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.
Hi Michael, I have a tradeline in collection with Cavalry Portfolio- It is for $1975, opened in Jan 2017, OC is synchrony bank. I read on their website that they delete if paid in full or settled. I am wondering, in your experience, how much can I settle this debt for with Cavalry? Im in NY.
It varies from one person to the next. Partly because you could be negotiating the Cavalry account with a different collection agency they send it to, or a collection law firm. On top of that, each of us will appear (from our credit reports and other details) to be collectable to debt collectors differently. Right now we all have COVID in common, so that can help establish a hardship, but what you can convey over that may be even more important.
Hi Michael..i owe to discover about 16000..my last payment was Sep last year and it was charged off March 31 20202..i tried negotiating for a smaller amount and they just would not work with me..so I’m waiting to hear from collection agency to see what their offers are..how do I handle that
It will depend on if the account goes to a collection law firm or not. Let me know who gets it.
Hey Michael,
I have a charged off a account with TD Bank totaling to about $4,300 and was closed off in 2018. The balance was only about 51% of my utilization at the time. I know they sold the debt to an agency. I am interested in settling for about 25% of the debt owed because I would like to buy a house in the next year. How can I go about this ? I also have one other charged off account with capital one for 6K. Thank you in advance for your advice!
Settling may not happen at 25%, but you can certainly resolve these for less and still accomplish your house goal.
When do you expect you would have closer to 50%?
You can often pay these settlements over time, so not having a lump sum to work with can still work.
My account ($1400) with comenity bank is set to charge off in a few weeks. The best settlement offer I could get on the phone was 60% of the balance (around $840). I am comfortable paying 40-50% of the balance but comenity will not budge and stated that they will be noting the account to not go lower than 60%. Should I wait and negotiate with a collection agency for a better offer (if so who does Comenity sell their debt to?) or just pay comenity?
I would hold out for the collectors if it were me.
They do not always sell, but when they do it is to debt buyers I regularly help settle for 50% or less.
When a debt is sent to a collection agency and you want to set up monthly payments with them do they charge the same monthly amount as the credit card company or is it less?
I typically see monthly payment higher than what you paid when current, but it can vary.
Who is the creditor at issue?
Who is the collection agency?
What is the balance owed?
I have a $20000 balance with AMEX that they have been unwilling to settle with me. It has now gone toGC Services LP. Do you think they will settle. My offer to AMEX was $8000.00. Any advice how to handle the collection agency.
Thanks!
Hoe late are you with payments?
Hi Michael, thanks for helping people. I made a purchase ($24) in Aug, 2019 at Macy’s but soon forgot whether I paid it or not. Then I received their first paper bill and I was ready to pay, I called Macy’s agency but was told I have 0 balance. In Sep, I made another purchase ($26) at Macy’s but unfortunately forgot this bill again , then I travelled out of America for 3 mounts. When I came back home, I noticed from paper bill that my Macy’s bill rises up to $210 ( for these two missed payments), my account is closed, my credit score is damaged from excellent to fine, also my case is transferred to debt collector. I am willing to take my responsibilities of the second bill, but I insist Macy’s also has fault by misleading me on the first case. So the debt collector took my personal information and sent my case back to Macy’s as a “ disputed bill”. Now Macy’s started to send me new increasing bill again($290 this time). What should I do? If I pay off my bill, will my credit score recover? If I don’t pay off this bill, will it keep growing and will Macy’s report again to damage my credit score again? Thanks
I would try to get Macy’s to reduce the late fees and pay it. They are not likely to remove the late pays from your credit, so getting this paid and showing zero balance can begin the healing from it happening.
Michael, this is not related to credit cards and for that I apologize, but this is the old forum I know where I could get a reliable response. My husband had a bill from Sprint that went to collections in April of 2011. For some reason we did not pay it at the time and it went unheard of again until this week. He got a new notice from a different collections agency referencing the same debt, offering a settlement. We live in TN and it seems this is past the statute of limitations. Is there a way of getting them to leave him alone since it’s that old? It was originally just for $261 and now offered at 35% but I would rather focus on current medical bills and avoid them going to collections right now. Do you have any advice?
If it were me being contacted about an old debt from 9 years ago, I would ignore them. It would be passed the SOL to sue and to credit report.
Upon looking at my credit report, I have two small delinquent items from a hospital back in 2015. One is for $100 and one is for $200. I’m trying to better my credit but I’m afraid for some reason if I call the collection agency, 1) they will tell me I owe a lot more than $300. 2) that somehow it will screw up my credit score. My score is not too bad 700-719, but I’m trying to acquire a mortgage within the next 30 days. Should I reach out to the collector American Adjustment Bureau and what should I expect. What kind of language should be used when negotiating. Should I get an email from them saying its “paid in full” then pay with a credit card?
Talk to your loan officer about whether or not these need to be handled prior to closing. Sometimes you can still get financing through with really small balances like this, especially with an FHA loan.
I would typically say just pay them, but doing so could drop your score a little for a month or 2, so I would want to make sure there is no loan without doing so, before I do it ahead of time.
Ask if they would pay them as part of the loan closing, so then your score may not impact your rate.
Hello, I had a Chase card in which the debt went up to 9k after I stopped making payments due to a medical crisis. I stopped paying for 6 months and it was charged off and United Collections Bureau has contacted me. They are offering a settlement of a little over 4k. My credit is already rated at “poor” and I’m wondering if I should just pay the settlement. How will that effect my taxes? Thanks.
If this is the only unresolved collection item on your credit, settling could help you improve credit.
I see settlements on Chase accounts that are better than this, so it may be worth trying to negotiate lower, or getting some help to do so.
Check out this article about taxes on cancelled debt: https://consumerrecoverynetwork.com/debt-forgiveness-taxes-settled-credit-card/
Charge offs: Capital one;
I started paying a collection agency (Scott Parnell and associated), after they served me I gave them a call and began payments. It’s an old Capitol one account and I just began attempting to repair my credit to build credit again and on a credit report I am seeing this same account with monthly charge offs from when it closed, up to now. I have other accounts that I haven’t even dealt with and they only added about 18, each. Yet capital one which I’m actually paying off,has added about 43 and keeps adding them every month even though I’m paying the collection agency….I don’t understand
I feel quite grateful to have encountered the website and look forward to some more cool ideas by reading here. Thank you once more for sharing!
I have a credit card with comenity bank which was duly paid for 2 years until I left the country . I lost my job and things were a little bit tight at that time . The total balance outstanding couldn’t have been more than $400. I returned to this us last month to find series of collections letters from a company called mcm collections with a balance of $1989. I called them and offered to settle for 800 and they said no , they wanted a settlement of $1,390 which I couldn’t afford. The original credit was for less than a thousand . I guess they were more interested in taking me to court. What are my options pls .would like to resolve this
Have they sued for the debt?
If not, is the account with a collection law firm right now?
Michael, After my divorce I was unable to pay all my CC bills and I have made arrangements with the ones that were willing to help and not just yell at me on the phone. I still have a PNC CC with 10,000.00 balance that shows on my credit report under Closed Cards (March 2016) as “In Collections/Charge-off”. I just got a letter addressed from PNC wanting to settle for 90% off ($1000) I am not sure if this will help my score since it’s been 3 years (I’m in NC) or am I just throwing away $1000 dollars of hard earned money. I work 2 jobs, 7 days a week to dig myself out of the hole I was in and don’t want to put myself in a bind over a debt that isn’t going to improve my situation. The letter states it will Settle the Account, but it doesn’t say it will remove from my report. It doesn’t show in derogatory marks, but just as a closed account. Thanks for your help.
If you have other unpaid collections, taking care of just this one is not likely to help much. But if you take care of this, and other ones you may have, you can start to improve your credit and finance options.
I have two chase bank cards already charged off for at least two years. I called chase and they’ve sold the debt to NCI Nationwide Credit Inc. NCI is offering me really good settlement offers seeming almost to good to be true. One account was around 4500 and they’re willing to settle for around 450 the other was 2500 and they offered a settlement of 388.00. I want to pay these but is NCI a legit company and how can I be sure they’ll report the accounts settled for less than owed if I pay? Couldn’t they just take my money and not report anything to the bureaus leaving me $1000 less and in the same boat I was in? How should I handle this? Chase won’t negotiate with me because it’s been so long and the debts been sold to NCI.
Chase stopped selling debt in 2013.
You can call Chase and confirm NCI is who they have your account placed with.
NCI should not be who is on your credit reports. That should be Chase still showing a balance owed to them. And Chase is good about updating your credit reports within 30 or so days of your settlement payment to show that it is now a zero balance, and resolved account.
If anything goes wrong with the credit reporting, or anything else, the settlement letter you get first, and proof from your bank account you paid, is all you need to correct someones mistake.
I have 4 debts I am pay a law firm for.
$5674. $50 a month. Have paid 2 years straight. $16589 been paying $50 1 year straight. $709. $25 a month have it down to $500 and $3849 been paying $25 a month for a year. None of them are on my credit report as public. Is it worth calling them and asking them to settle on the three I have been paying on the longest? Obviously I can’t settle on the biggest one.
Hi Michael! I had an Ashley furniture account that last payment was approx 3 years ago or so and the balance was approx 1200 or so. Then it became a charge off at a balance of 1500.00.
Now it has been with Midland for approx 2 years i believe and today my security guard at my complex said someone is trying to deliver something that allows ONLY my signature which the guard said it looked to have some law firm and something about Midland on the envelope.
At this point i could probably pay up to 600 or 700 tops to just get this over with. What is their options in dealing with me and what are my options of settling this?
Ps. I am in Texas
Settlements when the debt reaches the court are often at 50 to 80 percent of the balance they are suing for. I would try to raise more cash and then negotiate with the collection law firm.
Are there other debts besides this one?
Hello Michael,
Thank you for all the advice you’re giving people. I live in AZ and I quite my job back in 2009 and had to stop paying my CC bills while I tried to get my own company going. I since could never get it going enough to start paying company’s back that I owe them. I even owe the IRS which I am going to pay off first. But now that I have a great paying job again I’m trying to pay people back that I have been putting off since 2010. I have 4 accounts that are Macys for $432 and Kohls $224, will they be willing to settle for half? I also have a Capital one for $232 but says Paid as agreed but also says “Transferred or sold”. I have 2 other large amounts that I need advice on and they may be for the same charge off. Anyways one is Chass CC for $7,829 and was last reported 120 days at 11/2010 but it says under comments “Purchased by another lender”. The second is from Midland Funding for $7,274 and I have received court papers saying I owe that as of 10/2016 but I have ignored any calls from anyone. Now I have a “Real” job I want to settle and I don’t want them sueing me for the full amount and garnishing my wages. I have been telling all of them for years that I want to pay them but didn’t have a job to pay them. They stopped calling about 3 years ago. Any other info I can give you? Thank you so much for all your help!
Go through the Q and A with the bot on this site. Once you complete the questions it will email me, and when I see that, I will email you to set up a time to go over all of your questions and concerns on the phone.
Hi,
I have an account with Bank of America and I stopped paying for my credit card when i got shifted to my home country . Now when I login I find that my credit card account is closed. I had received an email last month that if i fail to pay the balance then it would be sent to a collection agency. I want to repay the debt in installments but I cant find any details as to whom and how to pay the debt.
Kindly suggest what needs to be done as I am losing sleep over it.
What is the amount you owe on the BofA account today? When did you stop sending in regular monthly payments?
Hi. Thanks for the reply. $3066. I stopped the payments sometime in may 2016 since i had to find a new job.
Would you be able to pull together around $1,000 in the next few months to settle with them instead of setting up monthly payments?
Hi, sorry for the late reply. Probably not 1000 but can afford 800. but whom do i contact. i havent received any email regarding whom it has been assigned to.
You can call Bank of America and ask them who they sent your account to and they will tell you, and likely give you a toll free number to call and reach the collection agency.
Ok, and will the collection agency be open to negotiation regarding how to pay them in monthly installments?. I live In India now and with my current economic situation I would want to settle it down in the next 6 months .
What do you recommend in terms of how to approach the collection agency? Would they have sued me already for not paying the amount?
I really appreciate your help and am going through the Q and A’s of other people to help me out in understanding these situations.
Thanks.
and also can you tell how much interest would be applied . Would the interest be applied from the time the debt has been charged off?? sorry for pounding you with such questions, but I want to clear off this debt before it gets worse
Thanks
It is highly unlikely (read never) that you will be sued by BofA in India at this time.
The interest accumulates consistent with your existing BofA agreement. You will need to look to that.
I would suggest waiting until you have the money to pay a lump sum in order to settle. If that is a few more months from now, I would wait to call.
Check out this video of what to say and not say to a debt collector.
Hi, Michael!
I just read your article and I would to Thank you for providing collection information in such detail. I’m glad I stumbled upon your page. I’ve been curious about how to deal with collection agencies and charged off accounts. Pretty embarrassing to admit to someone that you allowed your credits cards to go past due and into collections lol. So I have a couple of question I hope you could answer for me?
I had 3 credit cards when I was 18 Norstrom(C.O Amt $1,312), Jc Penny(C.O Amt $614), and Macy’s(C.O Amt $366) back in 2010. Of course knew nothing about credit cards and how to maintain them. Long story short, they all were charged off in late 2011. All in house collections. Since I Don’t show any collections agency’s having the debt. So would they original credits settle an acct or make you pay what you originally owed?? And if you pay it would it show as an paid collections or paid and satisfied?
Also last question would is your advice on medical collections?
Your balances will have ballooned. You will often be negotiating inflated balances, and can get them to come down a good bit based on how long ago you stopped paying.
First things first. What state are you in? DO you have positive things showing on your credit reports now, and if so what? Do you have money at the ready to pay settlement deals you make?
I live in Delaware and I have one credit card with capital one that’s current. And an old act I closed for 20k. Yes I have money to settle! Should I just wait until it falls off which the 7 yr mark period would be 2018? I want to settle for less to nothing lol
You will not be able to settle for next to nothing.
What is the motivation to settle now? Are you going for a home loan in the next year? It may be best to just let these drop from your credit.
I am working to settle a handfull of debts across 9 retail accounts. I know 4 of them are with Comenity Bank. They are 6 months past due. What % will they typically settle for, and does this %age apply to total balance, or principal only?
Thanks
When you are negotiating settlements you are typically starting from the balance owed at that moment, which will usually include the interest and fess that have accumulated.
I target settlement percentages on Comenity accounts at 30 to 40 percent. But that number can move depending on the debt collection agency you may end up dealing with, or if you are having to resolve accounts with a buyer after Comenity sells.