Debt Collectors Send Offers to Settle in the Mail.
Hi Michael, I’m wondering if you could help/advise me on what I should do if my credit card (Barclay), who has reached out to a debt collector (Capital Management Services, LP) regarding a 50% settlement of my current bill. I’m tempted to take the offer, which would take the roughly $2800.00 bill down to about $1400.00, however there are a few variables.
For starters I find myself thinking this sort of thing to be very hasty, the deadline for settlement is next week. I’m wondering if this is too good of a deal to pass up but if I take it, I won’t have money when I'll need it in the coming months.
Naturally, I’m worried on the effects to my credit score, but since I’m sure it’s not too good, from what I’ve read thus far, the next seven years are to be doomed. It’s all so confusing, and some how the mentioning of an IRS document, 1099c is also present, which is only heightening my anxiety.
Several questions here, most regarding effects on credit report. 1. Is settling with a credit card company a long term benefit? 2. What happens if I decide to not take the offer from the settlement company? 3. Would my credit repot be better off if I settled/ did not settle? 4. How exactly does the IRS form 1099 C play a role in this sort of disaster?
—Ellie
Offers to settle outstanding credit card debts with debt collectors are common. Capital Management Services is letting you know they are authorized by Barclay bank to accept half of what you owe on your account. But if they make the first offer, and at such a steep discount, are you leaving money on the table by accepting the deal?
Yes, you are likely leaving money on the table. At least, in this situation with Barclay.
There are other creditors who are less likely to offer to settle for less than 50%. My current realistic targets with Barclay bank are 40%, and occasionally lower when the individual hardship scenario suggest targeting a better deal in your negotiations. Without knowing all of the details of your hardship, and reasons for not paying for as long as you haven’t, I would target 40%.
Making a counter offer to settle with Capital Management Services.
You can use the information in the offer letter Capital Management sent to you as a starting point, and even time your efforts accordingly.
You know they will accept 50%, but they moved with the first offer. It is common to have an offer, counter offer, a counter, followed by an agreement, in negotiations of all types (not just with credit card bills and debt collectors). You can call Capital Management and make a count of, say 30%, making sure to leave them with a sincere impression that is all the money in the world to you, or that you are having to rely on outside resources to pull the money together. They may counter right then with somewhere in the middle, or suggest that they are unable to go any lower than the 50%.
You do not have to negotiate an agreement in the first call. Nothing wrong with shooting for that, but it is also okay to just accomplish 2 goals:
1. Relay a sincere hardship.
2. Show a willingness to pay something, but only if it is within your means.
If you were to call the debt collector today, but not reach an agreement you will take advantage of, just politely end the call. Use the date the offer expires they have in their initial offer letter as timeline to call them back and try again.
Debt collectors do deadlines.
Let’s face it, if there were no time limits or deadlines in life, how much stuff would get done? Debt collection agencies are often under some pressures to get stuff done with the files sent to them for collection. Barclay did not send Capital Management the account to collect on forever. The limits for assignment collection files like yours can be as little as a couple months.
Whether the date on your offer letter is timed for when the collector might lose your account or not, can definitely affect your ability to settle for the most savings, and the timing of your efforts.
Call them the day before the offer expires. Be ready to make a cull lump sum payment, or the first of several payments if you are going for a term settlement. Let them know you are calling back after having called recently and been unable to take them up on the mailed offer. You had 30% available when you called back and that was it, but you were able to pull together more, and make another offer of a round dollar amount consistent with your next settlement target of, say 40%, but that is flat out all you could come up with in all of your efforts.
If they do not take the offer, ask them how long they will have the account for, and that you will see what you can do to get more money together, but you already knocked on every door…. Many assignment collectors like this will have no problem telling you when they will lose the account. If Capital will have the account past the date on the settlement offer letter they sent you, use that date to time you last counter offer to them.
Check out this video about timing your settlement offers with debt collectors.
Barclay Bank does work with a network of attorneys to collect debts. They do sue as part of the collection effort. You may want to ask Capital Management how long they will have the account for in the first call you have with them. You can then assess whether it is worth the extra money you may pay when settling with them, to eliminate the risk you are sued, which ads costs to settlements, or can prevent them.
The benefits of settling your credit card debt with a collector.
Most banks do not send accounts like yours out to an assignment debt collector until you have missed many payments (3 to 6, though there are some exceptions like AMEX). That means the damage to your credit reports is done. But there are credit reporting, and other benefits, to taking advantage of settlement offers, and negotiating better ones. Here are some:
1. Your credit report is still showing a balance due, whether to the bank itself, or to a new owner of the debt. Settling should bring the amount owed to zero. That will help your debt to income calculations, and these days is a condition of certain types of financing, like many home loan, or refinance options.
2. You eliminate the risk of being sued, which can lead to additional credit damage, and expose you to extra ordinary collections only judgment creditors enjoy (that you will not).
3. The savings being offered to you in the letter a debt collector sends, or that you can negotiate lower right now, may be a better deal than you can put together with the next debt collector.
My experiences working with people who settle debts over many years suggest that settling will provide more benefits than not, if you have credit and financing goals set for the next few years; are not passed your states statute of limitations to be sued for collection; and are not already 1 to 2 years from the collections and negative items dropping from your credit reports anyway.
The tax implications when settling debt are very real. Not everyone will end up owing any money to the IRS, but anyone with more assets than liabilities needs to weigh the potential taxes into their budget. You can read through this critical report for more details on the tax issue: https://consumerrecoverynetwork.com/debt-forgiveness-taxes-settled-credit-card/.
You can post any additional information or questions in the comments below for more feedback.
Anyone considering a settlement offer they received from a debt collector, or with similar questions or concerns, is welcome to post in the comments below for feedback.
About Michael BoveeMichael started CRN in 2004 with a mission to provide people in need with detailed debt and credit help and education. Michael has participated as an expert panelist in federal consumer protection rule making, collaborated on state law changes governing debt consolidation, has worked as an expert witness in court matters related to the debt relief industry. He is available to speak with you about your financial struggle and helps people resolve their debt problems daily.
Hi Michael,
A few years ago I was severely behind on my Barclay Credit Card and 6 months went by before collection efforts started. Most recently, 6 months ago, I received via process server, a court order requiring m to make arrangements or be sued and be garnished. Obviously, I set up a payment arrangement and am currently paying 180/mo on a 2100 debt. Not worried, plan is in place and it’s auto paid. I never see the money. It should be paid off in another 6-8 months. However, I have been cleaning up my credit and paying things off and those items are reflected on my reports to my benefit. I am seeing as core increases and the like.
My question is: How do I get Barclay to report the payments and the reduction in balanced owed while paying one of their collectors? Is this even possible?
Thanks!
Mike
I do not typically see charged off collection accounts updates to credit reports until the full amount is resolved via payments or lump sum settlement. That means waiting the 6 to 8 months until you are done pay the collection agency for Barclays.
Hi i received a slip to go pick up a certified letter from synchony bank. I’m 3 months behind on my 2 accts i have with them total for both is about 9000. What could the letter say or be ? Should i ignore it or go and pick it up. Thank you
Go pick up the letter. It is going to say what the last one said, only this one gets your attention more because they used certified mail to send it.
Hi Michael…I’m in a situation. I have a Capital One credit card charged off to an attorney for 24K. Upon the court date negotiations we offered 8K which they declined o the spot. I have since sent a certified letter for 10K which the representative said was declined. They sent an offer of 18K, which I cant afford. What should I do next? Offer another amount? Wait for the follow up court date? Will they take a judgement? I can come up with $12K max. Please advise!
Capital One is not a lay up to settle with for less than 50% without a lawsuit, and less so if they have sued.
Call me tomorrow for a phone consult and I can ask some detailed questions that will allow me to offer better feedback. You may be able to hit your target, but it will not be easy. You can reach me at 800-939-8357, ext. 2.
Hello Micheal,
I hope this email finds you well.
I have two credit cards that were charged off. Both were with Synchrony Bank. I was unable to pay them back in Jan. 2015 and they went to collections around June. 2015. They have been bounced around by different collection agencies a few times.
I am wondering if I should- 1) ignore and hope I don’t get sued 2) attempt to settle or 3) pay them off and put it behind me.
The balances are around 3800 and 4300.
Your expertise is greatly appreciated.
If you are concerned about being sued over your Synchrony accounts; want to improve your credit situation in the years to come; and have the financial ability to fund settlement offers, I would encourage you to negotiate the best discounted payoffs possible, and as soon as possible.
Synchrony may not sue you directly, but they sell debts to Portfolio Recovery and Associates, and PRA does sue… a lot.
I also find Synchrony accounts can be negotiated for better savings when you are in collections with them. PRA, and debt buyers like them that may pick up your accounts, do settle debts, but often at higher rates.
Hello again,
I received an offer of 25% off of my balance on one of the credit cards I am dealing with, They have emailed me a settlement offer and want payment from checking account. They are saying the settlement is only valid for one day. The debt collector company is Professional Bureau of Collections of Maryland.
In your opinion, does that sound pushy or is that common procedure? Synchrony still owns the note.
Thank you in advance for your response.
It is pushy for Professional Bureau of Collections to only offer a day to pay. And 75% of the balance is too high in my opinion. But this is a good opportunity to follow up and negotiate a better outcome. I would be targeting under 50% on charged off Synchrony accounts.
Hi Michael,
We received a settlement statement from Capital Management Services LP out of Buffalo. The card was a SEARS by Citibank. The offer sounds reasonable. Three monthly payments of $1163.55 on a $9696. balance. Any red flags with this organization?
I do not have any warnings about settling with Capital Management Services. As long as you know the debt is yours; that CMS is legitimately collecting for Citibank; and the offer letter contains important elements, the SIF offer is consistent with today’s settlement percentage trends.
Hello. I have a unique situation. I owe $220 to Citibank (Macy’s) and it is comprised of only late fees and interest charges. I paid the amount in full but was 13 days late and didn’t see the letters coming in saying I owed late charges. I am now almost 120 days late (I refused to pay) and they have offered me a settlement of $100. I called and wanted them to take it off of my credit (as this was something I read that I could ask for so my credit would be reinstated) but they said they will only report to the credit reporting agencies that my account now has a zero balance.” I wasn’t sure what that meant and called them. They said that they didn’t know how it affected my credit and did I want to make a payment, or not. 🙂 Again, I can pay the amount but I’m concerned about what this means for my credit and if I can negotiate with a 3rd party if they sell it to a collection agency. Thoughts? Thank you in advance! FYI, my FICO is usually around 780-800.
Debt collection agencies have zero influence over Citibank regarding credit reporting. You will not be able to negotiate with a collector anything other than the account being updated to show zero balance owed and resolved. And even that is not really a negotiation as it is required that accurate and current information be reported to the credit bureaus.
Your best shot at getting something done is with Citibank and they are not all that willing to remove the late pays. If this is the only blemish on your credit it will not cause much of a problem after it is resolved.
Good Morning,
Since 09/2012 I had enrolled 6 credit cards with A debt settlement company (fdr). within the 1st 3 months one creditor offered me a settlement which i took and resolved. over the past 26 months 4 of the other creditors sued me so i removed them from the original debt settlement company, hired an attorney and was able to settle the accounts . Now, I have one BofA account that was with FDR that i recently removed because FDR did absolutely nothing for 30 months to resolve this account. Once i removed the account from FDR, I received a letter from an attorney stating they represent bank of America fia services and that it it BofA’s intention to sue me for $9,863. the original balance I owed. When I reviewed the letter the attorneys sent to me, it states that they are representing BofA but at the bottom it states that no attorney has yet reviewed the account. When I pulled my 3 credit reports, it shows that Bofa charged off the amount owed. It does not appear these attorneys are a collection agency or debt buyer. I want to resolve this with BofA . I have the funds to pay the balance in full but would have to make 9 equal payments. How would I go about initiating contact with BofA? Should I contact the attorneys of BofA directly? Please Advise
What is the name of the debt collection firm?
I would call the debt collector for BofA directly and offer a settlement. What if you were able to settle for half? Can you pull the money together to fund that? Do you have any money in your escrow account?
Thanks for your comments. I have not yet been able to settle with Capital One, they are demanding the entire principal balance, and have not budged. It is nearing charge-off, and I intend to let it do that after speaking with another representative last night. She was actually apologetic for their stance, but there was nothing she could do about it. I’m assuming that once it goes to a CA for much less than the principal balance, the CA will be more willing to deal.
You will have opportunities to negotiate with debt collectors after charge off. The settlement targets on CapOne credit cards do not change much when they still own the account, and only place your debt with a third party collection agency.
Hello Michael,
I would like to start by saying thank you so much for this website and the information you have provided. This has been so helpful to me, especially since I have never been in this situation before. In a nutshell, we had some hardships including a closed business, taking a job for less pay, and a large balance due to the IRS for a tax audit and back taxes. We retained a bankruptcy attorney and after a 6 months of waiting and follow up, the attorney told us that neither Ch. 7 or Ch. 13 would help us due to the value of our home and my husband’s income. They also told us, there would still be the large balance owed to IRS and for student loans that would not go away. The Ch. 13 monthly payment was very high, something we could not maintain. By the time the attorneys met with us to state that neither bankruptcy option was recommended, we were past the 180 day threshold with most creditors. The attorneys offered to do debt negotiation, for a hefty fee. We were able to contact a few and get hardship programs with 0 to low interest before the accounts were charged off. Now, we are in the process of negotiating with the rest of our creditors. 3 of the creditors have large balances. We have exhausted our resources and have limited funds to pay off our creditors. Do you have any suggestions for target settlement percentages with the following collections agencies/ creditors:
1. United Collections Bureau, Inc for DSNB Macys. Balance is $5000 and they offered a settlement at 75% of the balance due by 1/23/15. I didn’t have the money at the time. I have not yet spoken with them.
2. United Recovery Systems, LP for Capital One Bank. Balance is $11000. First letter from them was received in December. No additional letter has been sent. Should I call URS regarding my Capital one account, do they typically send a settlement offer? What percentage should be my target? I have received other letters from URS regarding my Chase bank account and the 2nd letter had a settlement offer of 40%. I settled the Chase account with them.
3. I owe $9000 to Citi bank (previous closed credit card with ATT Universal in which I was making payments on until hardships occurred). I have not received any letters from Citi regarding this account. I called once (there was a number on the citi website for previous ATT accounts) and the representative could not find my account and told me to call citi. I did not call again. I’m worried that I have not received any communication regarding this account and the last payment made was 7-8 months ago.
Any suggestions you have would be greatly appreciated.
1. UCB target settlement if I were working your file would be 35 to 40 percent of today’s balance. There are reasons settlements can be a touch lower, and a bit higher.
2. URS may not send out an automatic settlement offer letter to you on a Capital One account. You can call them and instigate the negotiation over the phone, and get them to follow up by sending you a settlement letter with the details you work out. I do not see many Capital One accounts settle for less than 50 percent of the balance owed. When I do, they are just a little lower, and not under 40 percent. There are so few that settle under half of whats owed, it is just not a realistic target to have in mind.
3. Call Citi bank and find out who they placed the account with for collection. If they sold the legal rights to your account, who to? But before you do that, can you tell me how much money you are prepared with right now to settle with these debt collectors? It may make sense to only contact one or two at a time.
Thank you for your quick response. I have 50% of each of the balances on the 3 accounts to settle. 50 % of each would be cutting it very close and not leave me any emergency funds.
You may not need as much as 50% on all of them, but it is best to be prepared.
Because you have the resources, it is a good idea to tackle all of them at once.
I just got a letter on my citi/ATT account from Client Services Inc. The balance is $9500. What would be a realistic percentage to try to settle for?
Thank you.
I would first offer 25 percent to settle, but with a realistic expectation that I would end up somewhere between 30 and 40 percent.
I’ve been talking to several creditors, trying to negotiate settlements. We got down to reasonable numbers, but they refuse to send any written documentation of the settlement until AFTER they receive the funds. I said that I would not do it that way. They said that the calls were recorded and therefore the transaction was safe, but I still said no. Am I not entitled to written settlement terms before making payment?
Read through my critical report about debt settlement letters. You can often schedule the settlement in their systems, but with a payment date a week or three out. This will give time for the agreement letter to reach you.
In cases where they just flat out refuse to release the agreement in writing until funds are received, record the call yourself, and tell them why. Keep that recording until you get the written agreement, and then continue to keep it anyway.
There are a couple of states that will require written agreements in these scenarios, but not all. Hopefully we see some national rule changes this year on this critical topic.
Who are some of the creditors you are dealing with?
Synchrony bank for JCPenney, Macy’s, BonTon, Discover, Kohls, and Capital One.
What if you don’t have any way of recording the conversation?
You can get good devices for recording on your home phone from radio shack. You can also put the phone on speaker and use an old school tape recorder or boom box. That would work for a home phone, or a flip phone on speaker.
If you have a smart phone, there are apps you can use to record live conversations. This method, at least for me, and the customers I work with in recent years, is the easiest solution. If you do not have a smart phone, you may consider asking a friend or family member to use theirs, and then send the audio file from their phone to your computer for storage.
Also, write down everything about the call. The number you called, the name of the person you are speaking with, the date and exact time of day etc. If there is a mistake later on, you will be able to easily point a Synchrony rep to what was said and agreed to. It would also come in handy if you needed to file a complaint with the CFPB, or other regulators.
any experience dealing with client services inc. ?
Yes. Post the details surrounding your current situation with Client Services in a comment reply for feedback.
chase slate card charged off 10/31/14- 15,263.recieved notice csi had this account for collection 11-16-14.have had a few calls but have not spoke to them.
also have a chase disney card charged off 11-30-14-15,350 have not heard anything on this one yet.tried to settle these cards with chase had no luck.dont know where the disney card will go.would like to settle these cards before law suites or judgments…have not worked since march 2011.lost job then wife has had several critical health issues.in and out of hospital and nursing centers 4 times she could not be left alone..then march had stroke left with dementia-aphasia cant read-write-talk-walk etc.have legal gaurdianship spen most of my time at nursing center watching out for her helping try to explain what she tries to say etc-etc. nusing homes just dont watch out and take care of people well at all unless you are right there on top of it..thanks for your resonse..so stressed and depressed just cant think well about all that is going on..only income right now is her s.s. disabilty1276.00 monthly.have a small 401 k 30,000 .could use some to try for a settlement.really dont want chapter 7..
I would target 30% settlement with Client Services on recently placed Chase credit card debts. You can use some of the tips for negotiating that are outlined here: https://consumerrecoverynetwork.com/question/settling-charged-off-credit-card-debts-with-collection-company/. Reading deep into the comments on that page will offer a good bit more insight.
Are there other debts than the 2 Chase accounts out with debt collectors, or will there be? If so, how much does all that add up to?
thanks for quick reply..no other accounts going to collectors..do you think the chase disney acct.will go to client services?better to avoid contact with them
till i find out?would like to get all settled by end of this year would prob.help with
1099-c issues…think it would be better to have CRN negotiate this for me?
thanks again for all your helpfull advice.
Call in to the hotline and talk to a debt settlement specialist at 800-939-8357 if you want someone else to handle the negotiations.
Chase sends unpaid accounts to several different third party debt collectors. You can call them and find out what happened to the Chase Disney credit card.
If you are ready to pay any settlement offers this month, and in full, you would likely account for that in the 2014 tax year. You could also get the deals negotiated, and even partially paid in 2014, but not fully settled until 2015, so that any tax implication would hit by April of 2016.