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 have 3 account in collection that show as charged off however I have not been able to locate who 2 of the 3 collections to be able to make payments. I know I still owe them so what are my options. For the past year I have been trying to locate a means to contact them. They are Chase CC, $879, SYNCD/WALMART $899 and Target CC 1,100. All three cards total about 3500.
.
When did you stop paying on these accounts?
Target 3/9/2010
Chase last date of pay 11/14/2014
Walmart last date of pay 8/9/2012
Chase still has your account as they stopped selling debt in 2013. You should be able to call them and learn that they have it in house, or the collection agency they have it out with right now.
Synchrony probably sold your debt. You should be able to call them and find out to whom.
Target may have sold your debt. You are approaching the time for Target to age off your credit reports, so doing something with this account now would be situation if it were me (going for a home loan would be an example). You should be able to contact Target and learn who they sold to, if they did.
Post an update with you learn, or what of this you have already done, and the details of what you learned.
I have a Citibank card balance of approx $6k that has been charged off as bad debt since 2014. The original amount of debt was a approx $10k and I have been working with a collection agency, Viking, making a few lump sum payments but always a minimum of $350 monthly payments. The collection agent told me today that CitiBank is “taking my account back” on March 1st and I should settle with Viking for a lump sum of $3k before that happens. The agent wouldn’t explain to me the ramifications of Citi taking back the loan. What does it mean for a bank to take back a loan that had been charged off and sent to collection? Should I pay the $3k to the agency before March 1st? Thank you!
If your intention is to pay anyway, yes, I would resolve it now if it were me, and if the resources to do so were available. But I would shoot for a better outcome than half with Viking Collection Services. You can often negotiate 35% with collection agencies on Citibank accounts.
Based on current trends, the account is going to be sold to a debt buyer. Depending on the debt buyer, you could be sued, or end up paying more for a settlement.
Thank you !
I have a Capital One credit card that was charged off. It is 21000 dollars. Last payment was Aug of 2015. I want to settle this. I had perfect credit until I got breast cancer. It’s in collections but I don’t see with who. What shall I do?
I live in Nevada for a few more weeks.
Do you have roughly 7k today in order to fund a settlement?
My name is Marisol Alfaro. I have an issue with a charged off account and my credit is ruined and I would like to fix it so I can improve on many areas in life. Here is what happened:
In December of 2014, my brother convinced me to use my credit to get an engagement ring for his fiancee at Gordon’s Jewler’s at Almeda Mall. The Gordon’s credit card was a citibank credit card, so they are the original creditors. When we were at the store buying the ring, the staff and my brother understood that I was only using my credit to sign off on it so he could get it and that he would be making the payments, not I. He made a down payment at the store of about $1000 dollars in order to be able to take the ring home. He swore to me he would make the payments and I didn’t know better and didn’t know how bad this could impact my credit. I was 21 and naive. So in January I began to receive calls from Gordon’s telling me that the payments were late and that they weren’t being paid. My brother swore he made the payments, but of course he was lying. I never even received the credit card, I don’t know what he did with it since we both got our mail at the same place at the time. So I was scared and made 2 payments and told my brother he owed me and that he had better make the rest of the payments, he never did. Eventually, the account went into collections. The first collection agency that I recall was United Recovery Systems. They would call me all the time but I would not answer. I am not sure how many debt collection agencies this account has gone through in the past 2 years. The current one is Portfolio Recovery Systems. The balance is $4, 358 and it was opened by Portfolio in September 7, 2016 according to Credit Karma. I want to settle the debt for way less. It was supposed to be my brother’s debt, not mine so I want to pay as less as possible to fix my credit. I need help and advice on how to properly speak to a debt collector so I don’t shoot myself in the foot. I’d love a consultation with you. Thank you.
Portfolio Recovery is a debt buyer. They are who you will have to deal with to resolve the Citibank debt now. You can sometimes settle for 40 percent with PRA.
Here are some resources to review about settling with PRA, and here is a video where I go over Portfolio Recovery negotiations.
Read through and watch back those resources. Then call in for a consult at 800-939-8357, ext 2 if you need to.
I would still like a consultation, I want to be as prepared as possible. Please and thank you.
Hey Micheal,
I know we spoke on the phone and I had asked if debt collectors such as PRA are able to know our salaries. I think you had told me no, they have no way of knowing but after doing some digging I found that there is a website called “the work number” which is owned by Equifax that sells that information to companies. Do you know about this site? Can debt collectors know how much I make using this site? I don’t want them to know how much I make and them think I can pay the full amount. I want to pay the minimum because I was basically screwed into this debt and want to get out of it as easily as possible?
If I remember our conversation correctly, you had changes jobs and took a pay cut? And if you have not applied for credit in anyway, which often requires us to fill in where we work and our salary, PRA would not have access to that information.
But if you have given that information in credit applications in the past, and that information is still accurate, that is how it is found anywhere at all. But I cannot speak to PRA using that Equifax product.
Also, given all the information I’ve given you, if I wanted to hire someone from your team to handle the situation for me, how much would it cost?
Everyone in the network charges 15% of savings, which you pay after the creditors are paid. You would need to call in again to see if we can work together. You have my email to set up a phone time.
I have a charge off from capital one. It was reported to the credit bureaus with a charge off date of April 2016 however the last payment made was June of 2015. I recieved a collection letter in the mail offering a settlement two weeks ago from a law firm. I suspect this is a tactic since the account was passed to a third party collection agency. I was already planning on paying the full amount once I got my tax return. However there were several discrepancies on my credit report as far as the date the a count was charged off. It is different on all three credit reports. Now capital one is reporting very month that it is a charge off and reporting I am over the limit once a week and for the last month twice a week a week to Trans union and experian. Can they report over the limit for every month past the charge off date? I understand they can legally report the charge off every month since I am still liable for this debt. I have worked to rebuild my credit and this is the only thing I have not paid off. Can you give any advice on how to handle this? It has reversed all the progress I have made on my credit report.
Is the settlement offer from an attorney practicing law in your state? That can mean you are about to be sued. And because settling is already your goal, I would look at ways to take them up on the offer, but if you have to wait for the tax refund, you may be able to call and get them to rework the settlement where you pay a little down this month, and maybe in March and April too, with the remainder once you are sure to have received your refund.
I would not get hung up on the credit reporting right yet. I would be reviewing the reports for accuracy very carefully after the paid status gets updated.
I checked last night when I got home. The letter is actually from Client Services based out of Missouri. It says “This communication is from a debt collector. This is an attempt to collect a debt” It does not say if they actually own the debt. They are offering to settle this for $187. I just realized that their offer expired on 2/10/17 I am just curious because Capital One is the only one on my credit report for this account… Can they legally report over the credit limit every few days since this account was charged off last year? They are also reporting a new charge off every month since the account was initially charged off. It is making it look like I have fresh charge offs every month on my reports.
Check out this post about Capital One and credit reports. i have been covering their odd credit reporting behavior for many years.
If it were me, I would resolve the debt first, and then look to manage inaccuracies on the credit reports.
You can call Client Services and negotiate the pay off amount and get them to send you a new letter before you pay it. They are not debt buyers, just the typical contingency debt collection agency.
Thank you for your response. My credit cards that are charged off can the amount owed get bigger? So far the letters that I have received from collection agencies all have the same amount as the charge offs, will the collection agencies add fees and interest over time?
There are scenarios where I still see interest accumulating after charge off. But I see that less and less. There are some court cases that lead to the practice being curbed.
Hi Michael. Last year I had to leave an apartment I was leasing early, due to losing my job. The complex sent me an amount I owed due to breaking the lease of $2500. I was not able to pay this amount to the complex, but recently when I contacted the complex they said they turned the debt over to a company called “Rent Collect”. I contacted them to confirm the amount, which they did. I have at least 40% of the amount. So my question is, how would you go about attempting to settle this debt/how would you approach this to resolve? And have you heard of/dealt with this company before?
You handle negotiations with most debt collectors the same way. Left over debt from an apartment that is that old, and who you do not rent from now, or intend to rent from in the near future, is going to consist of some phone calls where you make a lower offer to start, and follow that up with offer counter offer dialogue and phone calls from there. Check out this video of what to say and not say to a debt collector before you get started.
My current credit score is about 420. I have 8 credit cards that are closed and 7 of these 8 have been charged off. The total amount of my unsecured debt is about 80,000. The ;largest credit cards amount are Bank of America 14K, Chase 16K, Chase 13K , Citibank 7K, Citibank Diamond 10K, I think it has been at least a year since I have made any payments on these cards. My mortgage went into foreclose but I was able to catch up the payments and I am now current. I have a car loan with gm financial that is current with maybe 1 or 2 late payments the loan is 2 years old .
My credit report does not list any collection company’s only that the accounts are closed and charged off. So how can I be sure that if I pay the amount to the collections agency that the bill will showed paid on my credit report , and be a improvement on by score. Also think that some of the accounts have been sold again because i have been contacted by more than one agency on the same card
It is normal to hear from more than one collection agency on newly charged off debts. But that does not mean your account is sold each time. Bank of America has not been selling much debt the last 2 years. Chase stopped selling any debt in 2013, and Citibank tends to sell after you are 12 months late. But they all will send your account to different collection agencies for a period of time. And this is often the best place to negotiate the best savings.
Anyone reporting on your credit has an obligation to furnish only complete, accurate, and up to date information. All of those creditors do a good job at updating your credit reports to show a zero balance owed, and resolved collection, when you follow through with your settlements.
How any of this is going to improve your credit score will vary from one person to the next.
Are you saying that bringing the balance to zero by paying a settlement wont help improve my cr fit score ? I am concern about being able to finance a car in a couple of years
Not overnight, no, but it will help you to begin to improve your credit score. And settling is often an absolute must for certain types of financing, regardless of score.
Hi Michael. I have a few creditors that have been calling me for months. My job and income situation is bad in relationship to my living expenses and what I owe. I do not have the money to pay these accounts in full. Two American Express accounts are about 160 days past due totaling $11,000. A law firm named Zwicker has been calling about that. My other is a $15,000 loan from Lending Club, which is about 170 days behind and I was notified that a company named Velocity has purchased my account. Not sure what that means. Are you familiar with either of these companies? If so, what type of settlement could I expect to negotiate and how long might it take to get to a settlement? Thank you for any insight you can provide.
I am familiar with both of those debt collectors. You will want to be prepared to pay 50% to settle both. If you do one at a time I would deal with Zwicker and Associates first, as they are likely to sue you soon.
Good morning. I live in Michigan. I had a credit card through my credit union that I opened way back in 2002. Several years ago (I don’t remember exact date and of course can’t find any of my paperwork from the Collection Agency) I defaulted on payments and it was sent to CU Recoveries. They sent me letters and made phone calls up until May of 2012, at this time I received a letter stating that the debt had been charged-off as bad debt and profit and loss write-off. On my credit report, there is a $0 balance. I have not heard from CU Recoveries since then, no phone calls and no letters. Yesterday (February 6, 2017) I received a phone call from CU Recoveries telling me that I now owe over $8,000 in interest. The original debt was under $6,000. Do I have any rights? Why did they wait so long to contact me? In my ignorance, I did not realize I would still have to pay that debt and when no one contacting me for the last three years I had forgotten all about it. Now that it’s income tax time and I am getting a substantial return this year, they come out of the woodwork. If I give them my tax return it may just be my undoing. I am two months behind on my mortgage, I have over $30,000 in 401k loans and several other medical bills that have also gone to collections. I’m barely holding on and I don’t know what to do.
Unfortunately, a debt can be viewed as still collectible after the 1099c is issued.
I want to dig into some more details. When did you stop making payments? What state are you in?
I live in Michigan. As far as I can tell, the last payment I made was February of 2013. That is also the date the woman from CU Recoveries gave me on the phone.
You have options to settle debt, or perhaps discharge it in bankruptcy.
I see too few credit unions settle for less than 50% of the balance owed. Assume you need to pull together 50%, and then assume they give you 12 months to pay. Can you swing that?
Hi Michael,
I have an old Amazon/Synchrony debt ($1245) that was charged off because I couldn’t pay after being unemployed for five months. I now have the money to pay off the entire debt, but would rather pay Synchrony instead of Portfolio Recovery Associates. Would Synchrony be able to accept the payment? Or would they have sold off the debt to PRA?
Synchrony regularly sells debt to Portfolio Recovery. Once your account is sold by Synchrony, you typically have to contact the new owner/debt collector to put this behind you.
Why is it that you only want to deal with Synchrony?
Hi! Thanks for the response. I wanted to submit a pay for delete letter with synchrony in order to get the charge off removed from my credit report. If not possible, then I was hoping to have synchrony list the charge off as paid in full and force PRA to remove its entry from my report. This is all in hopes of improving credit score quickly so that I can buy a home.
You can buy a home with paid collections on your credit. Based on the credit reporting policies of today, you will not be able to get Synchrony or PRA to delete the entry in return for money. But PRA will update to zero balance once you resolve it with them (whether you pay in full or negotiate a lower payoff amount with them.
Hello… I am struggling with a few charged off accounts (Walmart, capital one and citi) I want to negotiate and try to resolve this. But I can only afford monthly payments not to pay the full amount which is around 10000. I just got a call from the prosecutors office. What does this mean? Please I need help.
When did you stop paying on these accounts?
What state are you in?
Which account were you called about, and what is the balance owed on that one?
i have a cc that was closed from schools first credit union in 2008 for about 9k and have a judgement against me for 22k from mct financial . is it possible to settle 40% on the initial balance or do they only take settlements usually on the balance plus interest accrued after acct closed? they got 1400 lump sum from my bank acct from a levy recently. what should i attempt to offer? and they are garnishing my wages at about 200 a mo for the last 10 mo or so.
When there is a wage garnishment in place creditors know they will get paid all their money while you have that job, and cannot meet garnishment exemptions. They are reluctant to settle for any savings. When I do see settlements in this situation they are often 80% of today’s balance at best.
What state are you in? When did you last make a payment on that credit union credit card that did not end up as a judgment? You may not have to worry about that one at all if you last paid in 2008. The collection agency pursing that account may not be able to sue or show on your credit reports.
i last paid in about 2008 possibly 2006 however the collection agency recieved a judgement against me and is collecting on a wage garnishment. Original balance at charge off was 9k now with interest is 22k. Im in Ca.
Thanks for the clarity. I understand your situation better. You are going to be dealing with the inflated balance with interest. And that interest is still be charged, so at the rate of $200 a month, you will be paying for many years.
Hi Michael,
I have about $4000 (5 accounts) with Portfolio Recovery Associates, and $2400 with Midland Funding
( 3 accounts). I will receive approximately $1800 in Income tax return and would like to settle. My biggest account is 1300 with Portfolio and 1100 with Midland. The problem I see is I have multiple accounts and I’m not sure the would settle those without addressing the other accounts.
Should I throw and offer to settle all debts at one or the other, or at the bigger debts and see how it goes?
I would want to tackle all the debts with each debt collector at once, and with both if possible.
Can you raise 40 percent to settle with a lump sum on your PRA debts, and then take a 12 month repayment plan with Midland Funding at 40%?
I’m not sure about the Midland Funding payment plan at the moment. My student loans kill me and I’ve used up all my forbearance and such otherwise I could probably swing it.
Do these companies settle for more than 40% or is that pretty much their standard? I was thinking of shooting them an offer of 60% I search for a debt settlement attorney in Montana but couldn’t find one to hear me out.
Thanks so much for you replies and helping people!
I can email you three experienced consumer law attorneys in Montana if you like?
When I say 40%, I mean 60% off. And yes, I see settlements with both of them for that. More with Midland than with PRA, but they happen.
I tried to talk Portfolio Recovery into 60% they are holding firm at 30% off I even tried 50 but they wont until I give them my bank account for security. I said no not until I have something in writing. Then they broke of contact with me and wished me luck with another representative? Sure I’ll take an email for attorneys in Montana thank you!
I will email what I have after posting this reply.
You can record the call where you cover the details of the settlement and save that until the letter comes. PRA will send the letter, but it is still an asinine policy they have. I cannot believe they collect more money allowing their agents to hold that over people head.
I was scammed out of $50,000 thru my credit card. I need to know my options & if you can help me.
D
Can you be more specific with what you mean by scammed?
Hey Michael,
I got a credit Card when I was 18 I was making payments very slowly to wells fargo. One day my account disappeared and I was sent to collections That was 6 years ago and I totally forgot about it, I checked my credit score for the first time in my life today and I owe the collection agency $869.00 what is my best course of action? I can pay this amount but I need advice on how to go about it to improve my credit score in the best way possible, I’m 25 now and no longer in school and I want to be able to get approved Car loans and things like that,
Is Wells Fargo still showing on your credit report, and with a balance owed to them, or is the balance showing as due to Wells Fargo showing zero?
If Wells Fargo shows zero, they sold the debt. And that can change my feedback.
Who is the collection agency?
What state do you live in?
Was it 6 years ago when you stopped paying? Can you get precise with the date?
Wells Fargo shows as Zero. The collection agency is called Greater California Financial. I live in California and the date the collection agency first reported was Aug 11th 2011.
thank you
Your in the drivers seat with negotiations. Wells Fargo sold the debt if they are showing zero owed to them. And you are passed the 4 year SOL to legitimately sue in California. Wells Fargo and the debt collector should come off your credit at the same time whether you settle with the debt collector or not.
Hello Michael,
I am from California and I have a debt of $4,800 from Lending Club but they sold my account to a collection agency named CKS Financial Debt Collection. I just got a letter from them stating that I owe them $5,300. I’ve been unemployed since last year of September 2016. I wanted to settle my debt but I want to negotiate to atleast 50% (much better if more)
Can you give me any tips on what to do first?
You are typically going to start with a hardship story that caused you to stop paying Lending Club, and how that persists today. Your story should be one that supports your inability to make monthly payments (that is what debt collectors are listening for). If you make a low settlement offer because your friend or family member is willing to help, you may want to start at 20% (depends on the situation). Some times I want settlement to be the collectors idea, so you can start with an offer to pay $20 a month, and see if they bring up settlement in the course of that back and forth.
Ultimately, you make an offer and they counter, or they make an offer and you do. It is not common to get an agreement in one phone call, so I may say :I am sure that is a good offer but there is no way I can come up with it. I will ask around for more help, but I am not optimistic”. You can call back in days or weeks and make another offer closer to where they were, and where you expect to be.
You may have to do this several times.
You want to be careful to recognize when a deal is as good as it gets, and when to take an offer to avoid being sued.
I think you can get 50%, and maybe even a bit lower.
I live in nc and have been trying to catch up on years worth of debt. The remaining pieces I have now are past medical bills. I’ve been dealing with optimum outcomes and have paid off several of the lower and arranged a payment plan for others. everytime i think i have them all on track it seems like they come up with another one. DO these agencies dig up things further back if they see your paying the ones they have more recent?
You bet they do. That is more the case when resolving medical debts.
Charge off from lending cub , recently received letter from velocity LLC
What is your goal for resolving the debt now that it is with Velocity Investment LLC?
Just got a letter from collection law firm for unpaid credit card. Says I have to respond within 30 days or judgement will be entered. I cant let that happen. Wells fargo card. 6400 balance. What should I settle for. I know this wont go away until its paid.
Settling with Wells Fargo, when your account is placed with an attorney, for under 50% is not all that common. I would start lower, but be prepared for that or a bit higher in some cases.