better call the to settle the matter. I tried googling the number but nothing comes up.
Judy – I would like to help you connect some dots. It would be best to connect off line, and we can follow that up with posts to this comment string, or I may start a new page in order to best warn others from what, at least right now, I consider a scam.
I sent you an email. I hope we can coordinate a time to talk. My direct number is in the sig line of my email.
Hello Micheal,
I have a few questions for you and hope that you can help me out. I am in the process of cleaning up my credit report and have been doing so for about six months (my credit was totally messed up). I have disputed items and some where deleted and some were verified. I am now at the point where I am ready to negotiate debts from collection agencies. I have 4 all together that i am ready to tackle. LVNV Funding for $1650, Main Street Acquistion for $7,903, National Credit Systems $6,432, and Portfolio Recovery for $1547. My questions are 1. What is a good percentage to shoot for when negotiating debt? 2. Are there any negative effects to paying off old collection debts (will they be able to sue me for the remaining balance if i pay or could it effect my credit score in a negative way)? 3. What is the difference between paid in full and settled in full as far as credit reporting goes and does it make a difference? I also want to mention that these are very old debts and the statue of limitations have already expired on all of them, in fact they are due to drop off my credit file within the next 2 to 3 years.
Mark – My answers are numbered below.
1. If you are able to pay the settlement you negotiate in a single payment, I would target all of the debt collectors you listed at 50% or less. The worse you look on paper to them as able to pay (credit report shot etc), the more I would target lower than 50%. If you need to negotiate your agreements to be paid over time you could pay a premium for that. Need many months to pay? settle for sometimes 60%.
2. No, they cannot sue you for the uncollected portion. Mistakes in how your settled debts are tagged in a debt collectors system (even original creditors are fallible), do happen, but not that often. Your settlement letter, or written agreement, along with proof that you paid the amounts agreed to, and on time, will assist in correcting any later errors, should they occur.
3. Now that you are dealing with debt buyers, the credit damage is done. There is no meaningful difference if they report the settlement as paid in full, settled in full, or settled for less. There are some one off situations where a lender will manually underwrite a loan product and seem to care about whether collections were paid in full or satisfied for less, but I see that so seldom nowadays compared to 10 or 15 years ago. This is not something to get hung up on in my opinion.
There are very real economic and credit benefits to settling debts this old. If paying these settlement meant saving half a point on a mortgage would be a good example.
Michael,
Thanks for the rapid response and I will take everything thing that you said and all the information listed in this thread into consideration. I have about $5400 saved up for paying off collections debts. My next step is to put that money in a special bank account and get own the phone and get to negotiating. I will get any settlement agreement in writing before i make those funds available to the collectors. Is there anything else that i need to be cautious of before i proceed? Once again thank you for all that you are doing to help. This thread was extremely informative, i actually learned quite a bit from just scrolling down the thread and reading your posts.
Mark – As you work through your negotiations and settlement with each debt collector, post additional comments and questions. You can use the search feature in the upper right to find current pages that discuss each one of the debt collectors you are dealing with. Each page will have additional information and comment feedback from other people, which are great to learn from too.
One caution when negotiating with debt collectors is to never offer too much information. Just stick to the fact that your finances have been, and continue to be, a struggle. You really have limited resources to try and put this behind you. If you get stuck on one account, move on to resolving the others and circle back. In fact, it is sometimes a good idea to play one account off of the other. Something like – “I have 1k to settle an account with. LVNV is another debt collector I am dealing with and will be calling them next. If you cannot help me with this Portfolio Recovery account, I will move on to the next debt collector” – or something similar. You are pretty much in the drivers seat with debts outside of the SOL.
Hi Michael,
I received a call earlier tonight from a Bank of America credit card that I thought was settled. They told me I was late on my payments. I had a balance of $11,383.68 in July that I made an agreement over the phone to pay $8987 by a certain date to settle the account. I was lent the money from a family member and made the payment. They are saying that because I didn’t call to state that the payment was for settlement that it was processed as a payment and I still owe the balance. Unfortunately, I did not get anything in writing. The balance as of today is stated as $2497.65. Do I have any options? I am currently living paycheck to paycheck and struggling to pay my current bills as is.
Thanks
Les – I would encourage you to file a complaint about this with the CFPB. Go to this page: https://www.consumerfinance.gov/complaint/. Click on credit card, and follow through with each field. Provide as much detail regarding all of your calls leading up to and when you settled. It would be good to put the chronology of what happened on paper first, and then use your notes to complete the complaint process. Be as specific with dates and names of people involved that you can, and where appropriate.
Response time on these types of complaints are fairly quick, but can take a couple weeks. Post an update to this comment string with what happens and lets go from there in needed.
Quick question: Was the settlement completed directly with Bank of America, or was it completed with a collection agency? If a debt collector, who?
Thanks for your quick reply. Yes, the settlement was directly with Bank of America. I will update to let you know how I make out.
Great news! I filed the complaint and Bank of America agreed to the initial settlement. I got a letter in the mail from them the other day saying that the account is settled. Thanks for your help!
Awesome! Glad that worked out for you. If you do not mind, would you post a follow up comment and briefly describe your experience with the CFPB complaint portal? It would help others get a feel for that process, and its effectiveness.