If you’ve been following the early tips I suggest for how to prepare to negotiate and settle directly with your credit card bank, you are already aware that most of the heavy lifting of the settlement process will be when you are between 150 and 180 days late on your credit card. If you have not read my previous article in this guide, What to Say to Bill Collectors, please do so now. Speaking with debt collectors is a vital component of being able to settle debts on your own.
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.
Before I get in to how you can go about targeting the amounts you’re most likely to settle at with each of your creditors during negotiations, I want to make something abundantly clear.
Settling Debt for Pennies on the Dollar
The internet is both friend and foe when it comes to looking for information about settling credit card debt. You will have no trouble finding websites, and offline promotions, of debt negotiation programs enticing you with claims that credit cards can be settled for pennies on the dollar. But if you define “pennies on the dollar” as 10 cents or less – it just doesn’t happen.
There can be one-off situations (mostly during the height of the economic downturn that began in 2007), where very low settlements could be achieved with some select lenders. But it is not the norm, and certainly not today.
If you have come across content or advertisements suggesting you can settle at these low – Low – LOW rates, you may want to forget anything else the source says about negotiating and settling. Targeting unrealistic settlement amounts is a good way to blow the opportunity to settle with your bank. Anyone leading you to believe that you can settle debt for pennies is more interested in selling you something than giving you accurate expectations and information.
Soapbox interlude about debt negotiation content online: Be careful of taking something you read too literally. Anonymous information is hard to verify, and information may be dated. While one national bank may have been settling for 40% in 2010, you may be able to target your negotiations with that same bank at 30% today. Conversely, a bank may have made settlements with many of their card holders for 15% to 20% at the height of the recession, but now rarely go below 30%, and more often will settle at 40% prior to charge off. It is far better to look for current information regarding your creditors and collectors. It is also best to not read too much into anonymous posters from yesteryear when it comes to negotiating settlements that impact you today.
How Much Your Bank Will Settle for
Each credit card lender will treat monthly payment reductions, collections, and negotiating settlements a little differently. But the similarities between credit card lenders policies for settling will generally take you as far as the amounts you should realistically target for each account.
Having reasonable and real time trend-based expectations for how much of a savings you can negotiate each of your credit cards for makes planning and succeeding with your goals obtainable.
By now, you should have a grasp of the fact that settling credit card debt is not rocket science. But there is a basic formula to follow in order to maximize savings and limit risks. The more creditors you have, the more important it becomes to strategically plan for which accounts to negotiate with first, and which would be better settled with outside debt collection agencies (after charge-off).
How you develop your plan should be based on how much money you have available to settle for the best rate of savings – given your particular lenders policies at the time you are negotiating with them – set beside any credit cards you have with a lender that is more aggressive in collecting.
Two ways to get help targeting and prioritizing what to negotiate for, and who to negotiate with first:
- Post questions in the comments below, or better yet, search for your creditors name in the upper right search box on this page and find a page dedicated to that creditor and read through what others are doing and post questions in the comment section there.
- Call me at 800-939-8357 ext 2, or schedule a consult (top of page menu) with me where I can provide a basic outline over the phone.
Who You Call to Settle Your Credit Card Debt
With your list of credit cards prioritized, and your timing set, making your calls to negotiate will start like prior calls I have suggested. Different creditors have different departments that handle delinquent accounts. In the first month or three of missing a payment, your calls may be handled by the bank’s customer service department. After 90 days of non-payment, calls are often routed to, or made by, a department that handles bank recovery.
Your bank’s recovery team will be who you are able to settle with. The number you call when you are ready to negotiate the settlement could be:
- one you received in a collection notice from your bank recently.
- the number on the back of your card (you will get routed to the department handling collections and recovery).
- dependent on the creditor – your account may be out with a collector even before the account charges off, in which case you may be calling a collector, are get routed to one when you call in.
What to Say When Negotiating Your Settlement
Take a moment to watch this video I did about what to say, and stay away from saying, when you are talking with a debt collector.
The previous article should have helped you with your frame of mind when making the call to negotiate and settle. You may start your negotiations with a simple restatement of your financial situation. If you have made prior outreach calls to your bank up to this point, your story of personal hardship is what you will repeat. This time however, and depending on what your notes say from prior calls, you can either:
- Repeat an offer that may have been made to you in the past (early on a bank rep may have said the account could be settled for say 60%), or you may have gotten a piece of mail from the bank offering some vague reference to settling, or a hard number or percentage. In this case, you simply start off by saying “I am following up on that earlier offer to settle. I tried everything I could think of to raise that amount, but fell short. I did come up with $_____. If that could be accepted as settlement, I can pull that together pretty quickly.
- Bring the subject of settling yourself by saying something like “I broke down and shared my situation with family/friends. They suggested they may be able to help me with a loan. They do not have much to give, but maybe enough to settle with. Is that a possibility?
There are many ways to bring up the subject of settling when you call in. When you’re calling in to negotiate and are between 150 and 180 delinquent, you will typically be speaking with someone trained to help you with that. You should already have a good idea of what the bank you are calling to negotiate with will reduce the credit card debt to in a settlement. Your offers to settle should NOT be verbalized as percentages, but as round dollar figures that are short of, or really close to, the low end of what that bank is known to approve and accept.
Answering Questions When Negotiating
A few years ago, some credit card issuers started asking a litany of questions before agreeing to a settlement. The list of questions is similar to what they ask in order to enroll you in a long term hardship repayment plan. You need to be prepared to answer these questions. Information about your income and basic expenses should prove to them that you are in the red and unable to afford anything other than the settlement.
People working for your credit card banks internal recovery department, and outside third party debt collectors, have real time access to your credit report. During the negotiation call you may get hit with questions about other debts that are not being paid, and certainly about debts that you continue to pay (house payment, auto, and even other credit cards). How you answer questions about other debts that you are paying is often going to be common sense.
Depending on the question asked, you may respond with something like:
- “Of course I am making my mortgage payment. I would be homeless if I did not.”
- “If I quit making the car payment, they take the car, and I have no way to get to work/look for work.”
- “That other credit card is not getting paid by me. My brother needed help and he is the one that made those charges. He is the one with the money to pay that one.”
- “That credit card bill is only $20.00 a month. That one is getting paid because I can afford that. I could not qualify for your lower monthly hardship payments, which is why I am willing to pool all of my resources, and even borrow money from family to settle if I can.”
Answering questions when on the phone with your original creditor, while trying to negotiate and settle your credit card with them before they charge it off and drop your account into the external collection pipe line, is normal and okay to do.
What if you call in and are told the bank is not settling accounts at this time, or that your account does not qualify for settlement at that amount, or at all? This can happen. Here are some reasons why it may happen to you:
- Your math regarding how many months you are behind added up to the perfect time to call and negotiate, but the banks math says you are 1 or 2 months less behind than you thought. Ask how many days late you are to confirm this.
- You just look more collectable. It sounds funny when you are not paying on time, I know. But if your balance is say 5k, and you are paying other credit card bills, your account may be flagged and can mean no negotiated settlement. You may have to settle with an outside collection agency in a month or three.
- That specific creditor is just not doing any settlements. It happens. They are not required to settle with their card holders. Refusing to is their prerogative. It is not common to flat out refuse settlements in today’s economy, but it sure was 10 years ago. American Express is a good example of a bank you may not be able to settle with directly.
- Sometimes you may be dealing with an original creditor who refuses to settle at 165 days late, but who is suddenly willing to negotiate when you call in and are 174 days late.
- You may have had account activity leading up to stopping payments that the bank finds questionable or red flags. This can include balance transfers, cash advances or large dollar transactions.
There are ways that a professional can help you work around these issues, so do not rule out getting help when you need it.
Negotiate Credit Cards Before Charge Off
You know that the first and often best opportunity to negotiate and settle for the lowest payoff will be with your bank, and prior to your account charging off. The better you understand why you should target as much of your debt negotiations with your original lenders, the more strategic, committed, and proactive you can be in raising the money you will need. You will want to understand how and why to prioritize some of your accounts over others for earlier negotiation. You should also know that it is okay when some of your debts progress into later stages of collection. Some of your debt may in fact be best negotiated and settled in 2nd or 3rd stage collections.
Do not hesitate to get help and feedback when prioritizing the debts you will negotiate first, second, third etc. You can do that by participating in the comment sections below, or on any of the pages you visit on this site.
You should know that it is best to be prepared to pay your settlements from a separate bank account that you set up specifically for this purpose. Having your “set aside” account set up in advance is just good planning.
Negotiating with Third Party Collection Agencies if Your Account is Not Charged Off
There are circumstances where your creditor will send your account out to a third-party debt collector before they charge off the account. American Express is the best example of a creditor who does this. Nothing much is going to change in your approach to negotiating an account that gets sent out for collections early, but that is still less than 180 days delinquent. There are a couple of subtle things to be aware of when negotiating with contingency debt collectors.
The next stop in our guide is not so much a “how-to” as a “need to know”. When wanting to settle debt after charge off, it’s important to know what to expect from your lenders, in terms of their policies, current trends, and collection practices.
Next is learning how the top 7 banks handle debt settlement, and setting realistic goals for your negotiations.
If you have questions and concerns about settling your debts at this stage of collection, and moving forward, post in the comments below for feedback. If you would like to talk over your situation with me you can reach me at 800-939-8357, choose option 2. You can also submit the “talk to Michael” form in the sidebar.
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 (you are here)
7 Largest Credit Card Banks and How They Settle Debt
Get Debt Settlement Letters and Agreements from Collectors
Paying Debt Collectors After You Negotiated a Settlement
I’m talking to Client Services for Chase.
I owe 1800, the offered me a settlement of 1300. My question to you is..is this a good deal, or should I try to get more shaved off?
I would definitely seek a better settlement outcome than this.
My target in this situation would be less that half, and by quite a bit.
You can often get payment terms on the settlement, which can make it more doable based on monthly cash flow.
If you run into trouble settling yourself you can submit a single account by clicking the get debt help tab in the upper right, and creating your user profile to submit to a negotiator.
The fee is 15% of whatever is saved in the settlement.
I have a number of debts, but have finished off a couple and negotiated a better deal
with Bank of America’s collection lawfirm.
Now my next focus is Paypal, but they want all of the settlement ($2100of $2900) in a 3 month plan.
Do you know if they will do a longer term plan?
How many months late are you on the Synchrony account?
Michelle,
I was wondering if you had a chance to see my previous post dated July 3rd at 1:11 pm.
Please advise if you could point me in the right direction, that would be greatly appreciated.
-Dan
Michael,
Thank you for the informative video..
I’ve have been put on disability twice within the last 4 months.
Over time I’ve managed to rack up the following and now in a pinch to make all payments.
1.Chase slate $ 14775 (3 months behind)
2. Chase freedom $3782 (up to date)
3. Wells Fargo $ 8987 (up to date)
4. Credit union master card $9890 (2 months behind)
5. Citi bank (best buy) $ 4624 (up to date)
6. Lowes $600 (I just made a payment after being late 3 months, the guy I spoke to on the phone told me he would be able to waive all late fees if I made a payment of $183, which was the amount that was required to bring up to date) .
The above amounts to approximately $42,454..
Initially I was going to look into getting a credit card consolidation loan at a low interest rate, a couple years back I was able to get a loan from best egg at %2.00 and have since paid that off. But I’m afraid that my recent late payments may prevent me from doing that.
I have been exploring other options and stumbled upon “debt reduction services” I called them and they were able to get me a quote. It seemed like a good option but after doing the math I would be paying 53 payments at $943/ month. That would amount me paying almost 7 grand in added fees after 53 months, yikes!
Well I did dome research and found out that these so called “debt reduction” services just negotiate with my credit cards and get a lower interest rate then close out the account.
The quote that I was given by this “debt reduction” service is itemized by credit card and has its respective new negotiated APR..
My question is:
Can I call my credit card companies and ask them if they can honor these new apr’s directly to me? That avoids me paying the $35 per month fee that I would be paying the “debt reduction”
Also, quick observation on the vague quote that was given to me:
The quote has a $ 35 per month “monthly contribution” ($35×53=$1885) I have no idea where that other $5100 is going to.
I’m 39 years old and up until recently my credit score was excellent.
I am expected to make a full recovery and my job has been very supportive of me in regards to holding my job..
I’m in the process of creating a plan and putting my finances together to see what I can afford.
I’m am prioritizing my expenses with my mortgage being 1st priority. Every other expense will be prioritized upon creation of my plan.
The $943 per month that this “debt reduction” service seems a little tight but if I can get that $35 monthly contribution fee cut and some how get my payment to $825 per month, I know I can do that. I might be able to do more, I will know for sure after I’ve created my plan..
Can you please help me out with some advice?
I would like to get this under control so I can focus on my health and get better.
Thank you sir!
It sounds like you are talking about a debt management plan working with a non profit credit counseling agency. The $35 a month is nominal compared to other debt relief services (other than chapter 7 bankruptcy being the most bang for your buck). But it is true you can often get your banks to do that directly with you (lower your apr) once you are already late like you are.
Talk to your banks.
They will walk you through a prepared script of monthly budget and expense questions. You have to be able to show you can afford your basic needs and still pay them, even if at zero interest. If not, they are not going to offer you a plan.
You also do not want to show that you can afford the basics, their payments, and still have several hundred dollars of “walking around” money. They will not offer you their best plan.
What concerns me about what you shared is that $35 a month is a make or break. If that is the case, a debt management plan, or your own version of a hardship plan direct with the bank, is not a great idea. You cannot miss payments on these plans, or they will not honor them.
If the payments are just too tight, you may be better off settling with creditors. But at least you can start off on the hardship plan and change into debt settlement.
Hi Michael-
I have two questions for you:
Question 1: I have $1300 in collective charged off account debt, one from Target (almost at the 7 year mark) and one from Cal Coast CU (also at the 7 year mark soon). Is there any way to get them to change my account status to not reflect a charged off account if I pay the balance in full?
Question 2: I settled an account with Sprint a few years ago and now they are saying their new debt collection company they sold my account to does not do “settlements” so I owe not only the remainder of my balance but it has been accruing interest for a few years now and it just showed up in my credit report, when it wasn’t there before. Not sure how to approach this one (also over 7 years so it should not be reporting on my credit report ,they refuse to remove it they said) It used to say paid in settlement on my credit report. Any advice how to handle this?
Thanks.
No, they will not reflect paid in full. Why do you need them to?
I would file a complaint against the collection agency for the Sprint account with the CFPB. More on that here: https://consumerrecoverynetwork.com/filing-complaints-with-the-cfpb/
Hi Michael. Your advice on credit card debt settlement has saved me thousands of dollars. I still have one issue I would like to ask you about.
I have an installment loan that is 160 days past due with a company called Bread. The balance is around $1200. They have already reported to the credit bureaus that the account is charged off, however they still own the debt.
I spoke with an account representative and inquired about having the reporting status changed and was told that The chargeoff status will remain but the balance will be updated to $0 after resolving the account balance.
Should I bother with paying this account with the original creditor or try to make a similar pay for delete offer to whatever collections agency ends up buying the debt?
Thanks
If it were me, I would settle with the original creditor and get the zero balance reported. If they sell to a debt buyer they are likely going to show a charge off zero balance then too, so this ends up the same, but sooner, and potentially for less than the debt buyer may have settled for.
Hi Mike, thank you for the videos and articles. One of my credit cards (Barclays) was sent to Northstar Location Services. I have not been able to make a payment since last May (hardship and now self-employed so money goes up and down) Total is $8550. I am trying my hardest to get back on track. After receiving the first letter from Northstar on the 1st of this month and receiving phone calls, I talked with someone there around the middle of this month and they offered a settlement at around 50%. Is this a general percentage that they settle for? Once we agree and I receive a confirmed settlement agreement in writing, do I send a cashier’s check for the amount to Northstar or to Barclays?
I would aim for a lower settlement if it were me. Something more along the lines of 35%. At the bottom of the article above there are links to how to pay your settlements, and what to look for in a settlement letter. Review those resources.
I personally would pay any legitimate debt I am settling directly from my bank account so I could track it and have easy access to proof I paid (as long as I have the agreement in writing already).
Hi, my credit card is with HSBC NEVADA BANK its only 798$ I owe from 4 years ago!! I want to settle but not sure how to approach them as far as what they will accept! What do you think?
Do you know if your account went to Capital One or not? Can you tell me the name of the last debt collection company that contacted you via phone or mail about this?
What is the percentage that Credit One will generally accept on a credit card debt?
I would estimate 40%, but still aim for lower.
Dear,
sir
i have 29000 dollars debt in credit cards please help me what can i do?
Post a list of your debts and include the creditor name, balance, and if you are late already, by how many months. I can offer you suggestions and feedback once I have those details.
Credit union wants to settle for 75% of original loan they have a judgement on me that was not properly served. Original debt was charged off to profit and loss 7 years ago stoped making payments 3 years ago 3 years to date Was served with a judgement in the mail with no prior knowleged that they filed a law suit just a judement arrived by mail.
What state are you in?
Hi Michael,
I currently owe about 17,500 on a CitiBank credit card and it will be 5 months late in a couple of days. They offered 50% settlement split into 3 payments, but the offer expires tonight. I am still not sure If I can gather the funds yet. Will they be willing to offer a lower settlement if I wait until next week, but before the 6 months?
You can probably negotiate the deal a bit lower too.
Hi Michael,
I have contacted Amex to talk settlement on two accounts. The one I have started negotiations on is for $1833.66. I was offered a settlement for 87.50 up front, 400. by Jan 27 and 487.50 by the Feb 28th. Total $975. I told them I needed a week to see if I could get the money together and would call them back on Friday the 20th. The negotiator I was working with reverted to shaming statements towards me but I did not bite and just continued with working on a payment settlement that would be good for me. I feel that this settlement offered may be the best I can achieve. It’s about 53%…what do you think. Also, I want to settle on a different Amex account but will not have funds for a while after I pay for the one I am working on. Should I contact Amex about the second account and talk to them about my situation? I already asked if they would combine the two accounts and they will not.
Louise
What is the balance on the second account?
When is the last time you made a payment on both accounts?
The second account balance is $3370.98 and the last payment was made 8/13.
Last payment on the 1833.66 account was also 8/13.
If you cannot raise the money to settle the next one yet, I typically hold off with negotiations. If you got them to agree to 50-ish percent, and a few months to pay, when would you be able to start paying on it?
I would want to find out if AMEX still has the account internally, or if it is out with a debt collector, and who that collection outfit is.
I’m pretty sure Amex still has the accounts internally. I would be able to start paying the 1833.66 account this month as I discussed with the representative. I did try to get him to split the last $487.50 due at the end of February into two payments but he would not agree. I will try again when I call back on Friday. You raised concern with Amex and how they may take legal action before other banks. That’s why I thought I should communicate with them about the second account and have some kind of discussion with them about settling, even though I won’t have the funds together for a few months. To be clear, are you saying don’t do anything until I have at least 40% to settle?
You can talk to AMEX about settling that second account, but they are going to do what they do with it because you will not have the money to fund the settlement. You will have more opportunity, and that includes with a collection law firm. Third party debt collectors can often provide more flexible options and payments when negotiating AMEX accounts (better than American Express will directly).
It is okay to let things go to collectors, and to accept the fact that you cannot avoid it.
Hi Michael. Thanks in advance for your help. I am recently divorced and lost 130,000 in yearly income. Needless to say, credit card bills are almost impossible to pay. I have 2 Citi cards. Balance #1 is $8,203. Balance #2 is $6,245. Chase card is at $7,849. And lastly, a discover card with a $4000 balance. I recently came into about 10,000 via a marriage settlement (house refi). I’m a month late on both Citi cards. All else is current. What’s the best you think I could settle for with a lump sums? Thanks so much for your help and response.
Done correctly I typically target settlements with Citibank at 35%. Check out this article where I rank the top 7 credit card issuers for how low they settle (and other criteria).
Hi there,
Thanks for all the information. I had 21k and have gotten it down to 12k with some help from family. I have joined the peace corps and will be leaving in~2 months. I will have no income really while I’m there. I’m not currently behind, but it seems daunting to negotiate from South America. I will be selling all my belongings and cashing out my savings; I think I can get $6 – $7k by e time I leave. Any advice??
What banks are you dealing with and what are the balances? Are you late with payments on any of the cards, and if so, by how long?
If you are current with your payments it is often not possible to settle credit cards that are only 2 months late (which is all you would be if payments stopped now). That means negotiating and paying the deals from abroad. It is not overly difficult to coordinate your settlements at, say 6 to 9 months late. I can help give you a map to follow once you post your reply.
Mr. Bovee,
After our initial phone consultation I had a chance to reflect upon my situation and I wanted to get your input on the following items:
1) After our conversation I misplaced the sheet of paper I used to take notes from our discussion. I wanted to confirm the typical settlement percentages of the various banks that apply to me. I believe you said Capital One – 40%, TD Bank 50% and Barclays – 35%. Can you confirm if this is accurate?
2) I have a brokerage account with TD Ameritrade which is actually linked to the TD credit card I noted above. I am assuming it would be prudent to move all of my funds out of the TD Ameritrade brokerage account until the credit card debt is settled. I don’t have much in there at the moment, but if they were able to raid my brokerage account for what little I have I would not be happy…
3) What effect will settling these debts have on my ability to finance a home or possibly finance a rental property at some point in the future? I know you said that my credit score should bounce back in 12 months or so which sounds really good. However, do you know of any specific rules set by Fannie or Freddy regarding the financing of a home and the settling of credit card debts?
4) I believe you were saying the sweet spot for settling with the original creditor is after 5 – 6 months of non-payment right before charge-off. I a bit concerned of the possibility of the six months coming and going without my knowing and the accounts being charged off. If I stop paying the credit cards in January, I should have the money to settle every single account at the reduced percentages discussed above by April. Is there a way to get the settlement percentages discussed above a couple of month before charge-off or do I need to wait right up until six months? Also, how do I know when their six month clock starts ticking towards the charge-off? I want to ensure I am on the same page as all of my credit card issuers in terms of the timeline.
5) Finally, I really like your idea about using Magic Jack to screen creditor phone calls. I guess my biggest concern is the embarrassment of them calling my family or my wife’s family looking for information. If I use the Magic Jack technique, and talk to them on say a monthly or bi-monthly basis to discuss my ongoing hardship, what are the odds they will make calls to family members?
Thanks for everything,
Chris
Your estimates you remember are correct. There are instances where settling with Capital One can be a tad lower or higher.
There are often firewalls between brokerage and other accounts, unless there is a cross collateral clause. You will feel better just keeping little in there until the TD account is resolved.
You typically cannot settle early and get the better results. There are some limited exceptions. You can know exactly how late you are by calling the creditors and asking them. If you let a couple months go by and call in, you could say something like “I wanted you to know I am not skipping out on payments, but that I am having a hard time financially. I am working on turning things around and will be in touch in the future. Can you tell me how late I am?” They nearly always will provide that information when you ask for it.
Just so later readers know, it is not always a quick credit score bounce back. 12 months recovery time is indicative of someone with many positive accounts histories that remain on the credit reports to offset only 3 accounts that go into to default that are later settled. As far as financing a home, read through this comparison of debt relief options and access to new credit.
Make sure you record your voice mail with your first and last name. They will know they reached the right person and are much less likely to call anyone you gave them as references. Calling them occasionally could further assist in this regard. We used to do that consistently with all of our members and clients. But these days that is not necessary with the vast majority of creditors, and even third party debt collectors.
Best of success to you. Be sure to post updates as you progress, or any questions and concerns that may arise.
Mr. Bovee,
When I called and discussed my financial hardship with the credit card companies they all tried to get me to agree to a payment plan to get the account caught up. In each instance I said I would do everything in my power to get caught up in the coming months and I didn’t agree to any special payment plan. I am wondering if these payment plan offers are some kind of loophole they are trying to use to delay having to start the clock to charging off my account, or are they actually just trying to help me make my account current?
I have been using MagicJack just like you said and so far all of the calls have gone there. Even at this early stage, about a month in, there have already been tons of calls. I really just cannot wait to get this behind us. Thanks for everything.
The creditors offers to set you up on hardship repayment plans is not impacting how long they can go before charging off your unpaid debt. And they truly are just trying to get you back on track with payments.
Sometimes those payment plans are a good thing. If you can afford them with confidence, and it fits with your goals, it can be the difference. But for those wanting to settle, I suggest staying the course, and not answering their hardship plan qualifying questions.
Michael,
I have a couple credit cards that have gotten way out of hand. After I get my tax return, I plan to call my credit card company with a debt settlement offer. What is the best way to go about this? How do you get them to approve the amount? I owe around $11,500 to Comenity Bank and plan to offer about $4,500. Should I offer more or less? What if they don’t accept?
I am in good standing order with all of my other cards due to family paying for them but they are going to be stopping soon. I owe the following as well:
USAA-$5,000
Chase-$3,000
Any help is appreciated.
You have to be far enough behind with payments in order to get the best settlement result. Read through this entire 10 part article series. If you are dealing directly with your bank when settling, you will know what to do and when. If you are settling with a collection agency the bank sent your account to, check out this post about settling with collection companies, or use the search function at the top right of this page and look for the agency you are dealing with and click through to the page and discussion about that agnecy.
I recently had a baby and my monthly payments are getting tough to pay. I have an account that’s around 6k but haven’t yet missed a payment. I was given a little money to help pay off my credit card debts, would credit card companies still consider a settlement amount if I haven’t missed a payment?
Unfortunately Salina, no, credit card banks do not offer anything close to an affordable settlement (or any reduction at all) when you offer to settle for less, but are current. You have to be late by 5/6 months or more to get the better outcomes.
My wife owes $11,500 credit card debt with Capital One. It has not been paid for several months and they sent an offer to settle for $9500. I think we can get a much better deal but I have a few questions about doing the settlement.. First, I saw on another site where they said to get them to say “paid as agreed upon” instead of “settled”. Will this help your credit or is this something that will not help in the long run. Second, the same site said to ask if they are willing to erase the account history or “tradeline”. My wife asked them to do this and they said they had no idea what she was talking about and wanted her to pay them with a bank transfer right away. She did not do that, and now wants me to deal with them, so I am trying to get as much knowledge I can before I call.
We do have the cash to pay this because I took out a personal loan to lower the interest rate on some credit card debt I have as well. We were out of work for some time as we went back to school and it took much longer to find jobs than we thought. We are both employed now and can make payments on the $30,000 we owe, but I want to settle this for the least amount and pay the rest with the personal loan. We also want the best for her credit rating because we are looking to buy a house when the rest of the debt is paid. We will be putting about $12oo a month toward the $30,000.
Is Capital One, one of the companies that does not like to send the deal in writing? I am going to call this week, but my wife said they told her they would not send a deal in writing. Also should I try and get them to change the wording as I mentioned above. I also heard about a “pay for delete” but was told this only works on smaller amounts bellow $1000.
Thanks in advance,
Scott
Capital One is not going to report a settled debt as pays as agreed, or delete the negative in return for money. They are going to meet their minimum legal requirement for credit reporting and that’s it. But that is fine, as it is all you need them to do for the most part.
Capital One regularly sends out settlement agreements before you pay.
The other site you are reading is leading you down a path that only complicates things for you.
And yes, done right, you can settle with Capital One for much better than what is on the table now.
If you like, fill in the talk to Michael form in the right column. When I see that I will email you to set up a time to go over your situation on the phone.
Hello Michael, This is a great site and valuable tool to learn in process of getting out of debt. Hats off to you. I have a Citi bank account that I opened a year ago with 12K balance transfer. My sincere hope was that I will pay it off in a year but got salary cut and ended up not being able to make up to my hope. I have 14 K now on this Citi and in addition I have 20K on BOA that i have been using for years. I want to settle these debts. I missed my one month payment after paying for 13 months to Citi. My question is does my balance transfer make it hard to settle Citi ? What kind of justification I may have for that. I have talked to Citi when i was current that I am facing hardship, and also after i missed payment I informed them that I am trying to arrange funds but not able to. They have only said sorry and not talked about any hardship plan etc. Would appreciate your insight.
It is difficult to get the best outcome when negotiating settlements on accounts that have recent balance transfers and cash advances. That is made even more so when the percentage of balance owed is the bulk of those transactions.
You are also way too early to be talking settlement with Citibank.
Fill in the talk to Michael form in the right column. I will see that and email you to set up a time to go over your situation briefly on the phone. I will be able to give you more actionable feedback after asking some detailed questions.
Very helpful information! I’m helping my 28 yr old son who has been suffering depression and “checked out” on things he couldn’t deal with. He was served a summons two weeks ago through Portfolio Recovery Associates for a credit card acct from US Bank. I don’t even know original debt amount the Summons is for $6,300. He has 30 days to file a legal response and already half way through that. I just found this out. He had a job change a few years ago, with much less income and became a single income household. He hasn’t made a pmt in 2 years. Child support is about to be revised taking 25% of income so even a garnishment wouldn’t pay out to creditor. I’m willing to loan him whatever he can negotiate as settlement. He has one other credit card of around $2700 needing attention also, I don’t have the details yet. Can I speak with the creditor on his behalf, with him present? What % can we expect from Portfolio Recovery? We live in Oregon. With 14 days left to file legal response timing is a problem. Thanks for any input.
You can speak on his behalf if you have written or verbal authorization. But be careful, as a parent can be vulnerable to falling for debt collection verbiage designed to get you to pay the most.
If it were me, I would file a general denial as if I am going to fight collection with PRA first. That takes the sense of urgency out of this and often allows for better negotiations. I rarely see litigation files settle for less than 50%.
Check out this post about settling when sued for more.
I would like your opinion on what I can reasonable expect from Chase Bank. I talked to them yesterday and they offered 90% settlement — I called prematurely as I have not yet missed a payment. My corporation dissolved (-200K+ loss carryover) in 2010 and I was the guarantor on the business credit card balance of $22K. I have paid $12K in interest and $4K in principle and the balance is still $18K. I have since been disabled and am on a fixed income and have run through my savings. After basic bills (house,insur, utilities) I have about $300 mo left before payment on this card which is over $300. However, I have an 800 credit score and other cards all current on my credit report – only one of which has a balance ($10K) – and I have money in a 401K (I am 58) working against me. It’s interesting that this card has never shown on my credit report (because it is a business card); Chase also holds my mortgage.
Your may be able to settle for roughly 6k, but your credit is going to take a hit temporarily. If this is the only account you are struggling with I would probably avoid chapter 7 if it were me, but if you add in the other 10k balance, it could be worth wiping out both balances.
Awesome video! I have 8 accounts in collections most of which are at least 5-6 years old. I am at a point in my life where I am ready to get rid of all of this old debt I acquired by during a dumb 20 year old.
The 2 biggest were both bought by midland and both credit cards, one in 2012 and one in 2014. I do not know the original dates, but I want to say both cards were closed some time in 2010. $3400 and $1200.
There is also another $1100 from EOS CCA for an old directv bill also from 2011.
Will I have better luck resolving bad debts simultaneously through midland? What kind of percentage can I expect? I am in the state of Maine so I think I am past all SOL.
My experiences settling with Midland Funding are often around 40%, even with the older stuff.
Thanks for video.
Im in a dire situation now with my financial future. I have a few credit cards that i owe. walmart..8k..discover 1k ..chevron mastercard 8k..paypal 7k.. Last week i got bad news from my doctor that will cause me to stop working and i can never work again. im filing for disability next week. Im current on all my payments as of now but i know whats coming. Can you lead me in the right direction with some advice.thanks.. I live in alabama
Read this review of debt relief options first. Knowing what your finances will be in the coming months, which makes the most sense to you given the circumstances?
My bills were based on my working income..no way disability will work.. I know snowballing method will not work in my situation. I have been reading here about settlement but i might not can afford the 50% the companies shoot for when you settle. Where can i start with this?
That suggest that you look at filing chapter 7 bankruptcy. You could be in and out in 90 days and for as little as $1500.
Barclays sold debt to MCM Midland credit. 3100 offered 800 now 1000 all i have. I called them and the debt is 4 yrs old. I pay 25_month rest of life. tryig be polire he is to. hopefully it will go away. video good thank you
What state do you live in? If the SOL to legitimately sue has passed you are in better shape to negotiate a payoff you can afford. If you are not, it is often not a good idea to sit back and hope it goes away. If you need help settling with Midland Funding let me know.
Hi there,
I own a house with an individual that apparently has a judgement against him for credit card debt. I am not married to this person and would like to sell the house and move on but there is lien on the property. When doing the math, after paying real estate commission, his half of the sells proceeds can only cover about 40% the lien amount. how does he negotiate with the lien holders? What are the options? just an innocent victim..
Who is owed the money and how much? When was the judgment entered into the court?
Hey Michael, credit card debt that was sold to a collection agency. As for the judgement date, it was earlier this year. Total a amount is about 32000.
Thank you!
It matters who the owner of the debt, or plaintiff in the lawsuit is. If you do not want to post it in the comments, fill out the talk to Michael form in the right column and we can exchange emails.
Hi Michael,
I currently have a judgement of $20,960. I went to pay a traffic ticket only to find out that I have a judgment against me from an accident that happened in 2008. This was rather shocking because I did not receive any notices to appear in court. But, nonetheless, what should I do. I would like to resolve this issue but a little worried that the settlement offer may not be affordable.
Judgment debts are a bit more nuanced to negotiate. Call in for a consult if you like, at 800-939-8357, I am at ext 2. You can also fill out the talke to Michael form in the right column. I will see that and email you to set up a time to talk.
explain settling debt that includes charge offs and delinquents that have been being paid for 12 months through a debt consolidation company that I make a payment to and they disburse agreed on amounts to all the charged off and delinquent accounts. Will they want to settle with me after this time especially since payments have been made to them for the past year? Will you give what percentage Citibank is at,Wells Fargo Credit card, Wells Fargo personal line of credit, and Capitol one are known to settle for?
You can still settle debts after you are in credit counseling. You typically have to stop the payments first though.
I have an article up about how your banks rank when settling with you.
I did successfully settle charged off debts that were currently being paid for the last year through credit counciling. Wells Fargo was strictly at 60% , Citibank at 30%, capital one at 35%.The worst part is finding who to talk to as that seems to be a maze.. This can definitely be done if you do your homework.
Nice job getting those settlements done. How long had you not been paying on your credit counseling debt management plan?
I was current with paying on my debt settlement plan, the key was the debts were charged off. After charge off, 1st I went into credit counciling debt payment plan, paid for one year and then I decided to settled.
hi michael, i was hospitalized for most of the last four months in and out. i am current on my mortgage, car payments, energy, etc but i did have to let some of the bigger cr cards with higher minimums go. now its a disaster. i have two BofAs totaling around 16K, one of which was only opened in Dec. Discover for 10K, citi card for about 2k, walmart aka synchrony for 2K and a medical bill for 2k that the insurance did not cover.
so, being that i am current and paying more than minimums on other cards with balances that vary from 2k to 6k, can I settle for less with the banks where the balances are super high that I’m behind on and still pay my others and will it look bad that I’m paying more than minimums on those to clear them up.
I’ve gotten lots of different answers from debt resolution companies. fresh start legals and the US enrollment group gave me varying offers of settlement and said I could leave certain cards out but just recently i contacted freedom debt relief and they want me to include everything but say one card with a low balance…bc if I don’t include the others, even though Im current and some at are a 0% and I think I will be fine. To pay them off….Freedom debt said that the other companies i include in a debt settlement will not work with me if they see I am still paying others.
Ugh. i could really use your advice on whether to contact the banks directly or not. i have received one certified letter from one bank saying it’s going to collections soon
look forward to your help. my credit has already taken quite a hit and I’ve gotten those letters of reduction of credit limit from citi, etc. but the other cards I’m paying have not sent me nasty notes yet. I’m about 4 months behind on disc, bank of am, citi and walmart. my biggest concern is not getting sued.
Good to talk with you today Susan. I look forward to your call later this week or next with updates on the rest of your research.
Good Afternoon Michael,
I have four negative marks on my credit from your experties i want your advice.
what should i do with these accounts:
Credit One Bank: Charged Off Sent to Collection amount Owed $827
Wells Fargo: About to get sent to Collections amount owed $233
Portfolio Recovery Associates: Amount owed $827- this is from CREDIT ONE
Midland Funding Corp.: Amount owed $802
I would encourage you to settle them systematically if you have the resources. How much money do you have to work with today?
Can I make a lump sum settlement with chase credit card and an upstart loan if I have never had late payments? I will be coming into some money the end of July and I am really hoping there is away to not pay all that is owed currently. Do I contact Chase for each card individually or do I lump them together?
You really can’t expect to settle when you are current with payments. Most people that try what you are suggesting with Chase will hear that settlement is not an option, or sometimes that the debt can be reduced by 10 percent only.
Call me to go over any circumstances that flat out require you to not fall behind and I can give you better feedback. You can reach me at 800-939-8357 ext 2, or fill out the “Talk to Michael” form in the right rail.
my son filled out a credit card application under my name with wellsfargo and ran 12000 bunch of charges–he had a gambling problem—they now call me and want the money–i explained the situation that he got the card and used my name—they want me to fill a police report and file fraudulent activity–i dont want my son arrested–what should i do–can i make a deal ?
How prepared are you to offer Wells Fargo the settlement amount you negotiate? Can you pay a lump sum of half the amount owed?
Hi Michael,
Just wanted to update you and get some thoughts on my progress:
Current balances:
Chase 1 $27k (Current offer from them is 65%)
Chase 2 $9.5k (Current offer from them is 65%)
BoA $31k (Current offer from them is 33%)
Synchrony $6k (Sent to collection agency after 60 days: current offer from them is 60%)
US Bank $12k (No offer yet)
All are around 110-115 days late. Do you think I could get them lower? I think BoA is pretty good. The rest I’m still hoping there’s a possibility they’ll all come down to around 30-35%.
The BofA settlement is in the area where I often advise accepting it. It is sometimes better to wait a bit before doing that, given your situation with the other banks. BofA will update your credit reports to show you settled. That is not necessarily an obstacle to your negotiating with Chase, Synchrony, or US bank, but an ideal situation would be to settle with all of them within the same 30 day window if you can pull the money together to do that.
Chase I would settle for 40% if working with the bank pre charge off. You can settle for lower than that with an outside collection agency after charge off. That would be something I purposefully target if I was stretched too thin with funds.
Synchrony often will go to 40 percent settlements as you get closer to 6 months late with them.
US bank is also likelier to get to the 40% settlement mark in a couple months. But I do see USbank getting more and more difficult to settle with prior to account charge off (6 months).
How do I negotiate a settlement before a lawsuit goes to trial?
I have been served with a lawsuit, filed an answer, and now and faced with interrogatories.
My end goal (I think) is to settle it for a percentage rather than trying to fight it and rack up legal costs in the meanwhile. The debt is mine – not disputing that – totaling around $9,000 (suit is with AMEX – law firm in FL has the case).
I might be able to afford – absolute maximum – something in the realm of $1k down and payments. I hope my financial situation changes going forward, but I really can’t count on it. Right now it’s a new job based on commission, so I can’t count on things ramping up quickly.
Question is: am I best off trying to negotiate a settlement quickly to save legal fees and how do I do this (without a lawyer – broke)?
Thank you for your help,
I have a page up dedicated to negotiating once sued for collection.
It is highly unrealistic that you will be able to settle an American Express account for that low (whether in the courts or not). You are realistically looking at half the balance owed in a situation like this,and that is not a gimme.
How long will it take you to raise the additional money you need? If you can raise it quickly enough you could continue to try and defend the collection action.
Good Afternoon. I’ve been reading all these comments and decided to post my questions/concerns and hopefully get some answers. We have some major credit card debt between me and my husband. We owe Old Navy 160, Best Buy 380, Walmart 550, Cabela’s 8000, American Express 7500, Discover 3000, PayPal Credit 3000 and Bank of America 7500. The payments are so high that sometimes I skip on paying the mortgage, utilities and skimping on groceries. Next month, we decided we can’t keep living like this and decided that we no longer will be skipping on those but unfortunately will be skipping on our credit card minimum payments. Keep in mind, on top of the credit card debt, we also have two car payments, a personal loan for 12000. This is our plan as of this Sunday: Since I don’t want to be a bad standard with BofA, I will continue making the regular payments to that credit card since that’s where I have my checking and savings account (We have no savings at all, and have two kids). I plan on skipping payments on the Cabelas, American Express, Discover and PayPal Credit. It is unfortunate but between those payments, it equals 482 every month. What I want to do for the first 3 months is pay down one credit card at a time from lowest to biggest. Meaning, Next month I will pay in full Old Navy. The following month, I will pay in full Best Buy. The third month we will pay in full the Walmart. This while giving regular minimum payments to my BofA. As of right now, we have more money going out than coming in, which is what is making us be in this position. I work full time already and my husband works full time as well and is currently going to school which is what made us be in this position also since he can’t do much overtime. What do you think of our plan? How does the settlement work and what options do you think we will have? If we settle? When do we start the process? I already skip one payment (Discover) and they’ve been calling me. Thank you very much for any help and input you provide.
What are your interest rates on all of the accounts you listed?
I would highly recommend you review my article series on negotiating in first stage collection. That links you to the intro page. Continue reading theough the series by following the links at the end of each piece.
You will also want to review the last several critical reports about settling debt.
Reading through all of that will not only answer your questions, it will answer questions you did not know to ask and prepare you for things to come.
I would also encourage you to call me for a consult. I wonder about your account selection; financing goals in the next 2 to 3 years; and the timing you will have when paying the deals you negotiate.
Man I wish I would’ve done this sooner. As of today, I believe my Amex, Paypal, and Discover are in collections since it’s been a few months. Today I receive a phone call at my work from a Lawfirm in Tucson called Guglielmo & associates. I called them back and asked them to please do not contact my work. He was polite so I stayed on the line. He then told about my options with one of my cards which is Discover. he says my total is $3330.00 and that I can settle for $2498. Is this a good settlement? Where do I go from here? How do I find out if my other accounts are in a settlement mode? I have read many sections in your website but I feel so drained! So much good information but I feel overwhelmed. I would like to put this behind me but unfortunately right now I don’t have settlement money, especially that much. I will go through my mail today and see what I have received from my other accounts. At this point, do the accounts ever to back to the creditor to discuss repayment options or will they stay in collections from now on?
You can probably negotiate a better outcome on the Discover account if you do it quickly enough (before they sue).
You can indeed work out payments or settlements with your creditors when they get the accounts back (if you time your efforts perfectly), but you may not want to. You can sometimes get better deals with the average collection agency than you can with the bank.
What are the balances on the other credit cards? Which agencies are trying to collect?
I want to negotiate a settlement with a US bank credit card what do they usually accept percentage wise? And how likely are they to sue? And I have to say thank you so much for your advice to me and everyone else on here, I’m so impressed by the wealth of information I’ve found on here!
How far behind with your US bank credit card payments are you?
I’m in the 2nd level of negotiations with Comentity Bank. I was charged off 02/18/15 with a balance of $6814. I’ve been paying some law firm that works for them $50/month for four months. I got my tax refund. It was for $1700. I offered to pay a $2000 lump sum. They countered with $3407. I said impossible. I asked if they could go any lower. They came back with $2725. I can’t pull the extra $725 together. Am I about to mess up a great deal in the end because of $725? I told them I would see if there was anything I could sell to a pawn shop since I have no family/friends available with that kind of money. I don’t think I have anything worth that much. Thoughts?
What is the name of the collection law firm that is working for Comenity Bank?
It is not that you are messing up a deal. You do not have a deal to mess up. Messing up is being able to afford to pay a negotiated settlement and not taking advantage of it. You need them to go lower in order to get this settled.
It may be possible to negotiate a lower settlement, but not always. Call me for a consult and I can learn what you have done and said so far, and likely give you some tips to progress this further. You can reach me at 800-939-8357, choose option 2.
I’m currently 175 days late on USAA credit card debt. Our daughter has chronic medical issues that requires surgeries several times a year. We racked up quite a bit of our living expenses on credit cards. We want to call USAA to settle this debt: $20,615. I’m petrified to call them. I only have $4000 to offer to settle – otherwise I’ll need to move on to the next creditor in line. This is still in stage 1 – getting letters straight from USAA. It hasn’t been charged off or sold to anyone else.
Any advice?
Is there any possibility of settling?
I really don’t want to claim bankruptcy but this is our largest debt – if they won’t settle then we’ll have to file Chapter 7.
Settling this debt for $4,000.00 may be a bit too optimistic. You may be able to get close though.
Post the other creditors you owe and the approximate balances on each. Also post whether you are paying any other credit cards on time each month, and whether you are paying a mortgage or car loan.
I can offer some negotiation strategies to consider once I have a better picture of your debt.
We offered our settlement of 4000 to USAA today. They said that they will never settle for less than 70-80%. But they told us to call back next week for their counter offer. They also said that whatever was not paid would be considered income and we would have to pay taxes on that lump some at the end of the year. That was new information. No one has mentioned that before.
We pay 1300 mortgage on time each month
No car loans (sold the car to have this 4ooo to pay on a debt)
Credit Card Debts:
Bank of America 4,923 – 1 month late
Bank of America 8,371 – 1 month late
RCI/ Barclays 10,477 – 1 month late
USAA 20,615 – 182 Days late
My husband wants to file bankruptcy since the bankruptcy lawyer told us we could end all this for our payment to him for 1000.
I still want to try and do the right thing, but it’s nearly impossible at this point. It will take years to work through all this. That’s if we don’t get sued 1st.
Ugh! It’s been hard enough dealing with our daughters medical issues. And now things are just barely normal, we are dealing with the aftermath.
I’m at a loss.
Thanks for your advice.
Filing bankruptcy, if you can do chapter 7 where your debts are discharged, is often going to be the better alternative to negotiating settlements on your credit cards.
USAA does settle credit cards and loans for less than you were told. The 20% you offered is a bit optimistic, but if you choose not to file bankruptcy and want some help settling with USAA for better than they countered, let me know.
I estimate you are going to need to raise another 8 to 10 thousand to successfully negotiate with BofA, Barclay, and USAA. How long would it take to pull that together?
Talk to a bankruptcy attorney before making any other plans and weigh the costs and time with what I just shared about settling. Let me know what you are inclined to do after that.
I have an article about how to find your bankruptcy attorney that you will find helpful.
I’m sure with our current level of income (which we are trying to increase), it will take at least 1.5yrs to raise the extra money – unless we could borrow it from a family member.
And we did have a consult with a bankruptcy attorney who told us he could end all o this for $1000.
Was that quote including court costs? There are administrative fees that will take you closer to $1,400.00 if they were not included in the quote. That is still hundreds less than the national average, so a fair price.
That is still a reasonable time frame to get through a settlement process. I am inclined to encourage the chapter 7 bankruptcy route given it is the most cost effective, and offers far better relief in the shortest time.
If for some reason you do decide against it, call me for a consult at 800-939-8357, choose option 2.
Thanks Michael!
I have a credit card debt from Gap credit card and I owe 5k I wanted to settle but I only have 1k do you think they would settle? what should I say? what can I do? I am unemployed and I am a single mom in school currently doing internship. I have 1k to offer, can you guide me on what to do?
How long ago was it that you last made a payment on the your Gap credit card?
It is not common to get GE Capital or Synchrony to settle for 20 percent. The account may settle that low later down the collection pipeline, but that is not all that common either.
Hi Michael,
I’ve spent several hours perusing your site and learned a lot. I have a situation that is driven by time constraints. I live in Tennessee. I have two credit-card collections accounts with CACH LLC. One was originally with BofA for $19,000 and the other with 1st National Bank of Omaha for $11,000. Years ago, I had worked with Money Management International (MMI) to settle the accounts (which had much larger balances back then). Then I went through a divorce. My child support and alimony ($1,600/month) and apartment rent ($700/month) precluded me from continuing with the MMI program ($990/month).
I stopped paying MMI in 2011 and left the program. The current debt balances of 19,000 and 11,000 have not changed in 4 years and were sold to CACH in 2013. They have made limited attempts to settle via US Mail (approx. 60% of the balances), but I have ignored all communications with them and never answer calls from them.
I had planned to let the SOL run out (6 years in TN?), but as my credit score improved over the past couple years, I decided to try to buy a house. With a FICO score of ~635, an FHA loan was my only option. The lender seemed upbeat. Entered a purchase agreement for a house ($153k mtg.) and it’s due to close June 3. Lender came back and said I will need to settle the collection debt before loan approval.
So, I’m considering contacting CACH to negotiate a settlement. (Also considering stopping the purchase process altogether.) I’m not cash poor, but can’t afford an $18,000 settlement. I would need a payment plan. My child support is beginning to taper down (one kid graduates high school next month), so I could afford up to $500 a month or so. I know you don’t recommend over 24 months, but I would need at least 36 months if not 48 or 60.
Would CACH even go for a payment plan? This close to the SOL running out, with no luck contacting me, would they think “a payment plan is better than getting nothing.” My only phone is my cell phone number and they don’t have that number. I plan to move in June, house or no house, and won’t file a forwarding address with USPS. I could be tough to track down in the next 18 months (or so I think).
Or do you think this is just a terrible time to be thinking of buying a house, even with an FHA loan? I would like to settle the debts even knowing they will fall of my credit report in three years. I have made several presumptions in this post, so feel free to correct me and give me a jolt of reality.
I would put things on hold unless you can come up with about 12 or so thousand dollars to settle in a lump sum. That could mean you will not be in the home buying market until these age off your credit reports, and not just the SOL to be sued in TN.
Your credit being run for a home purchase is visible to the debt collectors at Cach. Now is not a great time to negotiate with them, but it could be done if you are able to pull together the money.
Monthly payments to the debt collector in your situation, with the amounts you can afford, will put your ability to qualify for a home loan out for roughly the same amount of time.
Thanks for the quick feedback Mike. Here is one of the options I have: I am eligible to take out a 401k loan of up to $25,823. In fact, I have already begun the application to get that loan, which will be approved if I provide the 401k Plan with proof of home purchase, and I have a fully completed contract. At that amount, my monthly repayment (to my own 401k account) will be $226. If I do that, I could pay $12-14,000 to settle the collections account and still have plenty left over to make the down payment on the house ($5,355) and various purchase expenses (the home seller has already agreed to pay closing costs up to $6,120).
Believe it or not, I hadn’t even thought of using the 401k loan proceeds to pay off the collections debt (my head was so wrapped around doing it in monthly installments). Do you believe I can complete the negotiations with Cach and pay off the collections debt in time to close the mortgage loan within 6 weeks? Obviously, time is of the essence in procuring this payoff and documenting it. The mortgage underwriters will want to have full visibility (or even payoff control) throughout the transaction. Would it be beneficial to engage CRN services to help negotiate the settlement; and can your people work simultaneously with the mortgage lender to facilitate the transactions?
We have done these types of transactions successfully.
I would suggest we talk on the phone about strategy and I can also dig for any additional pot holes that could get in the way.
Send me an email (the same address you get these comment notifications from) with your number and the times tomorrow that are best for us to connect.
How were you able to go years on a $19k and $11k CC balance without getting sued?
Hi Michael,
My situation goes like this. I was about $20k+ in credit card debt a few weeks ago and was able to settle or pay in full 4 of the 5 cards I have. BOA, AMEX, 2 CHASE and Discover.
The only cards showing up as settled on my credit report are the 2 chase cards and it states settled for amount less.
The BOA first payment of 3 is due at the end of April so it has not showed up on my credit report yet.
The Amex I paid off in full.
Unfortunately I didn’t realize there was a sweet spot (between 150 – 180 days) for negotiation prior to receiving my latest letters from Discover and doing some internet research because they got me alarmed. Discover is my last debt and is now 213 days due, last payment date September 5, 2014.
I received 2 letters:
Letter dated March 10,2015 – I received a letter from them stating that they would take $400 off my $5,535 debt by using my tax return to pay off as an incentive, the letter states that I have until April 30, 2015 to secure this offer.
Letter dated March 8, 2015 (2 days earlier) – Letter states that attorney placement is pending. And that my balance is $5,651. It states I can resolve this by calling and making payment arrangements and that I have until April 30, 2015 8pm eastern time to do so. If not account will be forwarded to an attorney seeking judgement against me.
As you can see first of all there is a discrepancy in balance total in both letters. Both letters are communicating different messages and only dated 2 days apart.
I have not communicated with Discover at all since September 5, 2015 and don’t know how to proceed with this.
I have been with them since January 25, 2004 and have never had a late payement until this last couple of months.
My background – I lost my job March 2014, but had some savings. I started to live off my credit cards while trying to find work. I had to move back in with my parents at the time. Prior to losing my job I never defaulted on cc payments or student loan payments.
My student loans which are also in the ballpark of around $20k I kept paying with my savings bc my parents and cousins had co-signed with me and I didn’t want to ruin their credit scores. My score is in shambles now around under 600.
I met a man and am now living outside the US, but my parents keep receiving my creditor letters in NJ. They know my financial situation to a certain point, I didn’t want to worry them since they are both living off of social security. For the last few months any time Discover calls my dad just said I didn’t live there anymore, but they just kept calling.
I have absolutely no assets in New Jersey,United States where I used to live, no home, car and less than $200 in both bank accounts. My life now is shared with my partner and he takes care of me.
I am looking for work in my new home country, but it’s 1 off jobs here and there and I’m saving as much as I can. I can pay a lump sum of $2,825 from the money I have and some money borrowed from family.
I am trying to move on with my life and want to just be done with all these debts. That is why I settled my other credit card accounts. I still have my student loans and can find the cash to pay them off month to month. I want to just settle this debt with Discover.
How should I proceed? What should I say when I call discover? Do you think I have the ability to settle still since I’m 213 days out now and attorney threat was sent? Should I mention the other settled accounts?
Also, I plan on calling via skype which has a american number attached to it. My letters are still forwarded to my parents who can scan and send me. I can’t give them a number to contact me at because I’m no longer in USA and quite frankly I don’t see why telling them I’m outside will help my situation very much.
Any advice will help so much, Thank you for all the advice you have already given out. So much knowledge on this website.
Tammy
I think you have a fair shot at settling the Discover credit card for the amount you have available. I see settlements with them usually around the 50 percent range, but a few around 40 percent too. You are right in there with what you can afford to settle for if they are willing to accept your offer.
I see no reason not to tell them you no longer live in New Jersey, and do not plan on returning to reside in the US anytime soon, if at all. It means their sending your account to an attorney has no meaning, as they are not going to sue you outside the US. And it would not be a bad idea to go on record with them about that fact.
If you are unable to settle and pay with the bank before April 30th, wait for your parents to get the collection notice from whoever Discover sends the account to, and post an update with who that is, and lets go from there.
Be sure any settlement agreement you get is in writing.
Hi Mike!!!
Just got off the phone with Discover was able to settle for 40% > $2,312, original balance $5,651.
They tried to counter with 60% at first but I once again explained that I could not afford that at this time. I obviously explained my entire situation and at first the cust serv rep wanted to put me on a plan, $90 a month at 9%, I explained to her that monthly payments are not something I can do right now. That I’m dedicated to eradicating this debt and not falling off the wagon again with missed payments.
I want to thank you for giving me the confidence to ask for the 40%.
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I have another debt settlement with BOA on a balance of $7520, they approached me online via my bank portal asking if I just would like to settle for 50%. Since I’m living outside USA I agreed right away because I didn’t want to deal with the calls and waiting for settlement letter being mailed, they just sent me pdf online right away.
My first payment of 3 for $1,253 is due tomorrow with the last payment due June 8th. I was wondering because I’ve never seen anyone talk about this, but if I were to offer to pay the whole thing off in one shot right then and there over the phone, would they be willing to further reduce my debt even though I’ve already agreed to this settlement?
I understand 50% is good, but I’ve been paying them exorbitant interest for years now on this particular account and have been with them for 12 years. I would like to save as much as I can at this point.
Nice work with Discover!
Renegotiating with BofA now can be a mixed bag. You can certainly try to get this changed in their system with a phone call, and target your settlements for 10 to 20 percent lower. But you may find you have to not make the payment on the current deal, and let a little time go by before renegotiating.
I would make the call and give it a shot.
Hello…hope you can help me as I am very confused what to do. My husband lost his job back in September 2014 and just recently found a new job. Salary is much less than his old job. $25k less a year to be exact. So we have about 18 credit cards bills ranging from $14000 to $1000 balances. They total $50000.00 Companies ranging from amex, cap one, Chase, citibank. We maxed on all credit cards and just making the minimum payments. I called a debt settlement company and if I pay them $750 a month and pretty much stop paying my bills for about 6 months they will contact the companies and settle. We should be done in 3 years. After reading a lot of your posts should I try to settle on my own? The debt co charges fees but it’s included in the $750 payment. I did the math and we can afford a max of $800 a month to put away to try to settle each card one by one. We live in NY. We own our home and mortgage payments are on time. We also lease our car, also on time. We really don’t want to file for bankruptcy.
It’s difficult to sleep at night with all this debt hanging over our head so appreciate any advice you can give me!
Negotiating and settling credit card debt yourself is not overly complicated, especially the ones you target for settling the earliest. It appears from what you shared that you are current with payments, so would be speaking with the banks themselves to settle the first few accounts. This would be just before the 6 month late mark, similar to when the settlement company referred to being able to start getting agreements negotiated.
I have coached thousands of people through the process of settling debts on their own. The largest amount of stress and anxiety you may go through is often going to be between now, and the time you knock down your first settlement. Not just because you have to wait to be several months behind (often 5 or so) to get the best deal negotiated, but because this is the largest period of time you will be operating outside your personal experiences, so a bit in the unknown. After you succeed with your first negotiation, you will have climbed most of the worry wall, and now have some confidence about the remaining settlements you will do.
There are many pages on this site that are dedicated to helping you understand the process of negotiating settlements on your own every step of the way,and in virtually every circumstance. Myself and others are here to participate in the comments to offer feedback and deeper details as they can be applied to your situation along the way. So… it is easy to see I am a fan of DIY.
If you are up to settling yourself, I am up for helping you. I often find the fees you save can mean you finish a year or more faster, which could have a pleasant byproduct of lowering the risks of being sued for collection.
If you would like to get an estimate of time, overall settlement percentages, and how I would prioritize which debts to settle first, post the credit card bank, and rounded balance for each.
Hi, I have a question about negotiating a debt.
I currently owed $3,700 to PayPal master cards. Ive been in collections before for like 90 days. But then I used some kind of protection that i didn’t know i had. They payments were very high before for like $300 a month. Now I’m not able to make the payments again and I’m 1 month late. How should i go about it?
Are you confident you will be able to save up about half of the credit card balance over the course of the next 4 to 5 months?
Just to follow up on my first comment. Capital One has already closed my account but I dont think they have sold the account to a collection agency. Maybe they discharged it into an internal collection? They have stopped calling me for the payment and have received no letters. The account was probably closed for a year now.
You can call and ask the bank who they placed your account with for collection. You may catch it with CapOne in between debt collector placement, you may learn your account has indeed been sold.
There is rhyme and reason to an account being flagged for no settlement options. There are also instances where it seems arbitrary.
How long did you have the account before payments stopped?
How much of the balance at the time you stopped paying was from transactions in the prior 6 to 12 months? Were there recent balance transfers to that card, or cash advances?
I have followed your advice on how to negotiation with my credit card companies on my own and so far I have settled with all my credit card companies except one. I had a credit card opened thru Capital One on my sole proprietorship business. Even though I have settled on a personal credit card account with the same credit card company, they refuse to budge on this one. Any advice?
I don’t know if it would matter, but if the actual court info is important enough I’m not opposed to calling them come monday if they would be able to give me that info.
It would be interesting to know what the court record shows about service of process, but the fact you were not even living in New York means talking to an attorney with experience vacating judgments is a reasonable next step regardless.
Hey Michael,
Like most others who have posted here I greatly appreciate what you already have, and are still creating here. Of all information on the internet your website is by far the most helpful.
Like another poster, I also WWOOFe’d for about a year, 2011-2012ish, with no money, no real place to stay, no real job etc.
Prior to that year late-2009-2011ish I had a pretty severe drug and alcohol problem wherein I took on some debt which is as follows:
Capital One- Maxed out a $3000 dollar credit card.
Attempted Suicide- Hospital bill I remember was also about $3000.
Ambulance Ride- from a bar one night to an emergency room, I remember before throwing it away the bill being roughly over $1000.
Student loans- I think had been about $5000 total when I started drinking and dropped out. I’m not too worried about them, the government has been taking what little refund money I have accumulated and so long as it pays down the debt and keeps them otherwise off my back its fine by me.
I am still currently trying to get access to my credit report. I have to mail my personal info to Credit Karma since I didn’t answer all of their security questions right. But, I remember that this is pretty much the total brunt of my debt, plus I’m sure whatever fees, penalties, and interest they have decided to tack on.
Before you or anyone else reading this worries, I am doing much better now clean and sober and working to keep my life on track. After that rough year like I said, I started WWOOFing, traveled, met some awesome people, and really got some perspective, experience, and a little bit of inner peace.
Ok, so this is a little bit of a cluster. I have been living settled into a particular town for 2 years now. All of my debts were incurred in New York (Where I’m sure I’ve been sued by now). I had employment in multiple states in the past few years. I am currently a resident of Virginia, but actually live in Tennessee. And I just terminated a one year employment as a CNA, so I am unemployed at the moment. And my addresses and phone numbers change more than Snoop-dogs stage name.
Where I’m getting with all this is; I’m assuming I am probably considered pretty “uncollectable” and at this moment “Judgment proof” to anyone who owns my debt. And I’m worried if A.) Contacting collection agencies might stir up the hornet’s nest so to speak and get them all after me, B.) Agreeing that the debt is mine and ruining the roughly 3 years of statute-of-limitations I have accumulated and C.) If I could actually use my current circumstances to my advantage in negotiations.
I have no bank accounts at the moment, no car, very little possessions, rent a cheap studio apartment, I’ve been paying all my bills by money order or prepaid debit cards (expensive I know), but most importantly I have managed to save up about $4000 in cash over the past year.
My future goal is to create a self-sustained micro homestead. I can do this relatively cheaply. I don’t intend to use any credit to do this, I simply intend to save and buy everything I need in cash, so my credit report is of little concern to me. My concern however is that if I begin acquiring assets free and clear, such as land and vehicles that they will be at risk for liens and therefore foreclosure, seizure, if I get an over-zealous collector on my track.
Before I get another job and put my pay at risk for garnishment, and most definitely before I purchase assets, I want these things gone from my record. As I’m sure can be imagined, they are not only financially unpleasent, but also bring up a time in my life I would very much like to leave behind me.
I have been trying to piece together the best way to accomplish this and obviously it is a bit daunting and confusing to make sure I do it properly. Do you think I have enough money? Do you think I can settle in a short enough time so I can feel comfortable receiving pay without fear of garnishment?
And, one thing I haven’t seen too much on in posts is; when you reach a settlement amount don’t you have to get it in writing? I most certainly wouldn’t want to wire funds from an account with only a verbal arraignment, or just sit around waiting for them to mail me paperwork to sign and send back. Do I mail a form? How does that all work exactly?
Again, even if you don’t respond to this, everything I’ve read so far has helped a lot. Thank you!
I think you have a fairly decent shot at resolving all of those debts, other than the student loan, using the 4k you have. But lets see if you can find out who has them by viewing your credit reports first.
I am not sure what the issue was with credit Karma, but you are entitled to a free credit report direct from each of the 3 major bureaus every 12 months. You can get those by writing in, and also get them real time from http://www.annualcreditreport.com – try that and see if Capital One sold off your debt (debt buyer would likely appear as a new entry, and Capital One will say there is a zero balance on the account). Also look to see if a debt collector is reporting the hospital and ambulance bills. I would want to know if they are appearing on your credit before reaching out to the providers directly to find out the account status.
I would offer different feedback depending on who has the accounts.
It is possible that you were sued on some of these debts without your knowledge back in NY. That kind of thing is happening less and less these days, but was still very much a concern in 2011. If you were sued without your knowledge, it will change your approach on whichever accounts those were. And that information may also show under the public record section of your credit report, or can be found if you call or access the NY courts records online.
Post updates with what you learn and lets go from there.
I cover how to get your settlement deals documented, before you pay them, in more detail here: https://consumerrecoverynetwork.com/debt-settlement-letters-agreements/
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Hey Micheal,
Sorry it took me so long to post back, I had to mail in to get my report and I just got it today.
None of those old medical bills are showing up at all. The only things I see is my student loans and that credit card.
Capital One did sue me as of 01/2013 for $3,345.
As far as I can tell they still have the debt, because they have been charging it off every month and I don’t see any entries except for my student loans. The last charge off amount is for 10/14 for the amount past due of $4,042 with a credit limit of $3,000.
Again, thank you for all your help.
What state is the judgment in? Were you aware of the suit at all, until now? If you were not, it would impact the way I would approach handling the situation, which may/may not include negotiating a settlement at all.
Also, I know you mentioned you have little concern for those student loans right now, but if they are all government backed loans, you can get them out of default and on an income based repayment plan that works with your cash flow.
The medical related collections not appearing on your credit places them at the bottom of the priority list, at least right now.
Let me know the state, and also the name of the collection law firm that sued. Also, many courts have online access to their records. See if the court you are dealing with does, and do a search for your case by name. Look and see if you can tell what address the process server said they went to in order to serve you. What type of physical description was given by the process server for who it was they served, or whether they mention anything else about the service.
The judgement was in New York and no, I had no idea I was being sued. I assumed I would have been sued but was certainly not served, especially considering I was in Tennessee when it was filed (01/2013).
I looked for public records but the main website of the court doesn’t seem to have anything other than a reference to some federal recomendation to do so as of 2004. And as far as a collection firm that sued- the only one I can see is on the public records section of my credt report and that only lists Capital One as the plantif.
I cannot thank you enough for this information and help, seriously.
What is the name of a large city nearest the court where the judgment was filed?
You have the option of fighting the sewer service, and for perhaps less a cost than settling with the bank.
I can email you contact info to any attorneys I know of in the area that would offer a no cost initial consult, and who have experience in this type of consumer law.
That is the direction I would take on this, or at least look into what all is involved.
I would look next at using my available cash flow to deal with getting my government backed student loans out of default.
It was filed in Albany. I found a few court records but not apparently for whatever court my case was filed in.
Even if the judgement gets voided, won’t I still owe the debt and likely just get sued again in Tennessee, just with having gone through all the hassle and money of vacating one judgement just to wind up with another?
I do think getting my student loans out of debt is a good idea and working on rebuilding some credit, but if I can settle this one account (the most toxic and aggresive one) I think I’ll be way better off.
Depending on the law firm, do you think if I tell them my circumstances (no job, no assets, etc.) that they might settle for maybe %50? Or, does the fact that they have a judgememt against me just make that highly unlikely at this point?
I sent you an email with contact details to 2 experienced debt defense attorneys in Albany. Both likely offer an initial consult at no cost.
New York has well documented issues with sewer service. Whether or not you were pursued again for collection could depend on the tact taken by the attorney to get the judgment vacated. I would also base my concerns on that happening with where you reside. I had Virginia in my head when typing, which is a 3 year SOL on credit cards like this. Can you be certain of the last time you charge on the card, or made the last payment?
I do think you have a good shot at settling for 50 to 60 percent. You would not appear all that collectable being out of state, no job, no assets, etc. But I would talk to one or both of the attorneys I sent you first.
Hey, I settled with Capital One’s lawyer’s Malen and Associates yesterday for $2100.
As soon as I get a job I’m going to put my student loans on the income payment plan deal, and hopefully if I do O.K for long enough, then someday soon I’ll be financially stable enough to go hunt down those old medical bills and make that wrong right.
I absolutely dreaded calling these people, so for anyone who is curious this is pretty much how it went;
-I called the number on my credit report, gave them my social, and some guy gave me the number to their lawyers.
-Got a hold of the lawyers, they asked how they could help me. I told them I wanted to pay my debt. The lady said “OK the balance is $4,076.00. Will that be a card or check?”. I said “Well, I don’t have the full amount.” She said “Ok sir, what are you willing to offer?” I told her I had $1520. She told me that was too low and made a counter offer of $3600 (Roughly 90%). Told her I had some family I might be able to get a few hundred from.
-Called back next day, she reviewed her stuff on me and said she had “Submitted” my offer of $1520 (I’m assuming that means there is probably a supervisor who reviews and approves settlements?) She put me on hold, and as soon as they do put you on hold, music starts playing, they do not stay on the line with you so there is no chance for sob stories or anything like that really. But, after taking me off of a very quick hold time, she immediately offered me the $2100(50%ish). They faxed me a settlement letter via the local public library, and I sent them the money through Western Union.
That’s it! No more, no less. Each phone call was quick, to the point, and pretty much completely painless. Alright, that parts out the way.
Micheal, I am sure that you are probably already aware of how decent a thing you have going on here is, but I intend to make sure of it.
I could use many colorful words to express my overall disdain for finance. It is to me, remarkably distasteful that someone has profited off my misfortune. I am well aware of personal responsibility and am absolutely at a high degree of fault, but having vultures come in after the fact, and make legal claims to the fruits of my labors for a relatively extensive foreseeable future angers me greatly.
I saw the same thing happen to my parents when their farm was foreclosed on. They made payments for 15 plus years. A family was raised on that land. We buried our beloved animals on that land. We built and improved the barns and paddocks with our own hands. My parents marriage fell apart and the payments stopped being made. Again, they were not in the right, but when faceless people who know nothing of that property, or the people that lived, loved, and worked it, begin making legal claims to it based on numbers they literally manufactured on a computer screen a decade-and-a-half ago I can’t help but find myself with not only personal reservations but an overall moral objection.
Credit is such an important part of life today and literally nobody helps people understand all that entails it. When people don’t know what is happening, when they don’t know what they are getting themselves into, when they don’t have strategies to avoid pitfalls, people will exploit them. This is an environment where it feels practically impossible to not come out having been taken advantage of.
This website, and your advice, is the only place I found that gave legitimate, practical advice for dealing with this, and you asked for absolutely nothing in return. Thank you.
I intend to rebuild my credit and hopefully by myself a house, buy some solar panels, and grow some of my own vegetables. I want little else in this world other than to do this and be able to live in relative peace. Before finding this website, I had completely written off that I even had a capacity to do this anymore. So, thank you so very much. I hope the absolute best for you, anybody who works with you, and for everything you’re doing here.
Thank you for sharing that Jason. And great job getting the account negotiated and settled.
I am close to 180 days (9/26/14) and am discussing settlement with BofA. If I am not able to come up with the 30% they are currently asking I understand the account will be charged off; I also understand (from the representive I spoke with last time that the settlement amount might be lower after charge off. What is the effect on credit report if the account is settled prior to charge off or after charge off? (is it worth trying to stretch beyond my means and put myself and family at risk to settle prior to charge off)
It is never a good idea to put you or your family at risk over an unsecured debt. That said, you cannot be certain you will see a 30% offer again, so taking some lumps now, in order to save the most money over the long term, can mean sacrifices now make sense.
It is possible for your credit to bounce back a bit quicker if you keep this account from charging off and going to debt collectors. But that is situational. If you have, say 3 other accounts, all of which will charge off, the damage would probably be the same. If this is the only one you have to contend with… it would perhaps be another reason to settle with your bank now.
IN MAY, 2014, MY HUSBAND HAD TO QUIT WORKING DUE TO SEVERAL SERIOUS ILLNESSES. HE IS NOW ON DISABILITY UNTIL DOCTORS CAN WORK OUT ALL HIS HEALTH ISSUES. ON TOP OF THAT, WE JUST FOUND OUT THAT THE PROPERTY TAXES FOR HOUSE BE BOUGHT IN OCT 2013 WERE NOT PAID BY THE TITLE COMPANY BUT WE WERE INFORMED DIFFERENTLY, NOW I CAN NOT AFFORD TO PAY OUR CREDIT CARD DEBT DUE TO THE FACT THAT I HAVE TO COME UP WITH THE PROPERTY TAXES FOR 2013 ASAP AND PROPERTY TAXES FOR 2014 NO LATER THAN JANUARY 31, 2015
WHAT I WOULD LIKE TO KNOW IS: Is it better to settle credit card debt with the card company or wait until it goes to a debt collector and settle with them? Which will accept a lesser percentage of the debt? Thank you.
It varies from one creditor to the next, and can also be impacted by how collectable you look on paper (what your credit reports shows about some bills being kept current – if any – and the ones not being paid, and your current income and expenses). Read this report about specific accounts for negotiating and settling: https://consumerrecoverynetwork.com/credit-card-debt-to-include-in-settlement-plan/.
If some of your accounts fit criteria in that report, you can find negotiating with later debt collectors will offer the better savings.
Who are your creditors, and the rounded balances for each account? How late are you on each account? Are you limited without the ability to settle all accounts quickly, so will have to choose which one(s) to settle with before charge off, which means you will have to negotiate with bill collectors later?
Hello,
I have found your website very informative and helpful to my wife and I as we have tried to dig ourselves out of a debt. Short story, is that we are a younger couple (around 30, 2 kids) from Florida and had accrued a lot of medical debt (surgeries for wife, and having 2 kids), and some old college bills. We (foolishly) paid many of these debts with our BOA credit card and have been paying the various large debts on it for 5 years. We also are in the final stages of a short sale on our old house (we bought in 2007 right before drop, both had income cut, and didn’t pay for 18 months) and are currently renting a home.
We’re doing better financially than we were when we started short sale, but are still just barely breaking even monthly. She has started a new job recently making less money than before (old company was on shaky ground), but greater potential in the future. I am starting a new position after the first of the year with a new company, with a a slightly higher income. We’ve exhausted what little savings we did have, and are contemplating settlement on our CC debt. Now, we’re down to about $2k on our medical bills (no interest), and we have a Chase CC we use for normal purchases that’s paid off monthly (gas, groceries, etc), and a BOA credit card with $13K in debt (all large purchase, i.e. medical, college bills, car repair, etc.), never paid late.
Since our credit is already shot due to short sale (last I saw it was around 600), we’ve debated trying to settle this BOA account. We “could” scrape by and pay the minimum until I start the new job and then try to pay off the rest over time. But, we had debated trying to settle a smaller portion, allowing us to be at ground zero come the first of the year, and actually have some cash on hand, and breathing room in a monthly budget. It’s possible I will receive a signing bonus at new job which we could put towards this debt (or repayment of family loan for settlement), but we’d still owe 50% of the deb, and I’ve always heard cash on hand is better than credit. My understanding from reading is that BOA is best to settle around 90 -120 days past due. Since we’re in a short sale process, we aren’t looking to buy a house for probably 3-5 years or so, I’m leaning towards this option. How much of a hit are we looking at to our credit? What would you advise?
It is often best to settle with Bank of America after the 150 day mark. I would typically not try to negotiate a deal at 90 to 120 days late. Not unless BofA brings the topic up first. Post an update if that were to happen before taking any deal, as the savings in the early months of delinquency can often be less of a benefit than when you are fast approaching charge off.
How settling with BofA will impact your credit is different from one file to the next. The year plus late pays on the mortgage, and the soon to be short sale on the property will hurt you for some time going forward. Your credit reports showing 4 to 5 months of late payments, followed by a settlement for less than full balance, will blend right in. I would not carry a balance on the Chase card until after the settlement with BofA is done (you don’t now, but worth pointing out going forward).
If it were me, I would first look to how I could succeed with an aggressive debt roll up strategy. If I am not confident that I can apply extra cash to my minimum payments each and every month (an unplanned for cost in a month would set me back), I would likely look to settle with BofA between 150 and 180 days late, and would be realistically targeting about 5500.00, but would start a bit lower with my offer.
Thanks for the reply. We could probably swing a roll up, but based on readyforzero.com, we’re still looking at 18 months to pay it off based on next years projected earnings, and paying $15K back. That’s where we’re on the fence. Is it better for long term (it definitely appears better short term) financial health to just wipe the slate clean and take the hit on the CC settlement within a few months of the short sale, or does it make more sense to pay attempt to pay it down over 12-18 months, and hope nothing bad happens and puts us in a hole again?
That’s my concern, that you would be one flat tire away from not able to make the payment.
It does make more sense to settle and stop the monthly cash flow bleeding from purely a dollars and cents view, and from other angles as well. I know I would be geared to follow the settlement path if I was not able to put money into an emergency fund, while still meeting all of my other debts (which sounds to be the case with you).
That said, 18 months is a smaller window than most face in their debt roll up strategies.
I cannot make the decision, but can help you along the way once you do decide.
correction – it was Gatestone Collection Agency that contacted us
Hi Michael,
I stumbled across your website and have spent my afternoon reading through the wealth of information you are providing. Here’s my situation: My husband’s business is failing and he has an American Express card with a balance between $25,000-30,000 that he cannot pay. We just received the letter from Gladstone Collection Agency. I don’t believe our debt was sold to them, but they are collecting for AmEx. At this point we are current on everything else – other credit cards, mortgage, HELOC, all bills. It is just this bill that we cannot afford. I spoke to a Gladstone representative briefly yesterday. He spoke to me because he said I’m a “secondary” card holder. The amount they are asking is no where close to what we can pull together right now. They weren’t offering a deal, just trying to bring us current. I don’t see how we are ever going to get out from under it while they are piling on interest rates every month. I am afraid of the unknown. Will they sue us, garnish my wages, put a lien on our house (which does not have a lot of equity with the mortgage and home equity loan)? We are barely making ends meet as it is. We live in California, a common law state, so I assume I’m just as liable as he is for this debt. Is that correct? I checked our credit reports yesterday and the American Express card does not show up on my report, just my husband’s, and it says “collection account” (although the amount currently in collections is only a portion of the $25.000). Do you have any advice for me to help prepare me for what lies ahead? I have always been so responsible with money and it is really stressful to have this cloud hanging over my head. Thanks for any help you can give.
How long has it been since you stopped making payment to American Express? Can you raise 50 percent of the AMEX balance in order to settle, and if so, how long will that take?
Yes, you have an increased risk of being sued on AMEX accounts, and for balances this size. Your best opportunity to settle with AMEX is when they are using collection companies like Gatestone. But Gatestone will only have the account for so long. If, or when, the account lands with a debt collection attorney in California, your settlement options still exist, but typically for higher percentages, or perhaps not at all.
Your being current with other unsecured debts (not your mortgage or car loans), and that showing on your credit reports (which debt collectors and attorneys can see), makes you look highly collectable. Of course that is not the case. You run out of money before you run out of month. But the information they see will often dictate the decisions they make about your account.
Add up the monthly payments you are making to all of the other creditors (unsecured debts like credit cards, lines of credit), what is the total? Who are the creditors you owe? There may be creative ways to approach your situation, but lets walk through a process of elimination first.
My husband says we are close to 120 days late on the American Express bill. I humbly called a relative to see about help and right now they can send us about $6,000 but will see what else they can do. In the meantime, my husband spoke to a Gatestone representative and they offered 3 months of very low interest, followed by 9 months of not quite so low, but still better than 27% interest (I think it was 1% for the first 3 months and 9% for the 9 months). Basically, that gives us a year to get the money together before the interest rates go crazy again. But I don’t really think we can come up with that much extra each month, so ultimately we’re just setting ourselves up to be in the same spot in a year. Nothing was mentioned about settlement for less than the full amount. Since you said we are “highly collectable” I’m thinking that they probably won’t be willing to settle – a punishment for just letting this one account get away from us. We definitely run out of money before we run out of month and it feels like it is happening earlier every month!
We have 3 credit cards – 2 we pay off in full every month, 1 has a $4,000 balance that was a recent balance transfer (that card will have 0% interest until August 2015 if we put nothing else on it).
We have a home equity line of credit and a mortgage – both current. We have tried to refinance for better interest rates and increase of line of credit with no success.
My husband’s business is where the problem lies. He has the late American Express and another $25,000 line of credit with the bank – he has remained current on that. The lines between the business and our personal finances have become so blurred (our home equity line of credit was for the business as well as the $4,000 balance transfer). Writing it all out just makes me feel so foolish for letting it get so ridiculously out of hand.
Any advice you could give on dealing with American Express would be greatly appreciated.
You may have more options to settle the AMEX account with Gatestone the closer you get to 180 days late. If you can pull together 50% of the balance from friends and family, selling the dirt bike or other items (hypothetical here, no idea if you own a dirt bike), you may be able to settle. But with all else being current, they may not want to, or may get sticky at something more like 60%.
You do need to settle, or agree to more affordable payment terms, as in my opinion, you are the highest risk to be sued on this account.
Gatestone wants to get you to do something on this account with them. It is how they get paid, and your account contributes to their overall performance numbers with AMEX. They are very much part of your solution here. You may want to try calling in a couple of weeks, and try talking to the same person every time. Lay on the personal hardships, and trying to keep the business going and failing. You are setting yourself up for a later settlement, or better/longer payment terms as the account approaches and passes to charge off.
Cindee – If all you have to weather, at least right now, is this single account, you are going to be fine. Not a fun time, but things could be much worse. You are going to need all available cash flow to throw at a settlement. And settlement is what I would want to do here, as monthly cash flow appears to be unpredictable, so paying something to keep them at bay, only to stop paying later and still need to raise the money to settle, is a waste of resources.
So I should wait another 2 months to try to settle with them? If so, what do I do in the meantime (besides try to gather funds – which we are working on – talked to the bank yesterday about increasing our heloc a little bit – maybe give us another $10,000)? We are supposed to call Gatestone today to tell them if we will accept the lower interest rate plan. Should we reject that? How do we bring up doing a cash settlement instead? Do we even put that out there right now? Obviously they are expecting us to make some sort of arrangements with them immediately. How do we stall that?
P.S. No dirt bike – and we drive old cars. We have lived very simply for a very long time, that’s how we’ve lasted this long!
If it were me, I would call and say something like “I have agonized over bills, and what we can accurately assume our household income will be, and there is no way I can commit to any payment plan right now. I did confide in a family member what is happening with me right now, and they offered to help, but only if the help takes away a payment burden. They said something about settling a loan for less with a bank, and to ask about that. If that is possible with you, to settle the AMEX account, and it is an amount she can afford to give me, she is willing”.
This way I am leaving the options for payment plans, or settling, and hopefully getting the Gatestone rep to open up about what settlement could look like on this account.
I stumbled across this site: https://getoutofdebt.org/29430/how-to-settle-american-express-credit-card-debt . It was written in 2011. Is the advice given still valid?
For the most part yes. If you want one on one support, or DIY debt settlement coaching, Charles can help. Check out his website at http://www.zipdebt.com.
Okay, my husband called Gatestone this morning – just to touch base and tell them that we’re working on it. We are trying to increase the credit limit on our HELOC (but I’m feeling doubtful that that will happen with the AMEX collection on my husband’s credit report) and trying to see what kind of help our relative can give us. I told my husband to try to pin down where we are on this – how many days late. At first the agent said over 150 days, but then at the end of the call he said we’re a week away from 180 days. My husband hesitantly mentioned settlement and the agent said that AmEx has given them authority to settle for $4,999 off – not a lot when we’re still talking close to $25,000. We did not counter, just said that we will continue working on it and get back in touch. My fears – I don’t know what we can do in less than a week. Does it sound like they will take a counter offer and if so, what would you offer? I’m afraid that they want it to charge off and possibly sue us, but I don’t know if that’s just me being pessimistic. And to make me panic even more – my relative is away for the week! One thing the agent did mention was that we could put it on a credit card (ours or a relatives) and they would do it as a purchase, not a balance transfer, to minimize fees. And one last question – if we reach a settlement, will we have to have the money in hand to give them before the 180th day or deal’s off??? Thanks in advance for any advice you can give.
Gatestone is not who will sue. And sometimes getting AMEX settled for 50 to 60% will mean letting it charge off. Your is not a situation that should be rushed to settle prior to 180 days, at least not based on what you have shared with me, and certainly based on the current offer to settle being so high, and unobtainable.
If you do call Gatestone back to negotiate again, ask them for how much longer they will have the account before AMEX sends it somewhere else. Collectors will not always offer that information up, but many do. Post what you learn, or any additional progress, and lets go from there.
Thank you for responding so quickly. So what happens if it is a charge off (I assumed that meant they would be handing it over to someone in CA to come after us legally)? Gatestone has mentioned charge off as something we want to avoid. Would we still be negotiating with Gatestone if it is a charge off?
Charge off is an accounting term that wound up being a timing factor for credit reporting, and a line in the sand that many creditors will use for when they drop an unpaid account into their established collection pipeline.
I cannot know if Gatestone will still have the account next week, I suspect they might, but that is why I suggested you ask. No matter the answer, the 20% reduction sounds like something you cannot do, and you will likely have better opportunities too.
Here is more insight into your account charging off, and what that means going forward: https://consumerrecoverynetwork.com/charge-off-and-credit-card-debt-what-it-means-to-you/
I’m just checking in with an update. We told Gatestone that we could not do $25,000; $16,000 is all we can gather from all of our resources. We then were advised to write a hardship letter and they would send it to American Express for us. We submitted the letter on Wednesday, but because of timezone differences on Weds., and the agent we’re working with being out of the office on Thusrday, it wasn’t submitted until Friday. We hope to have a response very soon and I’ll let you know the outcome. How does this generally work? Will they outright accept or reject it or will they try to counter in an attempt to squeeze even more out of us?
I see all three. Just have to wait and see.
American Express rejected our offer – and did not counter. The Gatestone agent that my husband spoke to was very rushed and told him that because we have no other accounts that are in collections they will not settle on this one. He did not say what the next step is. Do we just wait now to be sued? …very discouraged… is there anything we should be doing to prepare ourselves for ???????
Continue to financially prepare for the opportunity to settle the debt. Save as much money as you can every month to supplement what you can put together today. Gatestone will collect for AMEX for only so long. You might even ask them for how long they will have the account. Make another offer you are certain you can fund about 10 days prior to their losing the account, and if not able to settle, you will be able to negotiate something with the next collector, or attorney the account is placed with.
I can’t pay 6K as a lump sum. Unless they could accept the 6K to be paid over 5 years
At reduced interest rate.
Maybe, Instead of request the settlement lump sum of $3225 Should I request a settlement of $6000 by restructure the loan for lower payments a re-payment plan with a reduced interest- maybe they can enroll me in a long term hardship repayment plan? (60 – month repayment plan, @**reduced rate 0.99% financing for 6 yr = $103 affordable monthly .
Does it sound like they could accept it?
Capital One regularly enrolls accounts into debt management plans. The monthly payment will often be between 1.7% and 2.5% of your balance as of now. That payment will be fixed for as many as 60 months (cannot go longer than 60 months based on federal regulatory guidance to banks). The better side of that payment equation is paying about 220 a month. Can you do that?
Capital One does not, at least to my knowledge, currently offer a balance reduction along with 60 month payment terms prior to charge off (or after for that matter). There are settlement options with better repayment terms that may be offered by a debt collector down the road, but you cannot know with whom, and for how much, without knowing where your account will land. It can land with an attorney authorized to sue too, which is often more costly to resolve.
… I am so afraid of what is going to happen if aggressive collections start and if they sue me, I just can’t afford a lawyer ( again). My house ( 40 years loan modification because was underwater) and my car ( which I need to go to work) are my asset. Would they take it? It sounds like not Hope for me
Post a comment over on this page with the state you live in and what your concerns are about regarding how debts can be collected on if things reach that level. I will post a reply with what your exposures are.
I live in florida
Michael, I was thinking … IF I could use the settlement lump sum ($3225)to request to restructure the loan for lower payments with a re-payment plan at a reduced interest rate-to enroll me in a long term hardship repayment plan. (60 – month) repayment plan,(as you said) at a reduced rate of 1.5% (for the life of the loan?) or financing for 5yr = $163 affordable
12800 – 3225= 9575 (1.5%) (60 Months) = $165
All at one condition: “all the negative listings related to the account mentioned above will be removed from the credit bureaus”
… Does it sound like they could accept it?
…. Will they still close my account?
… will they still do the charge off?
…what it will happen if a year from now my situation gets worse and can’t longer pay them
(This is causing me many sleepless nights) Please help
(PS: I’ll paste and post it at the other forum too.) Thank you.!
I think you will find the 165 a month a touch too low, but you are close.
You will not get Capital One to remove the 30, 60, 90 day late pay notations from your credit reports…not even if you paid the full balance owed today.
Those long term payment plans generally do result in your account being closed (whether the bank offers them direct to you, or you enroll in a credit counseling agency DMP).
You can often avoid the charge off.
If after a year, you stop making the fixed monthly amount as agreed, you are off the plan, and likely will not be afforded another opportunity at that type of repayment. Your account will get dropped into the banks collection pipe line, like is about to happen now.
Please do not lease sleep about this if at all possible. It is all just math. Yours no longer works for them, and their “unbendiness” is not going to work for you. You are trying to avoid filing BK, and may still yet, but it is there if you need it. And besides, you live in a favorable consumer law state. Even if they get a judgment, you can adjust to that reality, still avoid BK, and continue to save up money to settle down the road.
…ONE MORE QUESTION IF I WOULD TRY THIS, WHO SHOULD I CONTACT (WITH AUTHORITY TO APPROVAL) AND HOW SHOULD I APPROACH/PRESENT MY PROPOSAL TO CAP.ONE
You can call the same number as shown on the back of your credit card. In early stages of delinquency, you are still routed to customer service reps, and can talk to them about your options in a hardship repayment plan. Your account is about to be charged off, so once you enter in your 16 digit account number, your call will be routed to recovery personnel at the bank. They can walk through the hardship plan options the system says are available for your account.
If you are not offered an affordable plan, or any plan, call a credit counseling agency and ask about their options to enroll you in a debt management plan. I like MMI who helps sponsor the publishing efforts on this site, but you have many options for credit counseling agencies to choose from.
I almost cant believe it , I sent e-mail (CEO) and from executive office they called me back. They will review my case. I’ll heard from them next week , she said. Pray the Lord I gave good news for next week.
Capital One credit card unpaid balance of 13K will charge off on 06/23., talked to them over the phone and they offer me a settlement for 11K, but I told them I dont have that kind of money, I cannot afford the amount you have proposed.and I propose a counter offer -offering a settlement amount of $3225 to be funded over 3 installments, but she didnt accept it , I Ask to speak to someone who has more authority (supervisor or recovery department, she said then I will have to wait until account charge off .
Now, I dont know what to do or what to expect from them after charge off. One of their customer Rep said it will be still in house after charge off…..Maybe I will have a chance for a better settlements or payment plan and settlement options ?
It looks like Cap One its not as easy as BofA( last year I settle with BofA $20000 at 25% settle) but It looks like Cap One its not as easy as BofA
Please advice
I explained to Cap. One I’m in financial troubles as result of Divorce. I went from a 2 incomes family to a low income single woman with children. Divorce destroys me financially , In addition a little less than year ago I lost my job and now I went from a full time job to a minimum wage type job working 4 days a week not even full time.I am living paycheck to paycheck.
I have Richard Fairbank Capital One CEO e-mail Richard.fairbank@capitalone.com, but not sure if should I write to him or call to Executive Customer Service Team 703-720-2500 or Prepare To Be Ignored
Nora – I am very sorry about your financial struggles. I do hope that writing to the CEO of Capital One, or speaking to folks in the executive customer service office, leads to a positive result for you. But understand that many of their customers fall on tough times due to circumstances out of their control. Credit card defaults and slow pays are just coming off recent highs for virtually all the banks. I would not say people are ignored, as much as your needs of a much lower settlement than they typically approve, is outside set policy.
Nora – Capital One does not approve all accounts for settlements prior to charge off. And they do not settle for less than 50% very often at all, and if they do, not close to what BofA offered (subject to change of course, but than again it could change for the worse).
You also have a higher risk element for aggressive collections from CapOne. Can you raise 6k?
No, I can’t 6K at least not as a lump sum.
[edited out repetitive content]
It is what it is. You may have the ability to negotiate a more affordable settlement, with payment option, down the line. Your efforts now may result in something better than what I am responding with too, so do not stop trying.
I have credicards debts that havent been paid for over 10 years. Now i started receiving settlement letters to pay them ? My credit is good. What should i do?
You generally do not have to be concerned with your credit scores and reports when collection letters and settlement offers show up on debts as old as yours. If your states limitation to legitimately be sued is passed, and credit reporting limits have passed, and you still want to settle the debts, you are in the drivers seat as far as what you are willing to pay.
If it were me, I would do nothing and go on about my business, or if I was bothered by collection calls or letters (with debts 10 years old), I might send a cease communication letter in response… just so that debt collector would stop writing and calling.
What are you inclined to do?
Hi Michael,
I was sued and went to court for on a credit card debt. I tried to settle and make agreement with the bank’s attorney before the court date and before court hearing. I could not find an attorney to assist me ,only a bankruptcy one, so I represent myself in court and I did not fully understand some court procedures. After the case was heard the judge suggested we go outside the courtroom to make an agreement. While outside the attorney refused saying he did not have to settle anything with me, and said he already had a default judgment. The judgment and lien for $8,500 was put on my home and on my credit report. How should I handle this matter? What are my options?
Thank you
Sara – I have a page up dedicated to settling judgment debts here: https://consumerrecoverynetwork.com/question/can-you-settle-credit-card-judgements-like-other-debts-stressed/ – read through the page, including many comments, then post your questions and concerns in the comments at the bottom of that page.
This page is more focused on settling credit cards in the first stage of debt collection before an account is even charged off.
Mr. Bovee:
Thank you for your very informative and educational blog. My mother recently passed away, leaving credit card debt ($11,000 total between 3 different accounts) that had not been paid for four years (Medicaid took all her income for long term care).
The only asset she had is a small property in Oregon where my disabled brother lives, and which will be passed to him in her will during probate. The family wants to protect the property from liens/judgments that may force the sale to pay off the CC debt. The family has the resources to pay all the debt immediately, but want to settle for as little as possible. My mother received collection notices with settlement offers from Northland and Portfolio Recovery Associates–PRA has been calling my home number but I haven’t answered any calls from them (I guess my mother used me as the closest relative on the CC app).
What is the best strategy for approaching the collection agencies without divulging any of myself or any other family members’ personal financial information. We will open a separate checking account to pay these debts. What is your opinion on negotiating settlement online, which Northland Group seems to be offering.
Thank you for your consideration!!
Mike – Sorry for your loss.
Are you the administrator? If not, who is?
Yes, you can negotiate settlements with both Northland and PRA. I am not familiar with Northland group offering to complete settlements through their website, or online portal, but would be a huge fan of the process if it works well for consumers. I will call and see if I can learn more from them, but would ask that you share your experiences about that too.
When you negotiate credit card debts with debt buyers like Portfolio Recovery, keep it short and sweet, and be sure the person calling to negotiate the deal is authorized, or has a limited power of attorney. Never bring up assets of the estate unless they bring up specifics.
Do you have an attorney you are working with for the estate? It is okay to have someone take this part off your plate.
Thank you for your valuable advice. We were able to settle with the debt collectors via phone conversations (keeping it short and sweet) for about 40% of what was owed.
Nicely done. And you are welcome.
Michael-I am currently in Oregon. The debt was from Maryland. We did file taxes and the forgiven debt was accounted for on our taxes.
Unless something comes up where you hear from a debt buyer, or a debt collector working for one, I would not put much energy into figuring out why BofA completely forgave the debt and sent the 1099c. You did your part at this point. If something does come up with later collections, post an update and lets go from there.
Question: What does yoru credit report entry show for Bank of America? Is there a balance showing owed, or is it reflecting zero?
Hi Michael,
I have posted on here previously. This year we received a 1099 O? (Cancellation of Debt) for the credit line we had that Bank of America ended up writing off. Does this mean that we do nothing now since it was counted as income on our tax filing for last year? Bank of America has not contacted us for over 4+ years and we did not even realize it was charged off until we had went to apply to refi our car and were declined because of this particular debt, which we hadn’t realized existed basically. I did call them trying to get more information and they did not even bother trying to collect the debt. I am still confused on how this works. Please advise.
Thank you!
What state are you in Stephanie?
Did you file taxes or put it an extension?If filed, did you account for the forgiven debt?
HI there.
Back in March Northstar Location Services started calling me & members of my family. They’d leave voice mails saying they were “calling for ______, if you are not ______ press delete now. If you continue to listen to this message you are certifying that you are ______” The message then goes on to identify who they are & “We are a debt collection company hired by Barclays Bank Delaware to collect a debt you owe to them. It is imperative that you return this call today.”
They actually called my dad & told him to get a message to me ASAP that I “must call today or the account will be referred to a lawyer network”. My dad lives 2 states away & is in his nineties & he couldn’t recall a whole lot but he told them if they want to talk with me they should call me not him & hung up.
The first WRITTEN contact from Northstar was not received for another 2 weeks. & there is actually 2 accounts they are trying collect, one $48xx & the other $52xx.
Then it was a notice they had been asked by Barclays to collect a debt & “This is the final attempt. If you fail to contact us immediately to arrange payment the account will be sent back to Barclays Bank and placed with an attorney network.”
I waited until just before 30-days had past & them sent them a Notice of Dispute & request Verification of the Debt & evidence that Northstar is in fact an authorized party to collect the debt.
4 days after my letter was delivered (via USPS Priority with tracking) I received a letter from Northstar telling me that they have “suspended all collection activity pending receipt of verification from the original creditor”. They then tell me that “it frequently can take 30-days or more to obtain such documentation”.
They then tell me they will forwards all documents to me as soon as they receive them.
Then they say “We urge you to contact us immediately at xxx-xxx-xxxx to make repayment arrangements.”
The 1st letter they sent me in the fine print it says that if I dispute the debt the law requires that they respond by providing the name & address of the original creditor and if I request it verification of the debt within 30 days.
So now I am confused, the 1st notice telling me if I didn’t contact them immediately the account would be sent to an attorney network tells me if I notify them that I am disputing the debt within 30-days of receipt that they, by law, must respond with the information within 30-days.
However, now that I have requested verification they are telling me it will take at least 30-days for them to obtain the information from the original creditor.
So:
1). Are they required to provide the verification to me within 30-days? Or not? How long do they have to provide the documentation? They have not even provided me the address of the original creditor, just the name.
2). What happens if they do not provide the documentation in that time frame?
3). Are the voice mails they are leaving (before even sending me a letter) legal?
4). I pretty much know their conversation with my dad was illegal but short of getting a copy of their recording of the conversation I doubt anything can be done there.
5). Does the threat of turning the account over to a “attorney network” if I do not call them immediately constitute a threat to sue? In which case, how many days to they have to make good on that threat?
Thanks!
You should run your scenario, and your questions, by an attorney in your state with a practice that focuses on debt collection. There are potential violations that can be read in your comment, and you will want to hear what an attorney with the experience I reference has to share with you about that.
I can answer your questions from a more general perspective.
1. You request validation within 30 days. Debt collectors are not required to respond within 30 days. It is often painfully simple for debt collectors to meet their basic obligation to validate a debt. They do not have a limit of time to respond per say. Debt collectors have a limit on collection efforts until they meet their obligation.
2. Not much.
3. There are attorneys that practice in the area of collection violations in your local federal and state courts that will be far better at responding to this.
4. That call was likely recorded, just not by you, and would probably be requested in the discovery process by your attorney bringing an action on your behalf. Just narrow the date and time.
5. Again, you should run this by an experienced attorney. The implication is one that, in my opinion, reaches to where the average person would take it as a threat to sue. An experienced attorney would know how this question has been addressed in your district or state.
What is your goal with this account?
Michael;
Thank you for the quick reply.
I’m not sure what the goals are at this point, these are just 2 of many accounts. Most of the CC debt relates right back to a sudden jump healthcare costs.
About a year ago my income was reduced to Social Security Disability Benefits. My wife is 63 & also able to draw benefits based on my disability though she chose to started working instead to help provide herself with health insurance.
Although I was a farmer I also worked a fulltime job until about 16 months ago.
I already know that under Colorado Law most all of our assets (+90%) are protected from judgments due to my being disabled … 1 or more automobiles jump from$3k to $12k being protected, equity in the home jumps to $90k, & livestock/tractors/farm implements are as well entirely protected as is income produced by the “liquidation” of such, just 3 examples but that accounts for almost all of our assets.
Social Security is also a protected income. While there are few protections in Colorado regarding seizing bank accounts, any funds in the accounts that are from a protected income sources or were previously garnished (from paychecks) are still protected from seizure.
The only farm land that is our names is a small parcel the house sits on with equity of less then 60k, so no problem or concerns there. Most of the land was switched over to an trust in our kids names 12+ years ago when I was diagnosed with a progressive health problem.
There have been really good offers made by the some of the creditors. In fact Barclays made offers that were 38% of the amount owed; however, they would not accept any type of payment plan & pulling funds together on the short notice they provided was not possible.
I would like to try and make good on our obligations. That has been what we have always done during the good times & the bad; however, we do not see that as being possible.
We know that bankruptcy is a possibility & began taking steps a couple years ago to move the more valuable pieces of equipment into the trust & transferring the loan balances to the trust/our kids names fearing that one day we might not be able to meet the government insured farm loans that bought the equipment. We didn’t know then this day would arrive so soon.
So we really don’t know what our goals for these debts are … I’m not greatly concerned about credit ratings at this point.
I would like to find a way to make good on things but that would require A LOT of give & patience on the collectors side as well.
My wife is of the opinion of tracking everything … letters, voicemails, phone calls that once numbered 8 or 10 times a day from the same creditor even after we revoked the “implied consent” to robo-dial our cellphones.
Her plan is then, if we get sued to attend all the hearings, make them prove the debt is valid & that the party suing has a valid standing (obviously our agreements are not with the collection agencies or attorney networks), & counter-sue if possible.
Her plan is that if someone gets a judgment that looks like they are going to aggressively try to collect, then we then file for bankruptcy.
Like I said I don’t really know what my plan is … what I would like to do & what I am able to do are at opposite ends if the spectrum.
I’m not a big fan of counter-suing even if we have a case … & I know the debts are valid & feel very obligated to do my best to make good on them.
Sharky – Thanks for the additional details and candor. Here is the rub, at least… as I see it with the limited details I have.
Debt collectors and creditors are not known for their patience in working with you to set up payments on settlements you can afford. Creditors actually cannot be patient, as OCC guidance and generally accepted accounting principles dictate shorter windows to work directly with their struggling account holders. But there are exceptions to that when negotiating the amount you pay, split up over how long, when the accounts are sold off. Your inclinations are likeliest to be accomplished where your wife’s are most likely set to begin (making people prove stuff).
I cannot convey to you or your wife the amount of time and energy that will be spent making a go of defending yourself if sued (if you are serious about winning or dismissal anyway). One thing I can say, is that with very limited exceptions, folks I know would prefer to have avoided the whole process of courts, and lawsuits, if possible. The time committed, whether hands on, in person, or measured in thought and head space, can be spent on something much more enjoyable. Don’t get me wrong here…. If you are into this kind of thing, it can be a fulfilling experience. That’s just rare.
Filing a chapter 7 is far less of a cost and time drain than messing with collectors if/until the issue is forced. Settling for a reasonable amount can be quick, but would cost more than chapter 7. If you want my take on realistic settlement targets, so you can compare that with the BK, post the rough balances, who the original creditor is, and who is collecting now.
Thanks Michael.
I pretty much already have an idea of the percentages to expect from most of the creditors & the current collectors.
Most have not been in contact in the last 6-months, since their initial collection agency attempts. This is the 1st time, however, that we have been contacted by or on behalf of Barclays since we fell 180-days late (when they made they offer), we are now going on 12-months.
I don’t figure we can really defend ourselves & win if we get sued, I just don’t want a “default judgment”.
The “financial/BK counselor” we spoke with 16-months ago (more exploring possible options, not the “required” pre-BK counseling) indicated that many times the lawyer networks & collection agencies filing the suits are somewhat dependent on a default judgment. If the judge (state court) orders them to make documentation & discovery available to the court & to us “within the standard 10 days, sometimes 14 days”, they frequently can not obtain it that quickly & the case gets dismissed.
In fact she actually stated that most of the judges in this county & neighboring counties in the metro area describe it as being a waste of the courts time to file suit if they don’t already have the evidence/documentation themselves.
I guess, since under state law “failure to dispute a debt or collection notice can not be used in any court or arbitration to show or claim financial responsibility of the alleged debtor”, that maybe not disputing & not requesting validation at this point might actually be a help to us in the future — they won’t be expecting to provide it if we do show up at the hearing.
I guess I’ve kind of resolved myself to BK if/when someone pushes the issue even though that is not the path I want to take it is the realistic one.
Thanks Again!
P.S. I just saw a notation I made in the stuff from the counselor we spoke with 16-months ago. Our state fair debt collection act requires verification/validation be provided within a “reasonable” period of time of being requested, & by that I wrote “unless extenuating, case law 30 days”. Don’t know what if anything can be done if they don’t meet 30-days, but ….
Sharky – I would not say that debt collection efforts made in the courts across the nation are dependent on default judgments. I would say that collectors, and the courts themselves, have come to expect high default rates, but because people fail to engage the process more than anything else.
I am not sure about your 10 and 14 day references to your local court rules. Those can vary. But it is not common, at least from my experiences in this business, for debt collections cases to get quickly dismissed.
They should not make additional collection efforts if not providing the requested validation. If they do, post an update and lets go from there.
Thanks Michael. Will post again if they proceed with collections before providing documentation.
From what I recall on the 10 or 14 days … If the party being sued showed up & requested “discovery” or documentation etc, & if the suing party did not have it there at the time or had not previously filed it with the court, that the court would order it be produced & then reset the hearing for “about” a month later.
It seems that there was some rule regarding the time frame for the rescheduled hearing & some rule about the documents having to be “made available” to us a specific time frame prior to the rescheduled hearing. I’d have to read through the stuff that lady gave us back then to refresh my memory on the rules.
Knowing the court system, I am sure they could request another continuance &/or request additional time etc & drag it out for weeks or months until they are able to obtain the documents. But that too would all depend on the court/judge.
Thanks Again!
Michael,
I received a notification today from GE Capital credit informing me I would be sent to collections if a minimum payment is not received by the due date this month. The 14th will be only 90 days past due. I am not yet prepared financial to attempt to negotiate a settlement with them. I owe $5000 and only have $1000 saved so far. Should I call them to set up a payment plan just to buy time so it does not yet get charged off? I have contacted them monthly to make them aware of my inability to pay. Any advice would be greatly appreciated.
Thank you,
Melanie
Melanie – How much more will you have pooled together to use in negotiating a settlement with GE Capital in the next 60 days? That is normally the better time (between 150 and 180 days late) to negotiate for the best savings. It is also common (actually more so) to negotiate the settlement after charge off, and with a third party debt collector. So you have more time than that to get this credit card settled.
Calling GE Capital to set up a payment plan at this point will be counter productive if your goal is settling. You can indeed do that though. Are there other credit card balances you are struggling with that are targeted for debt negotiation too?
Michael,
Thank you for your quick response. I could possibly pull together $2500 to attempt to settle with GE Capital in the next week. The letter indicated they would charge this off to a third party if I miss my payment next week. I was shocked they were threatening to do this so soon. Do you think attempting to settle with them before the 14 th of this month with the offer of $2500 will get me anywhere or should I just allow them to charge off then settle with the third party at that point? I do have 2 other accounts I plan to negotiate. One is with BOA for $5000 and one with Citi for $7000. I have been communicating with those 2 monthly as well but so far have not received any threats to charge off yet.
I greatly appreciate your advice…you are so helpful. I can tell you truly are in the business of helping people. It means the world to myself and I am sure so many others.
Respectfully,
Melanie
Melanie – Based on what you have shared, if it were me, I would wait to negotiate and settle this account with the agency it is next placed with. Use some of the tips I highlight about settling with debt collectors in this video.
Thank you for these helpful tips. We recently had an account charge off from Barclay’s Bank, (was a UPromise World Mastercard) now being handled by Northstar Location Services. Does a third party collector ever settle for less than the credit card holding bank was asking?
Alana – Debt collectors will settle for less than the balance owed to your original creditor. It is quite common. Can you raise roughly half of the balance owed?
Hi Michael–thank you for such an incredible wealth of information. Here’s my story: I have a Chase credit card debt of $3ok. I am at 165 days. They have offered me a settlement of $12k, roughly 40%. I told them I had 7k at this point. They said this original settlement offer was good until May 6 and then they could re-assess. But my charge off date is April 30, so the timing seems bad. I’d rather settle before charge-off. I have a total of $8k so I can come up with (in another bank) but that’s it. So my question is–do I have any hope of getting them down again before chargeoff? Also, if I’m this far down the road in terms of damaging my credit report, will it get that much worse after charge-off?
anne – Settling your Chase credit card for under 30% of the balance (using today’s trends with Chase) is not all that likely. You may have a shot at 30%, or 9k, but that is going to be a stretch too. Getting a 35% deal before charge off with Chase is more realistic. All that said, do you have a compelling hardship? Something medical that is debilitating, personal loss, natural disaster? There are instances where those same things that make it tough to be you right now, are the very reasons you can use to negotiate a better savings direct with your credit card banks.
If your account goes beyond charge off, you will likely have the same settlement percentage targets, unless you are dealing with a collection attorney with authorization to sue in order to collect for Chase (or a debt buyer). That will often mean having to come up with more money.
Hi Michael,
I was able to settle a capital one card which was current for with a balance of $3200 for $1500 on the first try. I spoke with someone in their corporate office and explained I had been out for 2 years and that I was struggling to keep up my mortgage payments. I had been on the payment protection plan prior. I tried settling a debt with b of a and not only did they refuse to help me they lowered my. Available credit and this is on an account I have had for 13 years and never been late on. The balance is currently 5600. I also have three accounts with chase on that’s 1500, one that 2500 and the other is 3600. I had to cash out my 4o1 k in order to make ends meet while I wait on a hearing for denied disability claim. How can I settle the debts with these companies. None are behind. As they are all on those credit protection plans I was wise enough to sign up for:
Tonya – I want to be sure I understand what you are doing. Are you trying to trigger your credit protection plans with the banks, or settle the balances owed for less than what you currently owe?
hi michael,
thank you so much for this website. you’ve provided me with so much information i hadn’t even heard about before reading these articles. i’ve read everything you have regarding settling credit card debt, and the few pages on the site that mention wells fargo. it has helped me tremendously.
i have a $6,000 credit card debt with wells fargo that is scheduled to be charged off on the 31st of this month. its been about six months since my last payment, and i haven’t picked up any of their phone calls or acknowledged any of the mail until this last letter. i checked the internet to see what “charge off” means and got scared.
i’m from nebraska. my mailing address is in nebraska and my credit card with wells is from here too. i am technically homeless, i am a traveler. i participate in a program called WWOOF (willing workers on organic farms) … i travel from farm to farm, working for no monetary pay, in exchange for free food and education and a place to live for a while. i’ve been doing this a few years.
before traveling my credit card payment had always been on time, but over the last few years i’ve been missing payments, as i have no income, and now i haven’t payed at all for six months.
i have a car and auto insurance payments. i have sold the rest of my belongings and have piled up about $1,500 and i plan on calling them in a few hours, today, to try to settle.
i used to have a cell phone, but i cancelled it, because i couldn’t afford payments. i used to have health insurance too, but cancelled that as well. do i need to know these dates, or would guessing be good enough?
one thing i am worried about: i have some funds in an edward jones account, just a couple thousand dollars, but i don’t want them to know about it, as the money slowly grows and it’s really all i have left. its my backup plan. it used to be linked to my wells fargo checking account in a way where i could call edward jones and they could sell for me and put the money into my account. that checking account (and savings acct too) was closed a few months ago, because everything was delinquent. is it possible for the debt collectors to know the balance of my edward jones funds?
my plan is to tell them the truth, basically, that i am homeless, with no income. i haven’t been truly “employed” for a few years. i’m not willing to change my lifestyle. i have this money now, which is a lot of money in my eyes, the most i’ve ever had at one time. i’m hoping to settle and i’m going to offer them $1,500 … but i don’t think they’ll take it. i’m willing to pull some funds from the other account and bulk that up to $2k or 2,500 or so, but i don’t want to tell them that up front.
HOW DO I GO ABOUT NEGOTIATING? what should be my first offer? what can i expect them to say? are there any surprise questions i should be aware of? is it wise to say “i’m sorry, that’s the best i can do…” and end the phone call? that’s my plan right now. if they ask about the extra funds, i plan on saying i have about $800 and would prefer not to drain the account, but i’m willing to do it if i have to, etc.
how should i do this? i’m not very good at things like this, not at all! i anticipate calling them a few times, saying i’ve come up with another $100 or 2, etc. until they settle for one lump sum around $2k
i appreciate your response, and hope to hear from you in the next couple hours, if it’s convenient for you.
THANK YOU SO MUCH!!
adam – What an interesting way to see so much, and meet good people! I had never heard of WWOOF until now.
It is very unlikely Wells Fargo recovery personnel can see into anything with Edward Jones. If an outside collection agency has the account now, or later, this should not be a concern.
I too do not think you will get 1500 approved. If you are really able to convey the situation well, it is possible to get lower than the 40% I would suggest is a more realistic target, but not by much. Best case would probably be 30%.
Negotiating in that first call is probably not the right word to use. You are conveying your situation and lack of money. I would not say that any questions you could be asked will be surprising, but you should expect some to be raised. The questions are going to relate to why the inability to pay, and to both your income and budget, as well as costs of your monthly bills.
Your offer of 1500 will be turned down. It is okay to say that is all there is, and politely end the call by thanking them for their time, and if something changes you will be in touch. I would not waste too much time going up by 100 dollars at every call. If you start at 1500.00 and know you can go no higher than 2k, make the 2k offer on the second or third attempt (if it were me I would do that on the second call). It will be an exception if it gets approved (based on today’s trends). If not approved, you can look to resolve the debt with the first debt collector that gets the account, and not Wells Fargo.
A person with your life style should be the least freaked out about charge off credit card debts.
Michael,
I am so impressed with the information, help and overall support (both financially and emotionally). Thank you for sharing.
If you can help, I think I have a relatively simple question (we shall see).
I recently called CitiBank on a debt with the below info:
$36,891
166 days past due
I won’t go into the details of how the debt came to be, etc. as i don’t think it’s important at this time. There is no current hardship etc.
I called the phone number on the collection letter. The person I spoke to was nice and tried to be helpful, but said that the department that I can negotiate with will not even “pick up the phone” unless I am able to provide a “debt stabilization” payment of $842.42. In addition, my account will be charged off in the coming weeks if I do not make that payment.
I’ve read much of the content you have provided, but haven’t come across this. Is this normal? Should I pay this (which will already be a very difficult task) and then move forward negotiating with the bank? I read your advice is to negotiate with the bank before it is charged off for a better settlement.
Again, thank you for the advice on this site. I, for one, have been able to breathe a lot easier lately just feeling like I have a little bit of knowledge on how to tackle this. It is so appreciated.
Karen – I do see settlements with Citibank that just end up having to be done with an outside third party. While I do recommend working with your original creditors to negotiate the best deal possible before they charge your account off, it just is not always possible. That can be due to not having the amount of money needed to settle that soon, or in this case, a creditor policy that dictates you are better off delaying. That said, I would still look to reassert your willingness to settle in a couple more days.
What amount of money are you prepared to offer as a settlement? The part of your comment about the account stabilization payment being a difficult task seems to imply that settlement is not something you are ready for yet.
Hi Mike, You have done a great service to the everyday consumer by sharing this information. After studying and reviewing the steps mentioned here I am going to give it a go. Trying to resolve this situation is vital to my sense of well being and everyday outlook. Here is a list and approximate amount owed for each of credit cards.
Capital One- $5,200—104 days late
Capital One- $3,300—75 days late
Capital One Mastercard- $3300—74 days late…I spoke to Capital today for the first time, taking your advice not to ignore the situation, and they offered to split the total late on each into thirds to catch up. The first card that is the most late they wanted at least for me to make the first payment on it I missed that so it would fall back to 74 days.
Paypal Mastercard- $5,500— 100 days late
Billmelater- $4,900—107 days late….I spoke to billmelater today for the first time and they offered a settlement of $3,400 which is roughly 70%.
Amazon Mastercard (GECRB) – $1,300—67 days late
Thanks for posting the account details Gerald. Is your goal negotiating and settling with those creditors? What amount of money will you have access to in order to fund the offers in say, the next 60 days?
Question: Are there 2 different Capital One credit card balances at 3300?
Hi Mr. Bovee, yes there are 2 different capital one cards at $3300. I have spoken to their representative and the only conversation is to make small payments, and primarily on the most late(and largest), to keep it from going past 120 days. That may be something I should do because I don’t have enough cash to settle all of my debts at this time. I am hoping with $5-6000 I have I can settle all non capital one accounts for now, and work with capital one until July or August when I will have another $5-6000 for that.
On another issue, Amazon was very quick to send me out to genpac, who has been calling me up to 9 & 10 times a day. The least number of calls I get from them is 4 or 5.
Thanks very much Mr. Bovee for your time and consideration. I have seen your videos on YouTube and can tell you are very capable of fighting in this arena…
Gerald
Thanks Gerald. It is not so much that you need all the money to settle today, or even the next 60 days. I am focused on the next couple of months to see how many of these accounts can be settled before the typical charge off time frame.
Bringing up settlement with Capital One if you are not approaching 180 days late is often a waste of time. They do settle before charge off, but typically are not going to go under 50%, if that low. You can settle those accounts with debt collectors that get the accounts placed with them, or even a collection attorneys office, and for pretty much the same target amounts. So while Capital One is one of the least favorable creditors to negotiate with in the last 5 plus years, they are fairly consistent, which means you can plan better.
You can settle with Gen Pac for 40%, and possibly in the next 30 to 60 days. You may not get the deal in the first or second calls, and maybe not for a couple months, as internal policies may not allow for a debt to be settled at floor rates this early in the delinquency. If it were me, I would press hard and try to knock this down at the end of January, and then target the last 10 days of each month after that.
Bill me later I would be targeting at 40% too, but like with Gen Pac I would start with offering 10 to 15% less than my target, and look to lock things up in the final week of the month.
Post more questions as they come up, and if the account status changes.
As far as Capital One goes. I cannot tell you not to make payments to by yourself time etc. Just inform you of the benefits and drawbacks along the way after you have made your decisions. I know that you could probably fit all of these debts into a repayment plan if you could budget roughly 450.00 a month (maybe a little less). If you cannot do that, the rip the band aid off path you are currently on is where I would be going too.
Thank you very much Michael. I will proceed as I currently am, having the path a heck of a lot dimmer is incredible. I will periodically updated you as to my progress. Best to you,
Gerald
Gerald – Posting updates would be great. You are also welcome to ask questions etc along the way.
I was laid-off for 9 months back in 2011 and it has been rough sledding since. Short sold my house and did deed-in-lieu on my “investment” condo in 2011/2012.
1) I stopped paying DISCOVER about a year ago because they informed me they shut off the card even though I was keeping up in payments. Just got a letter from their attorney stating I owe about 6800.”we will assume this deb to be valid unless you dispute it within 30 days”.. I haven’t gotten back to them. (see next item however).
2) CHASE cardmember services/recovery (I stopped paying them about a year ago – probably same reason as above) just responded to my request for validation of a debt of about $6222, saying “what form of doc would you like?” This was charged off in May 2013 – they’ve just offered me (after BRIEF conversation on phone) option to settle at 4356 in 4 payments.
3) Citibank has, sold my debt – it’s at about 20,000. That is about 2 years old.
I’m beyond caring about my credit rating at this point. I still have about 14,000 in cash savings. My major concern is having these get to the point where they attach my wages. I plan to regularly open new accounts to avoid problems – and name them including the “wage account” in the name per legal advice.
Not currently working with an attorney.
I have too much income (when working) to do bankruptcy, over $90,000, and a 401k and IRAs. Renting.
I’d be glad to hear your further advice – great website.
Regards,
Mike
Mike – On the high end I think you are maybe 1 to 2k from settling all of these. If you can negotiate the Citi bank credit card debt for a better than current trend settlement, you are probably prepared with the 14k you have now.
Who is collecting on the Citi account?
If you had to come up with a couple more grand, how long would it take?
I dont mind paying say even 60% on each of these but i can’t do it in 4 months. I can probably lay out $600 or so a month, but that’s it (for both Chase and Discover).
Not sure at moment who has CITIBANK.
Seeing as you are BBB A+ rated I prefer at this point to hire you guys to do it. And I would rather have my 14K in the bank for emergencies, etc. As I said, the wage garnishment is what troubles me.
Mike – At 600 a month, not touching your nest egg, you are looking at 2 plus years before funding the settlements. If Discover has already placed your account with an attorney, they may sue you for collection in short order. That would be a priority to resolve. Depending on whether you feel keeping from being garnished is an emergency, I would encourage you to settle the Discover credit card quickly.
You may have more time to resolve the Chase card, but that is not certain.
Depending on who the Citibank account is with, you may have some more time before the potential for being sued looms large.
It is a matter of priorities for any one facing this situation. But resolving these debts quickly would put you back on a path to saving that same 600 a month for emergencies, where settling without having been sued will often yield a better savings; avoid other risks; put you on a credit recovery path sooner etc.
I am not currently taking files, but a couple of other CRN specialists are. You can call and consult with one at 800-939-8357 and learn more about working through this.
Good Evening Michael,
I live in Georgia. I am currently trying to negotiate a judgement debt. The original amount of the debt was roughly $8,800 with Bank of America. After the charge-off, debt collection began from CACH LLC. I am now communicating with an attorney located in GA representing CACH LLC. Including interest, attorney’s fees, etc, the debt is now up to $12,400. I offered to settle for a $5,000 lump sum payment and they accepted on the agreement that I also cover $250 worth of attorney’s fees. Since I have a judgement against me, how will my settlement affect the PUBLIC RECORDS section of my credit report and can it be removed? The settlement offer was emailed to me as a PDF. Does it need to be signed by the attorney and mailed to me? I assume nothing will change the way BANK OF AMERICA reported the charge-off but CACH LLC needs to report the settlement and I am concerned about that part of the process and how it is spelled out in their offer acceptance letter. Although I am offering a lump sum settlement for less than the amount of the original debt, can I request that CACH LLC report the debt PAID IN FULL versus SETTLED FOR LESS THAN OWED? I acknowledge the debt and want to settle but want to ensure that my negotiation warrants the most repair to my credit report. I appreciate your help
Chris – That is a good settlement offer on a judgment balance that size. Good work getting that. The settlement should result in the attorney for Cach LLC formally updating the court that the judgment has been satisfied. You should ask about how they are going to handle that on their end if it is not clearly referenced in their settlement offer you got via email (not necessary for that agreement to be signed).
Here is what the credit reporting will likely look like:
Bank of America charge off will remain as a key derogatory and collection account for between 7 and 7.5 years from the date you first missed a payment.
Any Cach LLC reporting of a collection account could remain for the same amount of time as the BofA credit report entry. Once settled, Cach should update their individual credit entry to reflect a zero balance is owed.
The judgment entry in the public records section, once settled and the court record updated, should show a satisfied judgment. This entry generally remains on the credit report for 7 years from the date judgment was entered in the court – so longer than the BofA and any Cach LLC entry.
The key piece to all of this for your credit report is that the debts are no longer owed. And you rebuild credit from there.
Thank you Michael. I appreciate the thorough response.
1. I guess my main concern would be a nightmare scenario where the settlement letter contains a deceptive message and leaves me legally obligated to payoff any remaining balance after I make the settlement transaction. Is there a way I could share it with you to get your opinion on the wording? The verbiage feels like they are following a template which I would imagine would be federally governed to some degree.
2. The law office rep said they require electronic payment. I am not completely comfortable sharing my ACH information and check number as I feel they could then try to draft more than the negotiated amount. The representative at the law office assured me that my information would be used for a one time draft on the stated settlement date we negotiated for later this month. I would certainly feel more comfortable sending a check via certified mail. Do you have any recommendations regarding the form of payment when settling?
3. Sorry to ask twice. Is the PAID IN FULL versus SETTLED FOR LESS THAN OWED credit reporting open to negotiation? Is this something I can get in writing from the attorney or CACH LLC before settling? I can only imagine that if not in writing, they would naturally report settled for less. I have always heard that it is important to receive in writing that the debt will be satisfied in full. However, I am not sure if the creditor can claim PAID IN FULL if they do, in fact, settle for less than the amount of the original debt.
Thanks again for the education. This is an excellent website and I was surprised by and appreciative of how quickly I received a response.
1. Yes, absolutely you can. You can either fax the letter to me using the number I will send you in an email, or respond to that email with a scanned copy attached. Settlement letters do tend to have standard verbiage. I do outline much of that in this post: https://consumerrecoverynetwork.com/debt-settlement-letters-agreements/.
2. Much of the concerns about the methods you use to pay settlements you negotiate revolve around issues from years past, or when you cannot verify the legitimacy of the collector. Currently, there is such a heightened awareness of abusive collection practices, any deceptive practices by a legitimate player in the collection space can be nipped by regulators quickly. Having said that, I do recommend using a different bank account to fund settlements through electronic payment. See this report. If you are certain of the legitimacy of the law firm, and there is a time sensitive deadline, it can be okay to make the payment in the manner they are requesting. I will be able to comment on the reputation of the firm once I review the settlement agreement that identifies them.
3. Settled in full, or settled for less will have next to no benefit with collection accounts, and certainly will not change the fact that the court record will reflect the judgment has been satisfied. I understand the focus on this key concern, but it is not the leading indicator some make it out to be. The paid in full reference has more to do with the account being considered settled/satisfied for further collection purposes, than for credit reporting. Having said that, there is nothing wrong with requesting the account be reflected as settled/paid in full (just not so much on judgment debts). The risk here is telegraphing you are settling because you care about your credit report, and this impression skewing the collectors opinion of your hardship situation, leading to holding out for more money. In other words – stressing the credit report notation can lead to higher settlements, with little/any benefit.
Look for that email from me. I will see anything you send tomorrow morning.
Chris – I received and reviewed the settlement you negotiated. I have no problems with the letters representing your agreement to settle. The reference of no attorney having reviewed this is a CYA statement.
The only question that remains for me about this is how they will treat filing with the court, after your funds clear, to show the judgment as satisfied. It is normal for that to take a few weeks, and if they do not do it, you can file your own motion to accomplish same, but I prefer they follow through on it. I would encourage you to discuss that with them.
I would like to cover this a bit more, and have some questions to cover off line. You are welcome to call me at the number in the signature line of my email.
Chris – If you call and get voice mail, leave a message and I will return the call. I have some things scheduled I will not be able to break free from.
I have an account that has reached the judgement stage and it is for less than $5,000, aside from this I have two credit cards that are currently in collections stage with collections agencies for $1,500 and $1,000 respectively. My initial intention was to make a payment arrangement for the judgement credit card first for the full amount owed, but have been considering opting for the settlement option instead. I was reading though the Debt Relief Program to try to determine my best options but it’s seems like it cuts off right before it gets to the topics that apply to my current situation. These are the only 3 credit card debts I have. Aside from this I have 2 bank accounts that have charged off less than $500 each (overdrawn) and two medical bills for less than $800 each that have entered into collections. I came into a flat out-no income financial hardship and have recently resumed working for the last few months to where I can make reasonable arrangements to rid myself of this debt. The last activity on my part to repay on any of these accounts happened about 8 months ago. These accounts vary between 4-5 years in delinquent debt age. What would you suggest I start off paying because I cannot see myself paying the $8,000-$9,000 in total that is owed in one lump sum, but I do believe its feasible to re-pay it withing 12-18 months. My questions are in the timing I was trying to read about in your debt relief program, which debt to target first second third etc, and which amount to pay-the full balance owed (that is growing) or the settlement amount…
Curiel – It is highly likely you are going to be dealing with debt collectors on all of these accounts. In order to parse which account to tackle first, second, third etc., I would need to know who the original creditors were/are and who is collecting on them now. You can post that detail in a follow up comment and I will offer feedback from there. Also, what state do you live in? The answer to that may allow you to place less priority on the judgment right now, or could make that debt a top priority.
There are a few reasons I have held off publishing the guides for second and third stage collections. The primary reason is that the debt collection industry is undergoing dramatic changes right now. More than any other time in my experience. But that process is taking longer than I first thought (state legislation and federal rule making moves slow). Here are two pages that will help you better understand where you are at right now:
Dealing with judgment debt: https://consumerrecoverynetwork.com/question/can-you-settle-credit-card-judgements-like-other-debts-stressed/
Dealing with 3rd party debt collectors: https://consumerrecoverynetwork.com/question/settling-charged-off-credit-card-debts-with-collection-company/.
You may have accounts that would be better to pay off, rather than settle, but post that list of accounts and collectors and lets go from there.
Sorry for the late response but I do hope you can still help me.
Here is the information regarding my situation as per your questions:
I am in Texas and my debt is from Texas (never have lived anywhere else)
All my debt accounts:
1. $831 GHEP-Greater Houston Emergency (Original Creditor 06/2011)
Amsher Collection Service-Current Collector
2. $663 GHEP-Greater Houston Emergency (Original Creditor 04/2012)
Amsher Collection Service-Current Collector
3. $1,555 Chase Bank (Original Creditor-stopped paying late 2009)
ARS National Services, Inc.-Previous Collector
Northstar Location Services, LLC-Current Collector (which I think is the same ppl)
4. $1045 Discover Financial Services, LLC (Original Creditor-CHARGED OFF in 2011)
Financial Recovery Services, Inc. (Still says Discover is the creditor though)
5. $193 Reliant Energy Retail Services (Original Creditor-Didn’t pay final bill before switching providers)
NCO Financial Services (Collection as of Dec 2012)
6. $215 Clear Lake Regional Medical Center (Original Creditor-10/2012)
NPAS Solutions, LLC
7. ****THE JUDGEMENT CASE****
$4,206 (written off) Citibank/Sears (Original Creditor-stopped paying late 2009)
Allen L. Adkins & Associates, P.C. (Current Collector has offered me a payment arrangement on either full balance or settlement for $2,600)
These are ALL of the accounts. Aside from this I overdraw 2 checking accounts in the past that have been charged off-but I don’t have anything on any of my credit reports about these ( I pulled all 3 reports from annualcreditreport.com
1. Chase- about $400 not sure who the current collector is because I can’t find anything on them..
2. $509 First Convenience Bank- Original Creditor/Checking Account 2011 charge off
TRS Recovery Service Current Collector
Again, I know I should have started chipping away at this some time ago, but being indecisive and unsure of the best route to take (which ones to prioritize first second third etc) has been holding me back.
Right now I have $2,000 saved for attacking this debt and I’d like your input as to where to apply this first and go from there. Your help and time is greatly appreciated!
-Curiel
Curiel – Texas is one of the more friendly consumer law states, so that is good. You also have a 4 year SOL to legitimately be sued for collection, which is also good.
Here are some targets I would use to put together a plan for settling using your available resources. I will follow that up with a short list of which accounts are a priority in my view.
Chase account settle with ARS National Services at 30%-ish.
Settle with Discover Financial for 40%.
Pay Reliant Energy now with NCO. Small balances tend to not settle well and if Reliant still owns the account.
The settlement offer on the table from Allen Adkins PC is pretty good for a judgment. Taking that offer means burning through your available funds plus some.
Pay bank checking account overdrafts in full if possible and if you need to clear yourself from ChexSystems, but after your priority settlements.
Pay off medical bills still with original service provider or medical billing company if possible. Amsher I would target at between 60 and 100%, and would probably wait to settle them last.
Here is a large concern – debt collectors pay attention to your credit reports. As you call to negotiate and settle your accounts, each account will show up on your credit report as settled within usually 30 days of the meeting your end of the bargain. This could mean some collectors will hold out for higher settlements, or choose not to settle at all. This is the most meaningful for you with the judgment, Chase, and Discover.
You mentioned above that you could raise the needed money to see your way clear of all of this debt over the next 12 to 18 months. How soon can you raise another say 2.5k? I would want to negotiate the judgment, other credit card settlements, and the medical debts with Amsher at the same time if I could.
Thank you so much for you quick response and appreciate the guiedance. I think it’s fairly reasonable for me to work on getting an additional 2.5k relatively soon, my only concern is the long term affect of having settled for less than the full amount.
The ultimate goal is to rebuild my credit over the course of the next couple of years. I know paying old debts is step one I just want to be sure I pay them/resolve them in the best way possible, that will not make the rebuilding process that much worse.
If settling and riding myself of these debts is not going to affect it much more than paying in full (but taking longer) then I will get the money together and settle them all and be done with it. On the other hand if paying in full is my best option for the long term, I need to consider how to manage that instead.
Curiel – Once unsecured debts, like credit cards, go without payment long enough to be charged off (no longer than 180 days), settling for less, or paying in full, will not have any noticeable benefit. The credit damage is already done, and only a manual underwriter would likely catch or care about the difference between an account being resolved by being paid in full, or that it was negotiated for less and settled. And we just do not live in a manual credit underwriting world much anymore.
The process for rebuilding your credit at this point, or at the point where you have negotiated and paid all of the settlements, will be the same.
Some exceptions/differences would be not paying a utility bill in full and later needing service from that provider who would then possibly demand a deposit. And also a medical service provider who you may have to see again in the future.
My Bank of America cards just got charged off to NES debt collector and I tried to settle for about 35% and they came back with 50%. Is 50% the lowest a debt collector will go or should I try for less? They also mentioned a 1099 to the IRS for the amount forgiven, is this something I have to pay taxes on or was there a recent law where this was forgiven by the government?
David – If Bank of America just sent the account to National Enterprise Systems, your negotiations may be a little early. NES will have the account for a couple, to several months. Often times you can negotiate the best settlement with a debt collector by timing your efforts with the performance goals of the agency, individual collector, and the time limit they have to collect on behalf of BofA. Learn more about negotiating with collectors here: https://consumerrecoverynetwork.com/question/settling-charged-off-credit-card-debts-with-collection-company/.
You may be thinking about how some forgiven debt on home foreclosures or short sales were given some temporary tax relief. When you negotiate and pay your settlement on a credit card, the portion of the debt that is forgiven (if exceeding 600.00) is considered forgiven debt. The creditor or debt owner will often send you and the IRS a 1099c for the amount forgiven the following January. It is treated as income and taxable by the IRS unless you can show you were technically insolvent at the time you paid the settlement (which many people negotiating lower payoffs can show). Here is more detail on the tax implications of settling debts: https://consumerrecoverynetwork.com/debt-forgiveness-taxes-settled-credit-card/ .
Because you are close to the end of the calendar year, if you determine you will owe tax on your negotiated debt, you may want to settle the debt in 2014. That way any tax implication and 1099c would be received in January of 2015.
Try not to get hung up on the tax part of this if you are going to end up owing. Settling means preventing being sued for collection (and all of the stress, legal collections, and added cost of that), and will help your credit recover quicker. Also consider that Bank of America could ultimately send the IRS a 1099c for the whole balance – if you never negotiate a settlement.
Do you have other unpaid credit card bills you are dealing with?
yes, I also have a capital one that just got sent to a law firm debt collector. I was wondering if I negotiate the same way with them.
So how much longer should I wait to re-negotiate with NES about my BOA collection and with the law firm about my capital one collection?
Negotiating your CapOne credit card should be done now. Capital One, at least at this time, is the most likely to sue of all credit card issuers. You will want to knock this down early because collection attorneys work differently than collection agencies who are not empowered to sue as part of their collection strategy. It is often ideal to negotiate a settlement with an attorney collector, with a reputation for suing in your state, as early as possible in order to:
1. Get a settlement or payment plan at all.
2. Maximize savings in your negotiations before they feel they have the leverage because they filed suit.
3. Get your savings from negotiations before legal fees are added from being sued.
4. Knock down your riskiest accounts so you can prioritize your remaining debts.
Negotiation with NES, now that you shared the info about your Capital One account, is likely better done after you know what you are doing with the attorney collector. But my feedback on this could be different if I knew the balance on each account, and how financially prepared you are to fund settlements right now, and over the course of the next 90 days. It would also be helpful to know the month your BofA account charged off.
the BOF was charged off to NES 2 days ago and the amount is about $18,000
the capital one is about $9,200 thats been charged off to the law firm on10/28/13.
I have another capital one card with about $7,000 which has not been charged off yet but its getting closed to being charged off.
Thanks David. Without knowing how prepared you are to fund settlements you negotiate (and other minutia), I cannot drill down too deep, but what follows are some assumptions based on my experience.
If you were able to maximize your savings when negotiating with the attorney for Capital One it would be at roughly 50% using today’s trends. Because you are at risk of being sued for that debt, I would not recommend negotiating the payoff with any dialogue related to monthly payments unless you simply have no choice. The reasoning here is that once you start down the path of settling using monthly payments with someone who is likely empowered to sue for collection, you telegraph you have a monthly income and budget for that, which translates as not being in too much of a hardship, and where suing means full repayment and possibly with legal fees etc.
Assuming you can pool together 4600, and can successfully negotiate that debt for 50%, that leaves the other Capital Once account. You may be able to get them to agree to 50% directly, but I would not try that unless you are confident you can access the funds. Capital One can be sticky on their settlement percentages, or even accepting settlements, if accounts are too new, or were used overly much in the months leading to payments being missed. But if you have resources, I would look at your options negotiating with them directly. You may even play the other account with the attorney off of this additional one. Something like – “I confided in a family member about my financial struggles. They can loan me 8k, and I am talking with the attorney you guys sent my account to about working something out. If I can knock this one you still have down, along with that one, I will take them up on the offer to help. If not, I may just borrow much less and file for bankruptcy.” That is over simplified of course, and may not fit your situation, but you get the picture.
Negotiating with National Enterprise Systems may be able to be held off for the next 60 or so days. And your deal with them can certainly include settling for less than owed along with a few months payments to achieve paying what was agreed to. 3 installment payments toward the payoff you negotiate is often a good target. I do not like seeing agreements extended too far, but those are often possible too.
How does all of that look on your end?
I am able to do everything that you have explained. Thanks and I’ll try that asap. On the letter by the lawyer states that I have 30 days to contest the debt, does that mean I have a 30 days windows before being sued?
The 30 days to dispute is a standard disclosure on virtually any collection notice. You could write back and request debt validation, but in instances like this when you are dealing with an attorney for the original bank, it does not serve much of a purpose. You might buy a couple weeks time with the request because it triggers a legal obligation on there end to pull a couple recent credit card billing statements and compose a letter to send to you. If your goal is to negotiate a settlement, I would just get to it. Validation requests, at least in this spot, and with this creditor, will not typically lead to a better outcome (but can in a very different set of circumstances). You could be sued anywhere from tomorrow, to sometime after the expiration of the 30 days.
I was able to get the capital one lawyers to agree to 50% and NES to agree to 40%
Whats weird is the I have one more credit card with capital one and its already been charged off to their internal charge off dept but they are still unwilling to take 50% even tho my other capital one acc thats been charged off to the law firm agreed to 50%.
Great work David!
Regarding the other Capital One credit card – Not really all that odd. Cap One can be indeed be reasonable with options on one card, and obstinate about negotiating a workable and affordable pay off on another. You will have opportunities to resolve the account. In instances like this I would continue your efforts periodically – once every couple weeks or a month. You may end up dealing with an outside collector on this one too.
Michael-
Thank you for your knowledge in all of this. So, what is the best way to go about finding out what amount they will settle for? Once we know an amount it will be easier to get the savings started. Looks like a car refinance is not in our immediate future.
The credit union we had tried to go through wanted to see the entire amount paid off before they would refi. I thought it sounded a little excessive.
Settlement targets with Bank of America can range between 25% and 40%. 40% is currently a more realistic target then 25 or 30. There are reasons some accounts will settle for less than others, and a short list of things you can do to set yourself up for success. Even though you are beyond the statue of limitations to be sued for collection, I would still be prepared to settle inside the current trends. You can often negotiate time to pay the settlement too, but realistically it would be best to have 25% in hand before contacting them again. If the debt is sold to a debt buyer I would have more feedback about your targets when negotiating.
It is pretty common in today’s credit environment for lenders to want to see collection accounts resolved prior to approving new credit – even when the loan is secured by a home or vehicle.
Dear Michael,
We have received a 1099-O for our Bank of America debt and it states on it that it is a cancellation of debt. I realize this means it will be counted as income on our taxes correct? What I don’t understand is how this debt was discharged. Does it mean we still owe the debt? We still haven’t settled an amount with them because they were not in contact with us for the past few years. Any knowledge you can provide would be really helpful. Thank you!
Stephanie – Some helpful information about whether you will owe tax on forgiven debt or not can be found in this report.
When did you last make a payment to bank of America on this account? When was the last time you had contact with them, or a debt collector, in an effort to negotiate a settlement?
Michael- At the current time we are not able to pool a large sum of money together. We are just beginning to get back on our feet after a long term of unemployment. We, however, are able to provide at least $50 per month. I thought there was something specific if trying to settle with them about having them correct the credit report to have the account reported as paying as agreed or something along those lines if we are able to get on some sort of payment plan. Wouldn’t they settle for a lower overall amount and then we could pay monthly?
Stephanie – Unfortunately, you are passed the point where you can re-age your account with Bank of America. That option is generally only going to be on the table if they agree to monthly payments within the first several months you started to miss them. There is really no way to approach making smaller monthly payments today, in order to get any credit report benefit. Settling with BofA today would resolve the account and it would be updated to show a zero balance owed on your credit report. That is likely what the lender would want to see at this point. There are instances where a lender would want to see payments being made on an old debt like this, but that is typically going to apply to home loans, like through the FHA.
Bank of America will settle for a lower amount, and they do offer payments. Those payments are often limited in duration. The lower the payment you need, the longer the duration, the less likely you will be settling, and the longer it will take to get this resolved on your credit report. The fastest way to your goal is to settle for a lump sum. If you cannot do that today, you can plan for it and save up money as quickly as possible.
By the way, for the BOA account we offered to pay $50 per month but they would not accept that. My husband had given them his salary amount when they asked and they had said the lowest he could pay was about $150 or something crazy. We have not made any arrangements to pay however as that sort of raised a red flag for us. Are they able to negotiate based on salary amount? Also, I was told by someone I know that if they haven’t collected in 3 years in the state of MD there is some law that they cannot collect or something.
Stephanie – Bank of America can make decisions about what to accept as a payment plan, or what to accept as a settlement, using their own policies and procedures. It is a bit unusual for that to be part of the collection and recovery process after this long without a payment, and after the SOL for credit card debt in Maryland has expired. But I suspect that had more to do with how you started the conversation when you called BofA, than anything else.
The SOL to legitimately be sued in Maryland is passed. But that has nothing to do with credit reporting. If you have credit goals you want to accomplish you may have to resolve this. Negotiating the credit card debt for a lower balance pay off will often make the most sense at this point, as opposed to payment plans (payment plans are not going to show you resolved the collection account for some time). What is the balance owed on this?
Michael-
The balance owed on this is around $7, 626.38. It was charged off April 30, 2010 and last paid November 23, 2009. What I find really strange is that it never went to a collection and we never heard anything from BOA regarding late payments or anything.
My husband had called on it regarding trying to set up a payment plan and when they told asked for his income he gave it to them. I should probably have him read the information here first. We still have not set anything up but would like to somehow arrange something so we can improve our credit in order to refinance our vehicle.
How do you suggest speaking with them about this?
Thank you!
Stephanie – As far as why the account did not get sent to a collection agency, or sold off to a debt buyer, I cannot say with certainty. Accounts do occasionally get “lost in space”. We had a member with a credit card that was ready to negotiate a settlement, but no one at the bank could find the account. It did not surface for over 2 years – with regular calls attempting to negotiate every couple months.
You need to resolve the account in order to best achieve your credit goals. It would be best to settle for a lower payoff, both for speed of resolution, and for savings. That means having a lump sum to offer. How much money can you pool together in order to settle with Bank of America?
We have a Bank of America account that was charged off in April 2010 and has not been paid since November 2009 because my husband was laid off from his job and unemployed up until August of 2013. The account says charged off on the credit report. We’ve spoken with BOA a few times as they had stopped contacting us in 2010 and we never heard from anyone regarding the account after that and we honestly forgot it was even out there until we tried to refinance our car August 2013. The credit union was the one who said it was on credit and to find out what was going on with it. It is a BOA Line of Credit (but was a credit card). Why wouldn’t it have gone to collection and what is the best way to deal with getting this figured out?
I have had BOA send us proof that it is indeed our debt. I wasn’t really sure at first.
Thanks!
Thanks, I’ll keep you updated of my progress.
My Capital One just got charged off to an in-house dept. They would not tell me how long they will keep it in that dept until it gets charge off to an outside collection. Their offer is not that great at the moment. They offered 30% off the balance. How should I go about this?
I am currently at almost 180 days delinquent on 2 of my credit cards. This was due to my hardship of losing my job, a divorce, and depleting my savings. I have been in talks every month with my credit card companies telling them about my hardship and offered them a settlement. One credit card said no offers is currently available and the 2nd credit card offered 85%. My family has offered to help me if the credit card companies agree to a settlement. They can come up with roughly 50% of my debt. My question is, should I start negotiation on a dollar amount close to 30% and try to work my way up if they refuse?
Who are the two credit cards you are trying to negotiate with?
Are you making timely payments on other credit card bills? If so, how many, and what are those balances?
I can help you to better target your negotiations, and the timing of your settlements, with answers to those questions.
One credit card is Capital One with about $20,000 and the other is Bank of America with about $17,000. I dont have any other credit card bills.
Targeting settlement with Bank of America between 25% and 40% is realistic. There are instances where you have to time those negotiations for just a few days prior to the charge off (180 days late). Be sure you are ready with the funds from your family member in order to get your payment in on time. BofA will allow for the settlement you negotiate to be funded over 3 installments.
Capital One credit card settlements prior to charge off can be targeted at 50%, but sometimes a bit higher. And there are accounts that they just don’t settle, but that you will have opportunities to resolve later with a debt collector.
I asked about other credit cards being kept current because that can skew how willing banks are to settle with you. Some other concerns are whether there were large charges, heavy account use, cash advances, or balance transfers in the months leading up to payments being missed. Do any of those concerns apply to your situation?
I forgot I actually also have a Discover card with about $5000 balance which has been delinquent for the passed 5 months but they have lowered my monthly payment to about $60 and an interest rate of 0.9% for the life of the balance as long as its current so I took that offer. I have paid the last 2 months payments.
Capital One has offered a settlement of 80% as of 2 months ago (120 days late).
I have not used any of my credit cards, cash advances, or balance transfers on any of my credit cards for about 9+ months. I only used my debt card which only has a little bit of money in my bank account.
Thanks for all the additional details Mary. At this point I would be reaching out to Capital One and BofA with a higher level of frequency. Deals can sometimes get negotiated within day(s) of charge off.
With the amount of money involved, the fact that you have a source of funds to get through these settlements rapidly, and the timing, you would benefit from talking with a CRN specialist. They have walked people through negotiating and settling thousands of accounts on their own. You may not need to work one on one with a specialist, but consulting with one at this point may help identify anything that may prevent you from locking in your settlements (at least with BofA), prior to charge off. You can reach one at 800-939-8357 ext 3.
One last question before I call you guys. I just got off the phone with BoA and told me there was no settlement they can offer right now. That account is actually 150 days delinquent.
I also just got off the phone with capital One and they also informed me that they cant offer a settlement right now even though my account is 172 days delinquent.
Please advise on your thoughts.
Your negotiations with BofA are a bit premature given the details you have provided so far.
Negotiations with Capital One credit cards can sometimes be more successful after they assign the account out for collections, though not always.
I am not sure what you have shared with either bank up to now. If you have only shared the basics of job loss, and the divorce leading to the loss of another income, than you fit the demographic for offering balance concessions.
I guess i’ll try capital one again in about a week, couple of days before collections. I’ll wait another month and try again with BoA. Yes, I have shared my info about job lost, divorce, and depleted savings with both credit card company.
I would try CapOne again no later than Monday. Perhaps even Friday and Monday.
Some credit cards with Bank of America will stay with an internal post charge off recovery unit after charge off. Keep that in mind if you are unable to lock in a deal prior to 180 days late.