Settling Credit Card Accounts with a Collection Agency After Charge Off
Credit card accounts have not been paid for a while and now collection companies are calling. I settled one late bill with my bank and I am now tapped out. Can I settle with collectors after charge off?
How to deal with a debt collector after accounts charge off?
—Pay collections
Short answer
Yes. Settling a credit card debt after charge off, once a collection agency is contacting you, is always an option. Sending the account to a collection agency is the most common thing a creditor does with a newly charged off balance, and that agency can negotiate within the limits your original creditor sets.
Key points on this page
- Charge off comes after the first stage of collection calls from your original creditor, which can last six months.
- Creditors have 3 options when they charge off a defaulted account. Placing it with a collection agency is the most popular one.
- Most of this work is done on contingency, so the agency only gets paid if you pay. Your account may sit with one agency for a limited window.
- The agency can only agree to what your original creditor allows, or to what it can go back and get approved.
- You cannot re-age a charged off account. The credit reporting damage was done by your bank, and the collector has no control over it, whatever they suggest on the phone.
- You will have to pick up the telephone to learn your real options. A debt validation request at this stage is often counterproductive to a settlement goal.
Yes, settling a credit card debt after it has been charged off and a debt collection agency is contacting you for payment is always an option. Below is an edited version of an article we published that explains “Charge Off” and what typically happens with your unpaid accounts after they are considered seriously delinquent and the unpaid balance is assigned to an outside debt collector. Settling the debt may be just the opportunity you need to move on with your finances and restore your credit.
For your unpaid credit card to reach charge off, you will have already been through many collection calls from your original creditor. The first stage of collection calls can last six months.
Creditors have 3 options available when they charge off defaulted credit card debt. The most popular option with newly charged off accounts is to send the debt to a collection agency.
Credit Card Debt Sent to Collection Agencies are Mostly Done on Contingency
The amount of time your account remains with an assignee debt collection agency will vary. Let’s assume that the agency that has your unpaid credit card bill will only have the ability to collect from you for 90 days.
The typical debt collector working for your creditor has two ways they attempt to get you to pay; your phone and your mailbox. There are other ways to collect, such as:
- Collection calls to your job,
- Debt collector calls to family members and friends (this does happen – it sucks and is embarrassing).
Lets focus on the most general efforts used by the debt collector who is collecting on your account just after charge off. When a debt collector gets assigned your account, you will often start getting collection calls (at a high volume). You should also get a collection notice in the mail within a week of the agency having contacted you by phone.
You do not have to pick up the collection calls if you are not ready to negotiate a settlement with the agency. My suggestions for speaking to a third party debt collector are not the same as picking up, or making calls out, to your original credit card lender. And you do not necessarily need to send a debt validation request in response to the collection notices you receive in the mail. That is often counter productive to your settlement goals.
Settling an Account with a Collection Agency
Some important details to consider:
- You will have to pick up the telephone in order to learn about your options with the account. I typically recommend that you not limit yourself to written communications with collection agencies.
- You will be speaking to someone who has been trained to push your buttons using the most effective and proven methods for collecting unpaid debt.
- The agency can only work out arrangements for payments that your original creditor allows them to, or where the debt collector can go back to your creditor and get approval.
- You will not be able to re-age the account when settling charged off accounts with debt collectors (the credit report damage is done by your credit card bank, the debt collector will have no control over that).
- Avoid some of the nut job advice on the internet about handling this stage of collection.
- In some ways, you have more payment term options you can negotiate with a collection agency than you would be able to with your bank.
- The collection agency only gets paid if they can get you to pay them (that may not always be the case, but contingency debt collection is the most common model currently).
Charged Off Debt Get Reported to the Credit Reporting Agencies
When this derogatory credit reporting happens the damage to your credit is done. You do not get to re-age charged off accounts. The credit damage from not paying a charge off account can then only get worse if you are sued, followed by getting a judgment against you. The judgment then shows up in the public record section of your credit report. Also, another debt collection trade line may later show up on your credit reports, and this would be considered additional damage.
A debt collector may comment how you should be concerned with your credit report and credit score after the account they are collecting on gets charged off, but this is just a collection tactic. Collection agencies will have no ability to change how the original credit card issuer reports to Equifax, TransUnion or Experian that your account was charged off.
There are tactics and timing I share on this site, and when you want to work with me one on one, that will better prepare you for dealing with outside debt collectors. You can optimize your results by knowing:
- How to negotiate a settlement deal that is timed with internal goals the collection agency has, and even that an individual debt collector may have.
- When to pass on an offer to settle that is too high without being concerned your particular debt collection agency will sue.
- What your bank will allow the collector to do (how low a settlement can get and what payment terms are common).
- The tricks and tactics that will be used to get you to pay more than you may have needed to.
- Collection abuse tactics.
If you are struggling with several credit card debts that are past the charge off stage, you should learn about your options and identify resources for handling the accounts before they end up in more advanced stages of collection which can include being sued.
It is important that your next step to deal with your now charged off debt be the step you take to put the debt to rest before the situation can deteriorate further. If you are serious about resolving unpaid debts and want to develop a workable plan, getting started is easy. Just post more about your situation in the comments below, and lets go from there.
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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.
I co-signed a Care Credit account with my son for dental work. Every time the account was late, CC called me and I made sure that the account got paid. In March 2016, my son made arrangements with CC to pay $50/week. After that point I never received anymore phone calls. In Sept 2016 i received notice from my bank that my credit lines were reduced due to negative remarks on my credit report. The source of the remarks were CC. The account have been closed and charged off. When I contacted CC they said that they are required to contact only one of the account owners by law and that the account was sold to MCM, Inc. Atlantic Credit & Finance Inc. is currently servicing the debt for MCM. They offered me a settlement of $1057.75 payable in the month of settlement on a debt of $2644.38 (66% reduction). I asked to receive copies of all monthly statements. They only sent me about half of them.
I can’t pay this amount in one month. I have a business line of credit for my corporation with Citibank that has been closed with a balance of $21,900 and they want payment in 48 months. I can’t pay this either.
I don’t know what to do.
Fill in the talk to Michael form in the right column. When I see that I will email you to set up a time to talk on the phone. I will go over you situation and help you figure out your options.
Hi Michael,
I’m being sued by a debt collecting law firm, on behalf of FIA card services, bank of america; for $27K.
i’m unemployed, they want me to settle for $17K with a monthly payment of $700 roughly. I can’t pay it. i’ve no job. i’m in ny.
any suggestions?
You can defend the lawsuit any buy time in order to come up with the money to settle ( I would negotiate a lower deal too).
You can look at chapter 7 bankruptcy to clear the debt, or set up a payment the court makes them accept (even if it is really low).
Do you have additional unpaid accounts besides this one?
I have debt of $5,700 to some debt collection agency. About 5 years ago I went through some financial hardship where I couldn’t pay my credit card payments so it went for collection. Since approximately three years nobody contacted me. I’m not sure what to do what are my options ? Thank you
Who was your original account with? Who is the debt collector you are dealing with now? What state do you live in?
Hey Michael
I have about 70,000 in debt. 11,000 in peer to peer loan and 33,000 in another peer to peer. 13,000 on BOA card and another 20,000 on BOA card.
I make rough 175,000 butt I have house note, car note and regular house expenses. The peer to peer Loan payments what killing me total 2,500 month.
Should I stop payment on all these let cash build up and try settle with all them one by one?
Lending club and prosper who loan through. Do you think they would settle. For less and payment plan later.
I contacted national debt relief but they wanted me pay them 1400 month fir 4 years do you trust them ?
I know management at National Debt Relief and like them well enough. But I do not like 4 year debt settlement plans.
Assume you need 11k total to settle both BofA accounts. Then assume you need 22k to settle Lending Club and Prosper loans. How long would it take to pull that money together using a whatever means necessary approach?
My in-laws that are elderly have an outstanding credit card debt of $5500.00. I found out that they stopped paying the bill about 8 months ago. The account was opened in 2008. My sister-in-law (POA) has been talking with them and was told to wait until the account is 90 days past due for a settlement. The account is 40 days past due. What offer should we make with the company; TDBank to pay off this debt? They don’t have much money left and own nothing in their name.
I do not see many settlements with TD Bank under 50%.
Michael,
What is it that you charge for your services?
Everyone in the network charges 15% of savings at the end. You pay the creditor the settlement first.
I have a derogatory mark on my CR from GE capital bank I have a very good score with it been on there, but my question is if I wanted to can I negotiate a lower payoff amount to clear the debt other than that it will drop my CR in 2 yrs. so which one is better let it fall off or lower the amount of the debt owe. the acct 6 yrs old
What credit or finance goals do you have in the next 12 to 18 months?
Hello Michael
This is my first Credit Card and I’ve gotten a Collections notice from the collection agency. I’ve lost my job and I tried working with the credit card company by asking if they had a hardship program. They had one but they pretty much didn’t want to work within what I could afford. With such a tight budget what kind of options would I have that work in my best interest? Will they accept low payment until I find another job?
Who is your credit card with? How late are you with payments?
Hi Michael,
What can I do about a credit card that I defaulted on in 2012.
I received a call from a collection agency back in July 2014 stating they were going to file a suit against me if I didn’t come up with the money that was owed on a Capital One Credit Card. I have never received a statement from the collection agency. They were telling me that they take credit card payments only & they will debit the card each month for the payment. I thought it sound fishy, so I told the man I would call him back the next day. I google the number and it was Alliant Capital Management. They had my name & card info. I started making payments to this account July 2014 not even knowing if they were legit.
I never received anything in the mail validating the account.
I don’t even know if the collectors have a right to collect on it.
I stop paying them this year & I recently received a very nasty call from them, yelling & stating they do not have time to babysit me. He said he as giving me 24hrs to pay the account in full or else …
I found their address.
Can I still sent them a letter requesting for validation?
Or, what would you advise on this matter?
Thank you,
Kay
It it were me, I would call Capital One and verify that Alliant Capital Management is the collection agency they sent the account to. After confirming that, I would look to continue payments if that is affordable and consistent with my goals, or skip the payments and offer a lump sum settlement instead.
What is the balance still owed on the account?
there was another agency calling before Alliant. so would capitol one know who the first collection agency sold it to? Alliant said the amount oweing is now $1400.
when they called me the other day. I told him I was going to call him back in 2-3 days because I needed to obtain a prepaid card for him to charge & that’s when he started yelling & demanding it in full & hung up.
Thank you for your time.
Not all debts are sold. Capital One has not been selling much at all in the last few years unless it is their HSBC acquired accounts. Was this an HSBC account originally?
Yes it was HSBC.
Hi, I have a BofA credit card that was charged off in March 2013. They are reporting the $2450 balance (which is $450 over the limit) to the CRAs and it is killing my utilization ratio. I contacted BofA in hopes of negotiating a Pay for Delete settlement but they told me that the account details are in the hands of Sunrise Credit Services and I need to discuss options with them. I just received a letter from Sunrise stating their attempt to collect. I have not read anything positive about Sunrise and am wary of dealing with them and have yet to contact them. Should I see what they have to offer or keep trying with BofA?
Thank You
You will be hard pressed to find any debt collection agency with a glowing reputation.
You will want to negotiate with Sunrise Credit Services now that Bank of America sent your account there.
Be sure to get any deal you negotiate in writing before you pay.
Hello Michael,
I have a credit card debt that has been charged off and sent to a collections agency. They sent me a letter in the mail with a settlement offer and a date to pay it by or it says I need to call to workout a payment plan. What would the best course of action be to save my credit score? Thank you for this article and your advice in advance!
Generally speaking, a resolved collection is better for your credit than one that remains unpaid. And settling old collections for less is often ideal.
Can you afford the lump sum offer? If you are short, how long would it take you to raise the rest?
You can often call in to negotiate a better savings than the one they offered you in a letter.
Hello
How does a person who had a best buy credit, which has been sold to a collection agency get receipts for the best buy purchases? Are the best buy receipts permanently gone?
Thank you
If you end up getting sued for the debt you could try and get as much of the details as possible through the formal discovery process.
I have three different credit cards that all went in to charge-off status around Jan 2016 as I was unable to make payments for 180 days. They total around ~$20k and I have gotten offers from the collection agencies to settle.
I understand the damage is done from the charge off status. What I’m unsure of is: If i reach settlement with the collection agencies will this wipe out the “balances owed” to the initial creditors on my credit report?
In other words by settling for 40-60 cents on the dollar with debt collectors (not the original creditors) can i begin wiping the slate clean on my debt to income ratio? And what will potential employers see when they pull my credit report? Aka, can I say “yes I went thru a rough patch but I’ve made good on debts” or will it still look like i owe all these creditors?
Negotiating a lower pay off does result in the accounts showing as zero balance on your credit reports. It does not matter if you negotiate the deal with a collection agency or the lender. Just be sure to get the deals in writing before paying, and have the ability to show proof of payment. With those 2 things, any credit reporting errors can be fixed quickly.
Hi Michael,
So my husband and I have been dealing with charged off accounts from cards opened under his name by his parents. He worked out a payment plan with Nationwide of $1437 monthly on a 33-40k balance on AMEX and we received an offer from Nationwide this week to settle a chase balance of 9800 for 2300, should we try to negotiate it down also apparently we’re down to 20k on the Amex at some point can we try and renegotiate that with them on a lump sum, at the time we didn’t have the 12k they were asking for and I believe he paid them 7k and worked out that monthly plan automatically withdrawn from his account, was that the right thing to do.
Fill in the talk to Michael form in the right column Jean. I want to dig into the details a bit before offering actionable feedback. When I see the form submission I will email you to set up a time to talk over all of this on the phone.
Hi,
Thank you in advance for your help. I have good credit but got into a fight with Capital One when they unilaterally closed my account and confiscated thousands of dollars worth of miles.
I just received a letter from them that they assigned the debt to JH Capital. I would be happy to settle the debt for 60%-70% of the original sum of 18,000. Although I do not have that kind of money, I have the ability to borrow it iat very very low nterest right now and do not want to let this fester of incur legal expensiveness should they sue me. How do I best do this.?
I live in NY, no payments or contact since end of 2013.
Are there other accounts that you continue to pay on time showing on your credit reports?
You may want to fill in the talk to Michael form in the right column. I will see that and email you to set up a time to connect on the phone. I can dig into personal details that may impact what you can settle for.
Thanks. Yes I have other cards (2) that I continue to pay on time.
Hi Michael, I actually just left another message on a different post, but was a bit concerned by this statement: “Charged off debts get reported to the credit reporting agencies. When this derogatory credit reporting happens the damage to your credit is done. You do not get to re-age charged off accounts”
Provided this information, do you think its better to dispute a derogatory remark ($100 incorrectly charged by an internet provider who did not have my full name or social security number) rather than just pay the collections agency, and have that derogatory report confirmed?
Many Thanks,
Larry
I sometimes suggest disputing collection items that cannot be verified prior to negotiating a settlement.
thanks so much Michael. Should I begin by disputing the item with the credit bureaus? or the collection agency? or the original utility company?
Many Thanks
In your situation I would dispute it with the credit bureaus.
thanks so much Michael. Good Karma to you. Just to clarify, I should individually contact each credit bureau. Is this correct?
The ones that you confirm are reporting it.
Hi Michael,
My ex-husband had an extreme gambling problem (I finally discovered what was going on after 21 years of marriage, and that’s why we are now divorced). Anyway, one of his debts is totally ruining my credit. My score is about 540 at this point. There is a Wells Fargo credit line in the amount of $53K that is held jointly in both our names. I never even knew the account existed (but I was NOT on top of our finances, unfortunately, so it’s not surprising that I wasn’t aware of this joint account). My ex has moved on and is living with a girlfriend in California, but I continue to receive mail on all of his debts. The law firm of Zwicker & Associates P.C. wrote regularly for about 6 months beginning about a year ago. I have never received any phone calls, and now I do not receive anymore letters from the law firm. I am dying to get this debt off of MY credit report. I am currently looking for work, but I am not in the position to make a lump payment or even monthly payments at this time. I did try to dispute that the debt was mine online on my credit reports, but I didn’t have much proof so I don’t believe anything came of my claim. One report notes that I “disagree” with the findings… My question for you is: when should I expect to hear from the lawyers again? And is there any possibility that I could work out a settlement to get MY NAME removed from this debt? My ex is completely ignoring all of his debts–this $53K Wells Fargo debt is literally the LEAST of his problems–he has many many others that are much larger (hundreds of thousands, plus a mortgage of over 1M), But I’m not worried about him, I’m worried about me!
Thank you,
Tina
I would recommend you set up a phone consult with me Tina. I have too many questions and details I will be asking in order to offer some suggestions that would be meaningful to you.
Fill in the talk to Michael form in the right column and when I see that I will email you to set up a time to talk.
Hi Michael,
This is the first time I have experienced debt. Up until now, I had a credit score of nearly 800.
I have only had 1 credit card throughout the years, Discover. Due to unforeseen circumstances and a recent move I have been spiraling down the black hole of not even being able to afford rent but that must come first. That and a car payment. It’s 2016 and I am making less money than I did 20 years ago!
Times have changed, for the worst. FInding work that is full-time is nearly impossible and forget about earning a livable wage.
I am single, no children, educated, and white. I am struggling to say the least! About a year ago, I became a licensed Insurance agent. I drove all around the state of VT. I made less than 4,000 in a year. I depended on my savings, which is now gone! I got a job in April at a garden center. In August I received a letter telling me I needed to get out of my apartment in 30 days because the landlords were selling the property.
After 9 years of living in the same place, I wasn’t prepared financially to make a drastic move which is what I had to do. Upon moving, I got a job as a hostess getting zero to 8 hours a week. I picked up another hostessing job and would get cut after not even 2 hours. This is when I had to make what bills I could pay for a priority.
Now, I owe. I owe the electric company and telephone company. I owe my insurance company. And I owe Discover.
I tried talking to Discover. The problem is- I can’t afford the interest and the monthly payment. I got no where. They want me to catch up and have my payment go back to the 205.00. BUT- the problem is, is that I can’t afford the minimum payment. I can’t afford to pay the interest! I stopped using the card a while back. The thing is…if the interest rate would just be half of what it is….If I could just pay on the principle without the interest and late fees occurring…I could do it! But that’s not how it works. I get it!
If you can’t afford something…You have to pay more for it! It is a backwards system…I have just fallen on hard times….I called to negotiate and communicate a resolution that would work for me. I want nothing for free, but I deserve the opportunity to get back on my feet…I have been a responsible citizen. Now the struggle is about feeding myself and being able to pay rent and find work….it’s an everyday sadness. I want to work, I want to live, I want to Earn….But freedom…I can’t afford. This country is starving its own ….We The People…are hungry.
What is your interest rate with Discover?
Have you missed any payments yet, and if so, how late are you?
I have an order on my account that was just released and I have to pay the Federal Tax Bureau.
I have a Macy’s Account in Collections with United Collections Bureau, Inc for 610.37. They will accept $457.78 back in October. I have a Visa with Bank of America for $3022.
I don’t have the money to pay except for $5 a month for each acct. Can I negotiate with them to stop interest charges? Should I just tell them I don’t have any money to pay them? My credit has been impacted with Macy’s going to collections, late payments reported to credit bureas from mortgage co and car pmts, my car insurance had dropped me, etc.
Bankruptcy not an option since my debt is with taxes, correct?
I have a laptop that I owe $300 on and is interest free so I been plugging away at paying it off.
What do you suggest?
IRS debts can be bankrupted in certain circumstances. Check out this article about finding the right bankruptcy attorney and then consult with a couple and see how chapter 7 would apply to you.
Let me know what you think, and whether you would prefer to try to settle with these collectors later on if your cash flow improves.
What is your experience working with Mercantile Adjustment Bureau in Williamsville NY they have a charge off of $8400. from KeyBank account I owe I can not pay off and would need a payment plan or settlement
Negotiating a settlement with Mercantile Adjustment Bureau is pretty standard stuff. Can you pull together 30 to 40 percent of the balance owed? How soon can you have that at the ready?