Short answer
Most of the heavy lifting happens when you are between 150 and 180 days late on the card. Have the money ready before you call, know roughly what that bank approves, and make your offer as a round dollar figure rather than a percentage.
Key points on this page
- The best window to negotiate directly with your bank is between 150 and 180 days late, before the account charges off.
- Settling for pennies on the dollar, meaning 10 cents or less, does not happen. Targeting unrealistic amounts is a good way to blow the opportunity to settle.
- Treat settlement percentages you read online with caution. Bank policies move over time, so look for current information about your own creditors.
- After 90 days of nonpayment your calls are usually routed to the bank’s recovery department. That team is who you can settle with.
- State your offer as a round dollar figure, never as a percentage, set short of or close to the low end of what that bank is known to accept. Expect questions about your income, expenses and other debts, because recovery staff and collectors have real time access to your credit report.
- A refusal can come down to being fewer days late than you thought, looking more collectable, questionable account activity before you stopped paying, or that creditor simply not settling right now. Pay any settlement from a separate account you set up for that purpose.
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
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.