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 a charged off account from a Dillards card that Wells Fargo was handling. I wanted to make a settlement on it & start paying in it so I could get it off my report. However, since Dillards sued Wells Fargo, I can’t find out who to contact. Any advice?
I would still call Wells Fargo to resolve the balance. If the account has been placed with a third party, Wells will tell you who.
I have an old credit card debt with CreditOne Bank. It was charged off in April 2023 and sold to Credit Asset Sales LLC in May 2023 and then sold to LVNV Funding LLC later that month. I paid LVNV Funding (thru Resurgent Capital Services) for the full amount in November 2024. To their credit, they removed the collection line item from my Equifax almost immediately. However, CreditOne Bank is still reporting the past due balance on my Equifax credit report. It shows that my utilization rate is -181%! it’s killing any opportunity for me to get any sort of credit approval anywhere. What can I do?
If Credit One is still showing a balance owed to them, and not just a charged off account with a zero balance, you can dispute this and get it corrected.
Check out my video about why you still see zero balance charge off credit reporting.
I HAVE A CARE CREDIT ACCOUNT WITH A LARGE BAL OF 18975.23 < I WAS UP TO DATE WITH PAYMENTS BUT CARE CREDIT STATES THEY HAVE CLOSED MY ACCOUNT DUE TO THEIR CARD HOLDER STIPULATIONS, I HAVE CONTINUED TO PAY THE CLOSED ACCOUNT BAL BUT THE BAL IS NOT MOVING AND ITS A HEFTY MONTHLY PAYMENT, IS THERE A WAY TO NEGOTIATE A CLOSED CREDIT CARD ACCOUNT , I HAVE NOT MISSED A APYMENT BUT I AM STRUGGLING AND CANT CONTINUE LIVING WITH THIS LARGE PAYMENT THAT ISNT EVEN MAKING A DIFFERENCE TO THE BALANCE.HELPP?? DO I HAVE OPTIONS??
Settling closed accounts is normal. You typically have to be late many months before a good settlement can be achieved.
If you want help with this, you can schedule a call with me by clicking the Get Help tag at the top of the page.
Hi, my original creditor sold my debt. The charge off on my credit report shows a balance of zero. What are my options to get this derogatory removed?
It is not common to get an original creditor to remove a charged off account from your credit reports. It will age off after 7 years from when you stopped paying on it.
Who is the creditor involved?
Who is the debt buyer?
Hi, I have 3 store credit cards that have now been sold to Crown Asset Management. The total owed for these 3 cards is
$11,028. I want to begin negotiating settling with them. Any advice with this company?
This is a good time to publish an article about this debt buyer. I will look to get that up on the site in the coming weeks.
Negotiating and settling with debt buyers is much the same as a regular collection agency. In fact, Crown Asset may actually place your accounts with collection agencies and law firms to collect for them.
When did you stop paying on these accounts?
What state are you in?
Do you know how long Crown Asset Management has had your accounts?
I’m in North Carolina, I stopped paying in November 2019 when I had hired Carolina Legal Services which turned out to be a scam. You and I talked early last week about my options, I didn’t put my whole name in the post.
I am not sure how long they have had these accounts. I found out when I called the credit card company trying to locate my debt.
Thanks.
I would follow the general outline I give for negotiations with them.
If you learn any of the accounts are being handled by an agency or law firm let me know and we can go from there.
Hello!
I have a question regarding Care Credit. About a year ago, Care Credit removed the account from my credit report after I disputed it. So it is no longer on any of my credit reports. Now they have filed a lawsuit against me in Pennsylvania. Their lawyer is through Patenaude & Felix APC. My question is if I get a lawyer and agree to a settlement, once I pay it off, will they be able to put this account back on my credit report even though they took it off?
It could end up back on your credit even if you do not settle. I see that happen more than it being taken off, and then settling causes it to go back on.
Hi Michael, I’m currently working to pay down 3 charged off accounts. Is there a benefit to paying what is owed rather than settling for a percentage of the balance in one lump sum payment? I have one payment left to Client Services for a Synchrony balance. I chose to pay what was owed on the Synchrony account which required an initial lump sum payment followed by 12 smaller monthly payments. After the final payment I plan to start discussions with Client Services again for a Capital One $5600 dollar balance charged off from a year ago. My 3rd charged off account which is a LendingClub balance of 22K charged off a year ago as well. This account is being serviced through Viking Client Services. Any experience with this agency? Because of the balances and time since charge off is there a possibility of being sued for either of these balances? I’m guessing that’s always a possibility. I dont think I can take on trying to pay down both debts at the same time so I’m wondering if it would be best to start discussions with Viking for the 22K balance as opposed to Client Services and the smaller Capital One balance. Thanks
There is not much different to your credit if you settle a debt for less, or pay it in full, after the accounts charge off. Your credit reports are updated with zero balance owed reporting in either case, and that is what allows things to improve. Paying a charge off, or settling one, accomplishes the same thing.
The big difference between the two is that you are able to accomplish that update of a paid charge off faster when you settle, and you save more money.
You have to be concerned about being sued on both of these accounts.
There may be a way to manage both.
I suggest you schedule a call with me using the box above this comment, or at the get help tab at the top of the page.
I have reached a settlement with Amex; 3K upfront and 5800 spread out over 2 years to cover 15,278 debt. My question is; if I sign this month to the agreement I assume that a 1099 would be generated for this year to attach the forgiven debt to my income. Is that assumption correct?
You typically do not see the 1099c until the January following the year you complete the settlement.
The debt is not settled until you give them the last amount agreed to.
Not everyone will owe tax on forgiven debt.
Hello Michael,
Thank you for all the information you provide.
I have an offer from a debt collector, Mercantile Adjustment Bureau, for my debt with US Bank.
They have offered $8,059.40 to satisfy a $20,148.49 balance.
I cannot afford the 8k and wanted to ask your advice on how to proceed. I was going to offer 2K, which is what I can afford and see what they respond with. I am not worried at this point about my credit; I’ll worry about that once all my credit situations are dealt with.
On another note I have a case pending with Amex, is it possible to negotiate with the law firm who brought the suit?
Thank you once again for all the information you provide.
You may be able to get Mercantile Adjustment Bureau to accept a lower settlement, but not as low as 10%. They are already at 40%, which is the most realistic outcome. Getting this to 30% has a chance.
If you cannot afford to pay a lump sum settlement you can often get the deal spread out over many months.
Mercantile Adjustment Bureau will only have the account for several months. Once it leaves there it could go to another collection agency, or to a law firm who may sue.
When did you get served the legal papers for the AMEX lawsuit?
Who is the law firm suing?
How much are they suing for?
I was served (somewhat illegally, slipped under my gate) on January 8th 2020.
I responded with various affirmative defenses. They responded with requests for admissions, requests for documents and form interrogatories.
The law firm is Michael and Associates (Thousand Oaks, CA)
Amount is 14,769
Thanks.
How prepared are you to settle the AMEX account?
What if they agreed to 50% with 12 months to pay?
Could you tackle AMEX and the other account at the same time?
Financially I’m in worse shape than earlier in the year.
Not sure I could handle both at the same time.
This is quite a jam and I still have other accounts.
Just to be thorough here… have you looked into whether you qualify for chapter 7 bankruptcy?
My understanding is I do not due to the fact I own property.
I would be sure to talk with an experienced bankruptcy attorney in your area to be sure. Even if you qualify for chapter 7, and choose not to do it, it is good to know the option exists. Similarly, it is good to know more details about chapter 13.
Either form of bankruptcy would stop a lawsuit in its tracks.
With that all said, I would focus on resolving the AMEX account first, as that one is in court, and the US bank is not, and you have the limited resources to work with. It is not unless I felt confident I could swing payment plans on 2 settlements that I would try to negotiate with both collection agencies at the same time.
This could mean you end up dealing with more aggressive collections on the US bank account later, but this may be how it goes, where you are putting out a fire while you can see flames approaching in the distance.
Thank you Michael,
I will look into the bankruptcy options with a lawyer (though with no income stream I doubt Chapter 13 is an option). Meanwhile I will begin negotiations with AMEX.
Thank you again for your time and information, much appreciated.
Hi Michael,
Thank you for all your hard work!! I learned so much by reading everything I could. It gave me the confidence to attempt a debt settlement with a debt collector. But now I’m stuck in trying to negotiate.
USAA charge off 12/2016
$10,646
CBCS/ Revco has the debt till this Aug
Last written settlement of $5,855.84 on 10/19
We called offered $3000, 3500 &3900 during 3 different phone calls, 3 different people.,
During first call they offered a debt settlement of $4791.50
We are applying for mortgages soon & want to make a one time payment. Do you have any tips? Should we take the offer of $4791.50??
That amount is close to what I often see with USAA. You likely will not get much lower right now. If I wanted to accomplish a goal, like a new home loan soon, and I had the resources, I would take the deal.
Make sue you get it in writing before you pay it.
Thank you so much!
Hi Michael, my credit has been pretty much destroyed after my husband’s business went under in 2017-2018. I’m trying to go back and Negotiate Credit card debt with collection agencies. Many are willing to settle for a lesser amount and said they will remove the account from my credit. My question is will this help my credit score? I know “charge-offs” are the worst. Also, one told me that I would still need to contact the original creditor to see if they will remove the account from my credit. Will removing the collections accounts help my score? Should I attempt to contact the original creditors and see if they will remove the account?
Removing a negative from your credit should be positive to your credit.
Banks are not known for deleting collections or late pays (even when paid) from your credit earlier than the 7 years allowed to remain on your reports.
Michael I owe $5300 to Carecredit. My last payment was May 2014 it shows on my credit report as charged off but no collector has ever tried to contact me about the debt. Every month Carecredit reports my balance and charge off in payment history. Should I call and try to settle or will it fall off after the 7 year mark? What should I do?
If you can wait for the collection to age off your credit, I would do that.
If you have a credit goal you are trying to reach before then, like a home purchase, I would settle it.
Hello Michael,
I have around $60 K Debt including credit cards, personal loans, Medical bills and Toyota Repo. Most of the credit-cards and personal loans are charged off. Unfortunately i am in very bad financial situation and stopped paying all the payments. Now i am planning to rebuild my credit score so could you please suggest me how to take care about my debt and get back on track with decent score.
Break down the creditors and/or debt collection companies you are hearing from in a comment reply. We can go from there.
Hi Michael,
Thank you for doing your videos and helping us all. My question is I have a Walmart card that I have not used in about 5 years and I am almost certain there is a balance owed but when I call the number on the card and even go on to http://www.walmart.com/credit, I can not find any information and my account is not recognized. Any suggestions on how I can find out the information needed to settle the debt?
What is showing on your credit reports for this account? Any collectors or debt buyers, or just Synchrony showing a charge off?