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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- request a general debt consultation here
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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 citibank card with a balance of 12527.00 that went to alliance one. I spoke to them yesterday and they demanded I settle with them for 9500.00. I dont have the money and neither does any one I know. I offered 200.00 a month until I can pay more. What can I do?
Are you certain you can afford 200 dollars a month consistently?
Are there any other unpaid debts out there other than the one Alliance One is trying to collect on?
Yes i am taken on two jobs and yes there are more debts but those are 1000 or less I talked to them yesterday and they offered 4950. to settle something i still cant come up with. everytime I aske for more time they require 100.00 deposit. so far i have paid 250 in two days. they also want proof that i am tryingto get the money is that normal? They want me to aks everyone I know and show verification?
That is a bit over the top… for you to show verification that you are trying to borrow money from family and friends. But the 4950.00 is a really good settlement on that size of a Citibank credit card in third part collections. Can you raise that amount of money quickly? If so, it is worth considering.
I would stop throwing any money at this without a plan in place.
If a payment plan is all that can be done, it just is what it is. 200.00 a month is not far from what you could get in a repayment plan with a credit counselor (as it is not all that common to get Alliance One to agree to that long a repayment term, but where that is one of the primary functions of a credit counselor).
If you hit a wall with the payment plan you need and can afford, call and talk to a counselor at 800-939-8357, and press option 1.
Hi Michael,
Your site is great, and has been much help already. Wondering if you have any additional information based on my specifics:
My mother retired at age 82 approximately 6 months ago, at which point I discovered that she had been putting almost all her paychecks toward monthly minimum payments on 13 credit cards that totaled around $60,000 in debt. Now retired, her income is only Social Security and a modest pension; she lives with me in my house and has no assets. Obviously continuing to pay the way she has been would be impossible, so I’ve taken some steps I think in the right direction: I have filed Power of Attorney papers with all the creditors, made personal contact and explained the situation, and stopped paying anything around 5 months ago.
I believe that her specifics make her judgment proof, and probably a good candidate for them to settle with for something. My question is: How much can I reasonably expect them to go down off of the current balance? My only real success at the moment has been Comenity, which owns one of the store cards for $4,000. They offered to settle for $2,300, I countered with $2,000, and they accepted. I thought I maybe could have gotten lower, but this particular card has my sister as a joint account holder, and I thought for that reason it was good to get settled.
With the others, no one has gone lower than 60%, and so I’ve declined settlement so far. Do you think that’s wise? Many will charge off in the next six weeks, so I figure I’ll keep calling in. But what’s a reasonable settlement percentage, would you say, given the circumstances? If it matters, the other banks are Citi, Citizens Bank, Chase, and Bank of America.
Thanks very much for any help you can give!
List all of the creditors and the approximate balances on each account. I can reply with estimates I would shoot for when negotiating with the same set of circumstances.
Is there any reason you can think of for your mother to need financing of any sort going forward?
Hi,
Here are the approximate balances:
Chase – $22,000 (total of 5 separate cards held by Chase)
Capital One – $17,000
Citizens Bank – $12,000
Bank of America – $6,000
Synchrony (collections for QVC Card) – $3,000
CitiBank – $1,700
Kohl’s – $1,500
And no, I don’t expect my mother to need financing going forward. Conceivably, her car could wear out, but then my siblings and I would help her get another one. With the SS and small 401(k) she has, she’s able to pay her regular monthly bills from this point forward without needing credit any longer!
Thanks greatly for your help.
What follows are general estimates like what you can find for the major banks I cover here. Fixed income/no asset situations like your mothers can often result in better settlements, so I will offer both a general target, and a more aggressive negotiation target when I know it can apply.
Chase currently targets pre charge off settlements at roughly 40%. I do see a sprinkling of 30-ish percent settlements still, and those results tend to be with people experiencing long term hardship (medical, fixed income, etc).
Capital One collections at nearly all stages are roughly 50%. I do look forward to some softening from CapOne, but I have been saying that for a long time now. There are instances of lower settlements with Capital One, but those occasions are often with outside collection agencies, or debt buyers.
Citizens bank I target at 35 to 40 percent settlements.
Bank of America I generally target at 40%, but much like Chase, there are many situations where I see 30 percent settlements, and even the random 25% settlement – all pretty much associated with unrecoverable, or long term hardships.
Synchrony would likely be settled with a collection agency down the line, so… not much to estimate until you know where the account lands.
Citibank settlements can be between 35 and 50 percent currently.
Kohls I would target at 35 percent.
Now… assume for a moment that all of this 63k total of debt could be settled for 25 percent. That means coming up with roughly 16k. Now compare the national average cost of a straight chapter 7 bankruptcy (straight meaning no asset), at roughly 1800 dollars (hers may be as low as 1500-ish).
The simplest, quickest, and least involved solution is discharging these debts in bankruptcy. But I am here to offer help and support if you choose to continue settling these accounts.
Thanks for the help. Working on this progressively every few days. Today, had great success with Synchrony (handling QVC) . The debt was just shy of $3000, and I was ready to offer $1250 as a first offer. Before asking me what I would offer (the technique I expected), they offered $1050, or 35%, to settle. A fine outcome, I’d say. The others, I’m still negotiating with, or waiting for them to come down lower.
On the bankruptcy option, we did consult a bankruptcy lawyer at first. But because my mother lives in my house, he explained that the law has recently changed and the courts would look to me to revolve all debts before a bankruptcy filing. Thus, this approach. Thanks for your help, and will keep you appraised so that that can help your view of things as they currently stand in the world of debt collection.
Hi again,
In the past month, I’ve had good success with about half of my mother’s creditors, and am at various stages with the others. I have a specific question about my current status with Chase, which holds 5 separate cards with approximately $22,000 of debt among them.
Chase has been saying no to any settlement the past few months. They said that charge-off will occur next month, and said I had to go through the formality of speaking with a Credit Counseling Agency before they would consider anything else. So I did that, and was told by the Credit Counselor (very helpful independent agency) that my mother’s outstanding minimum monthly balances were $1300/month higher than her fixed income minus expenses. (This I knew!) So they told me to call back Chase and say that Credit Counseling was not viable in the least.
I did that, and asked to speak with a supervisor at Chase. He said that an option might be to document medical hardship and to just have Chase write-off the debt totally as uncollectable. He put in some paperwork and I got in the mail today a request for a documentation of my mother’s monthly expenses and a letter from her doctor saying she can no longer work. Then, the letter says, Chase may move this into a “bad debt” category.
So, question: I would have no problem getting the documentation they request. But is this a good route? Am I missing something? The supervisor says that, this way, my mother will not have to pay anything. But on the internet I have seen warnings that this may just mean the debt is sold to a debt collector and I’ll have problems later on. Here I am willing to settle for 40% or so and I can’t even get Chase to have that conversation like other creditors have had with me.
Your thoughts? Thanks again, by the way, for reading and caring!
John,
I had a similar dealing with chase. 3 cards for approx 15k. They wouldn’t offer any settlement. But then they put me into collections. As soon as that happened i was able to negotiate. ended up settling for for 35% total. So strangely was able to better deal with them after put into a collection agency. settlement took place around day 110 late. hope that helps.
You are not missing anything. I have worked files where there were hardship and fixed income scenarios that resulted in banks completely wiping away the credit card balances. I have also seen those best intentions from a bank still lead to accounts ending up in a sold portfolio, or placed later for collection. Those were mistakes and errors that got fixed, but one instance was an absolute bear.
Just be sure you document any outcome. And also know that anything you do send is just as easily evaluated for how collectable she might be, as it is to document why the balances will be completely written off. In other words, you want to be sure what you provide in this type of scenario is going to back up the hardship.
I know it is weird to have perfectly good money in your hands that you want to send the bank, and Chase’s response is counter intuitive, but it is what it is, and could lead to a better outcome.
Please do post an update with how you progress with Chase.
Hello Michael,
Thank you for having this blog that helped so many people in need.
I am a first time home buyer recently considering buying a home. I have checked my FICO score last week on myfico.com; Equifax 734, Transunion 731, Experian 659.
I have a medical bill from a clinical lab around$100 in feb 2013, plus $38 late fee, it went into collections as $138 in november 2013. I had moved to another address when the clinic bill me so I have never actually receive the bill. I found out I had this collection debt when I recieved a letter from American Capital Enterprises the collection agency in december 13. At the time I did not know the tactic of negotiating before paying the bill. I immediately called american cap ent and paid it off. Today the collection record is still showing on my credit report which is why my experian score is significantly lower than the others. My question is what can i do about it at this point?
Also another negative showing on my report is a deliquency payment. It was a cfna firestone account, the total amount was $1300. I was late on payment once for more than 30 days in 2012. Equifax and transunion showing it was march and experian showing it was april. The late payment was paid off immediately the following month. I paid off the full balance in july 2014 and i made a mistake of closing the account. Is there anything i could do still to get it off the record?
Other than that i have very good records on all my credit cards, car payments. No late paymemts. So im pretty sure these two things mentioned above are the reason for my lower experican score. Please let me know if theres anything i can do about it.
Thank you!
There is not much to do about the two issues you shared, or with Experian. If those collections are showing as resolved on your credit reports, that is what you want.
Your other credit scores are quite good, and the Experian one should not hinder your home buying efforts. Your tri merge credit report that is used often in home lending markets, will often base underwriting on your mid score, so in this case, your TransUnion 731 credit score.
If you do have trouble with the loan based on collection items in your Experian report, post an update comment and lets go from there. And best of success shopping for your new home!
Great! Thank you so much! That is all I need to know.
HI
I have a captial One Credit card that was charged off in 2011. They are reporting every month to the credit bureau that my account is late. Is this legal? Can they continue to report me late on my credit report even though they charged the debt off?
Your late pays and the charge off will continue to report for as long as 7.5 years.
Are you saying that Capital One is showing as a fresh late pay every month? Are there other collection agency accounts and on your credit reports?
They are teporting fresh late pays. When they charged it off they never turned it over to a collection agency. So they have been reporting me late or collections every month after the charge off for the last 4 years
I would file a credit reporting complaint against Capital One with the CFPB here: https://www.consumerfinance.gov/complaint/
Thanks! Very helpful. So just one more clarifying question.
Should goal be get something I know I can swing monthly easily ~$300-350 and then stash surplus cash for few months until I have ~50% of the balance to propose a settlement?
Is there any benefit to do a lengthy payback (3-4 years) over a settlement within the next 4-6 months related to credit report etc (which I realize is already heavily damaged)?
Call AMEX and find out if they charged off your debt already. If not, find out if you agree to a long term repayment plan if they will reage the debt like they will do with credit counseling company repayment plans. If they are not going to reage (where your account does not look late in perpetuity), I would not like it for myself, and would prefer to save up every penny for a settlement so that I reach that goal much quicker.
The flip side is that a settlement means have the debt reflect zero balance on your credit report much quicker. That would make you appear healthier debt to income wise.
Hi –
One quick follow-up — First Source offered what I think is good settlement on first offer – $5417 on $15,500 — however, need to have by end of this month. They sent a letter — is there any wiggle room with them to extend amount of time – I could get to this mid-January but going to take a bit to get cash together.
A settlement with FIrst Source on an American Express account is not going to get much better than that. Not based on today’s trends. Take it if you can. If there is no way possible to accept the offer, call First Source and try to negotiate the deal over 2 or 3 payments. If they cannot budge, ask them how long they will have the account for. If they are set to send the account back to AMEX, and if it lands at Zwicker and Associates, or another attorney that does a lot of collection work for AMEX, you could lose a couple grand in savings.
If this is a no can do, it just is what it is. You never really lose out on a deal you never could have accepted in the first place. It was just as impossible as being able to keep current, so don’t brood on it (not that you were going to).
Hi,
Appreciate past help. Agreed to settlement of four payments to be direct debited on the 28th of four consecutive months. First three went fine and then they direct debited the final payment a day early (never notified me nor did I agree to) and it was returned insufficient funds.
Wrote them a letter and sent to AMEX as well (really wasn’t sure if First Source was really AMEX or what). No reply. Intent was to still honor the original settlement.
Now they’ve sent to Zwicker – from which I gather is First Source connected.
Can anything be done here?
I would file a debt collection complaint with the CFPB. Read that article and gather up the narrative, dates, names of people, and documents in advance. It helps to have all of that outlined in the complaint so that the folks at First Source and American Express can look over their files and decide how they will correct this.
How do I stop Zwicker in the process? Ask for debt validation?
You could send a debt validation request. But not the canned and overdone ones you find online.
You could send something like “Dear Zwicker, I am disputing the validity of the debt as paid and/or that AAMEX through it debt collector First Source, failed to honor the agreement to settle by drafting the final payment earlier than was confirmed. I have file complaints with the CFPB and am waiting to hear more on that. If you would like to correspond with me further about this account please consider this a formal dispute and request that the debt in question be validated”
Something like that anyway….
Hi,
Have a AMEX with $15k balance. October 2013 entered hardship program but April of this year couldn’t make full payment. Called and have monthly to make payment enough to keep out of collections I was told. Last payment early August.
Tonight got collecting call from First Source Advantage for AMEX. Didn’t talk.
Called AMEX was time to make another partial payment and they said account no longer there
Thoughts on options, can’t make full payment. Is there a way to get it back with AMEX or is that even best solution?
.
Now that American Express has placed the account with First Source for collection, you will have to deal with them. You can often set up a lower monthly hardship like payment with debt collectors for AMEX. I do not like this option though, unless it is the only way to keep an account out of the courts.
What is the approximate balance owed to AMEX? What were you able to pay AMEX before? What is it you can afford now?
Balance is $15,134.
Hardship payment when in the AMEX program was $740/month. I can’t do that now, but could do something in the $350 range, maybe more some months.
That high of a payment to AMEX was no hardship plan amount. Your hardship payment would have been something more like 318.00 per month. What type of Amex account is this (Gold, personal, business)?
What are the chances you can put your hands on 8k somehow in the next 3 months? Can you borrow from family/friend, sell a bike or unused item, other creative ideas? Settling this for about half is ideal, and First Source Advantage is authorized to make those kind of settlements for Amex.
It is an AMEX gold.
I’ve gone the route getting rid of unused items to pay down – over last nine months went from $24k to present $15,134.
Between now and December have some extra work that is going to net about $4,000-$5,000 to put toward this but no luck in getting family/friends to loan.
Also, have yet to discuss with FIrst Source beyond answering call at work and requesting that they not call at my employer as not allowed to take these kinds of calls.
How do I approach them about settling or payment plan? Do you just say what can I do to settle or is there a more appropriate approach?
You would need the 8-ish-k to settle. Whether you do that now, or 4 months from now, I still like your chances.
As far as how to get a settlement, or see what kind of payment arrangement they will take, yep, it starts with the call to First Source. Payment plan will be a matter of you impressing upon them what your cash flow monthly can support, and your sticking to your guns with not committing to something you are in any way skeptical you can continue with. Finding that balance and getting it approved is not too difficult. Just do not say anything about your finances that gives any other impression than things are tough (like leave out any optimism for making larger payments in a few months, or come tax refund time, etc).
Settlement negotiations are similar, just focusing on how tough it is to be you monthly with current cash flow, and no prospects for improvement. You cannot commit to a payment, as you have no idea if you will be able to make the next one. You heard about settlements for debts from a website, and are wondering what that looks like for you?
You know Amex will approve a 50% settlement fairly often, so when you are close to having that much in hand, or quick access to that much, is when you would start that dialogue.
Comenity capital/ hsn- 1309 balance
First premier bank- 848 high balance
Merrick bank – 979
They all say charged off with a balances. So is there still a chance I could get the charge off removed if I pay them in full?
All are the original creditors
It is not all that likely you would be able to get those creditors to remove any credit reporting in exchange for money. But that fact, the charge offs on your credit reports, is not necessarily what holds up the home loan. Its the fact that they are unpaid.
In answer to your original questions, it is best to pay off collections and charge offs that show on your credit reports, in order to get approved for a home loan.
The fact that the debts are charged off, but still show a balance owed to the original lenders, suggests they did not sell the debts off to bad debt buying agencies. But the accounts are still likely placed with debt collectors. You can call each bank and ask who your accounts have been sent to for collections. Post the names of those collectors here, or use the search box above to find pages I already have dedicated to settling with them.
Because you will not likely be able to pay for deleting from your credit report, settling the collections for less will get the same result.
Have you already tried to get pre approval from a mortgage broker, or bank loan officer? If not, and you want to settle these accounts for the best savings, do that first.
Can you estimate when you last paid on these debts?
Hi Michael
Is it best to pay off charged off accounts? Trying to get ready to purchase a home.
When were the last payments made?
How many accounts are there?
How many and which of the original creditors are reporting the account charged off, but with a zero balance owed to them?
Hi Michael,
I hope you’re still answering questions from this post, but I cannot get any definitive answers from anyone on my particular issue.
Are collection agencies allowed to report incorrect account numbers to the credit bureaus?
I have a CA that’s reporting a charged off bank card from 6 and a half years ago with a different account number. All of the info is the same. I called the bank’s recovery department to ask who the account was sold to and it was a CA that’s no longer in business.
Another site I visited said that when CAs own a debt they can give it whatever account number they want. It doesn’t have to be the original one. Is this true?
It doesn’t sound legal.
It is not their file number that is holding back your credit. Have you disputed the file numbers accuracy as a way to get the account removed?
I cannot give you a reference to some case precedent, or policy related quote regarding the treatment of unique account numbers used by debt owners, but it is fairly common.
Is there some type of financing you are working on that suggests you deal with this now, rather than wait for this to fall off of your credit reports soon?
Thanks for your quick response Michael.
My finances went bust in 2008. I decided to pull all 3 credit reports a week ago to see what they looked like. They’re not as bad as I thought they were going to be. The largest debts are set to drop from Experian in November of this year and 1/2015 for the other two. I disputed with all three bureaus, but only TU allowed me to remove the charged off account and they said the CA voluntarily removed their info from my report. Equifax didn’t do anything, but ask the CA if it was my account and since they said yes and left it on there. They didn’t have to show them proof or anything. I have no idea what’s going to happen with Experian, but since both accounts will be falling off in November I’m not going to sweat about it.
I was more concerned that that CA was reporting an incorrect account number. When I ask this same question to all three credit bureaus, the people have no idea if this is okay or not. All they say is that the CA should be reporting accurate info. Yeah, duh, I get that, but why list the OC and all other reporting information as correct, except the account number?
I thought you would know if this was illegal or not. I was thinking about calling them to see if this is the actual account number they have in their files for this debt, but I keep reading how you shouldn’t talk to them over the phone and keep everything in writing. I know for a fact that the account number they’re using for the debt is wrong. I just wanted to know if they could legally report a different one to the CRAs.
If it is illegal, I am not aware of a good precedent case you could use as a reference.
I can tell you that there were public comments submitted to the CFPB about this very thing earlier this year. The CFPB is looking at using their rule making authority to reign in debt collection abuses. Part of the formal process the CFPB follows involves opening a comment process along the way. Some comment submissions pointed out the inability for consumers to recognize collection accounts as there own when dealing with debt collectors generally, and when information does not match up with original creditors shown on credit reports specifically. It would be great if the CFPB’s final rule (which I expect sometime next year), required a method to tie all credit reporting and collection activity together. Requiring the original account number be maintained across all records would certainly make sense.
Hello so I am kinda young and I need help. I lost my job so I wasn’t able to pay off my debit. S things are better now so I have contacted this company’s and they want to settle capital one I owe 500 which was my lmiti and Jared I owe 145 it’s been a year if I pay off these debit will I be able to restore my credit? Thank u
It will take some time to bring your credit scores up. Paying the delinquent debts in collection is step in the right direction. You may need to build credit too.
Do you have any other debt collectors on your credit reports?
Do you have any accounts that you are current with that show on your credit reports?
I am fortunate enough to pay off all 4 of my accounts that were recently forwarded to collection agencies. So far, I only show kohl’s collection agency reporting to the credit bureaus. From your experience from people that you helped before, do you know if Amex, Macys, and Walmart collection agencies will report also?
Thanking you in advance. ….Jennete
If they are only contingency debt collectors for those credit cards, you will likely only have to deal with the creditors updating their credit reporting to show paid or settled. If the accounts get sold off to a debt buyer, rather than placed for collections with an agency, Walmart and Macy’s would show zero balance owed and charged off, while the debt buyer will likely report a new collection trade line (AMEX Does not sell debt currently, so no debt buyer will get that one).
Hi Michael,
Best Buy $550.00
CAP $ 2,800
Dis $2,500
A. Tay $1,800
Macy $300.00
Sears $1,000
Credit Un $1,600
All trying to collect – plans with Disc & Ann T
Estimates for settling would be:
Best Buy 40% depending on who is either collecting, or the debt buyer that bought your account (if any).
Capital One 50%.
Discover between 40 and 60 percent settlements, but you do have to have missed payments again.
Ann Taylor 40%, and here too you would need to fall behind.
Macy’s is a stretch to settle because the balance is so low, estimate 50%, but be prepared to go higher. You can read more about settling low balance accounts here: https://consumerrecoverynetwork.com/credit-card-debt-to-include-in-settlement-plan/.
Sears 50%, but also depends on the collection agency.
What is the name of the credit Union?
Thanks Michael,
Just read the article. Quick question, if I were to try and pay off the debt- any suggestions on where to start with regarding to multiple debt collectors as well as R&R?
Much appreciated.
Settling with Capital One once they sue is something I target at 60% or higher, and you will want the money in one lump sum payment. If you post each of the other accounts individually with the balance as of today, and who was last trying to collect, I can post an estimate of settlement targets for each.
Thank you very much. I will look over the article.
HI Michael,
I’m in NY
Thanks for the amazing post of information. I was out of work and had a baby (2nd child) – Its been about 15 months since I stopped making payments on the cards due to no income. I recently began working and I’m trying to get back on my feet but I’m receiving letters/lots of calls from several debt collectors and I’m hestitant to start handing out my acct info as they all ask for “a good faith payment” and then a large monthly payment as I don’t have large sums of money to give as I’m just getting back on my feet. Some cards have gone from one agency to another and in some cases both are still stating they own the debt and want to collect.
I’ve reached out to some of the main companies and they either don’t know who owns it or give me names of one of the two stating they own it – I’m Confused! Who do I try to deal with- who do I trust to pay off the debt. Also there are about two I’ve reached out two – One direct (Discover) $80.00 monlty (2,500.00) & (A. Taylor – creditor Comenity) 135.00 monthly on $1800.00 balance – I understand I cant make such large payments to all and survive financially – I’m trying to do right and I don’t want to end up in a bad place. I’ve had issues with Cap One – I received 1 creditor in writing requesting payment – then someone came to my home, gave papers to a neighbor stating I was being sued and had 30 days to appear in court – I had reached out to the first company then stopped moving forward with them due to the law firm (Rubin & Rothman) which gave papers to the neighbor) which has extremely negative reviews online warning not to deal with them directly – tons of post!! They have began calling – several times – all types of hours – never leaving messages – sent mail to my home and whited out the return address – then I received a letter from what appeared to be from the court stating that Cap One filed against me.
I have about 5 other cards – creditors reaching out balances from $250- $3900.00)
Some have suggested I file others say try to pay it off – My score was preety good – I’d like to start rebuilding – any advise would be great.
Capital One is the priority. How much is Rubin and Rothman suing for? How much room do you have in your monthly budget other than the payments you are making to Discover and on your Ann Taylor account with Comenity?
Post those answers, and the combined total of all your debts (including those named in your comment), and I will help you draw some comparisons, affordability and time lines.
Thanks for the response –
R&R $4,050.00. Total debt including R&R is about $12,500 including all cards. I can try to give up another $250.00 a month and survive financially.
Assume a chapter 7 bankruptcy would wipe out all of the debts for a total cost of 1600.00 (that is start to finish – all inclusive). Now read through this article about how bankruptcy and settlement compare when it comes to how long before you can get approved for credit products again: https://consumerrecoverynetwork.com/credit-report-score-rating-debt-relief-programs/.
Unless you are going for student loans in the next couple years, bankruptcy would offer faster and more thorough relief than debt settlement.
Hi Michael
Please let me know if you received my response as I do not see it and replied earlier.
Thank you
You posted using a couple of different email addresses. The comment system will recognize only one as you, and hold for moderation anything else.
Michael,
I am in shambles over in my house. I have payments of credit cards that I cannot pay, I lawyer suing me for a personal garuntee on a business transaction that I cannot pay, Hospital bills,Taxes, and student loans. And I do not know what to do.
Credit Cards:
CITI: Active: 900
Citi: Active 2000
Chase (Collections): 5200
American Express (Collections) 6000
Master Card (collections): 300
Macys: 300
B of A (collections): 70000
Sears: 900
Taxes (joint w/husband) 3,000
Hospital Bill from child: 5000
Merchant Service legal: 5000
Do I go into settling these things, but the problem is I do not even know what I can settle with.. Should I talk to the collectors, or ignore them??
Molly – It is far better to have a plan, or even a sketch of a plan in place, before calling creditors and debt collectors. I can help you with the sketch right here in the comments.
Are you working with a tax professional? Is the issue state, federal, or property?
Were any of the medical costs covered by insurance (even a penny)? When were the costs incurred?
What amount of money can you pull together all at once to start settling debt today?
What amount of money can you consistently set aside each month to save up and settle more debt, one collection account at a time?
Is your current household income stable? Do you expect it to stay that way?
How much is the lawsuit for, and were you served? Have you answered the summons and complaint?
Do you own a home?
Hi Michael,
Thanks for the clear and thorough responses you post to consumers looking for advice. I have successfully negotiated 10 of the 11 default accounts after I lost my job in 2008 and was illegible for unemployment because I was self-employed. Since I started cleaning up my credit in 2011, it is people like you who have helped me get this far so thank you.
Here are the facts of my *final* negotiation before I can close out this chapter in my life and make buying a house a reality. My wife and I want to buy in the next 30 days (or pushing it out further, if I have to due to this final mess) and the pre-approval process flagged this collection issue today, but I have known about it for several years.
1. Original debt (credit card) was with Bank of America with a max of $10,000 credit limit.
2. I made my last payment on January 2009. BOA added late fees and interest taking the debt up to $11,300.
3. BOA sold the debt to Calvary Portfolio Services in 2012 at the original amount of $11,300 as is listed in my credit report. BOA has it listed as Charge-Off.
4. Calvary (collection agency) has been hard to work with in the past so I sent them many Debt Validation Letters (last one was in 2013) to see if that would get them to stop. They provided me with the last bill BOA sent me in September 2009. Calvary is now showing the amount on my credit report as $17,500, which goes up every month.
I checked the Statue of Limitations for California (4 years), which I think should make this a Time Barred Loan. I have not been sued by Calvary and my credit does not show a judgement against me, just a negative collection item. The comments in my credit report state “Consumer disputes this account information.” Because I never signed the agreement with Calvary, I tried to fight it via the credit report agencies, but had no success.
So my question is how do I go about negotiation with Calvary? They have historically been the hardest and most stubborn… I have always avoided the collection agencies and went directly to the original lender, but that is not available to me this time around.
Can I negotiate on the original amount of $11,300?
If not, then given the age and SOL, would 15% of the current balance owed of $17,500 even be realistic?
I was going to offer them 25% of the original amount, or $2,800 and hold at $3,500. The problem is that the more I give them, the less I have to put on a house down payment and if I go beyond $5,000, I won’t be able to put enough down to buy a house.
If I cannot negotiate beyond $5K, I was going to try to add threats of the SOL expiring and threatening to sue them (reading your links to CFPB and CA Fair Debt Buyer Practices Act).
Today, I called BOA to confirm it had been sold and they told me there is nothing that they can do. The previous 10 negotiations were all with the original creditors, which always went fine at a 30% of the original amount. In addition, I am put off by the balanced owned as reported by Calvary of $17,500, which makes negotiating on that amount at 30% beyond my reach. What would your advice be?
Thank you in advance. I have learned a ton from your website and the DIY credit repair community over the years and hopefully I can wrap up the credit building process this week…
Best,
Luis
I would probably start off by offering Cavalry 2k to settle the debt. I would point out that you are aware the debt is passed the SOL to sue, but are still trying to do the right thing, and within your means, after your finances fell apart a few years back. If the offer is rejected, I would probably increase the offer to Calvary in 500 dollar increments, and in 2 to 3 week intervals. This would obviously impact your home buying goals, so you could shorten the time you make your next offer, or respond to their counter offer. I have done settlements where offer and counteroffers were made multiple times, in a single day, and got the deal done in the same day. That too is a possibility, but less common when you are trying to negotiate such a low settlement with Calvary. A front line debt collector may not have the authority to approve a settlement that low, which means more eyeballs on your file, and more collectability scoring. If they can see that you are home loan shopping, they may get stubborn real fast.
Hi Michael,
If I use that strategy, do you think there is any risk that the debt gets purchased by another company down the road? Or that Calvary will try to trick me into making a settlement only to extend the SOL?
After some more research, they are breaking the FDCPA law and I can file a complaint against them on the BBB and CFPB and the CA State Attorney General Office. I saw complaints against Calvary on BBB and the records were deleted off the credit report. The arguments I would press for are:
1. Ask them why they are pursuing a time barred loan since they have zero legal recourse. They basically have to tell the truth and say that there is no legal recourse, otherwise they breach FDCP section 807 (15 USC 1692e) sub-point #5 – “threat to take any action that cannot legally be taken or that is not intended to be taken.”
2. Ask them why the DVL they provided only included a copy of the last statement form BOA with an amount of $11,300, while they are asking for $17,000. No breakdown of the fees has been provided. They should be in breach of FDCP section 808 (15 USC 1692f) sub-point #1 “The collection of any amount (including any interest, fee, charge, or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law.”
3. Demand that they produce the original signature on file as I have already contested that this is not my debt and the last copy of the BOA bill doesn’t include a complete itemized deduction of all charges, original signature, or a copy that the debt was legally transferred from BOA to Calvary. On the BBB site, Calvary was unable to furnish all 3 of the above and the person’s item on the record was deleted.
So if I do try to settle for $2K with $500 increments like you state, would that not end up hurting my credit because I would have another charge-off that is not several years old?
Would Calvary then send me a 1099 for the amount of $17,500 – $x,xxx settled? That would be a huge tax bill for me, especially as the original debt amount was $11,300…
Thanks again, Michael.
Best,
Luis
Luis – Based on what you have shared so far, your disputes about Cavalry on your credit reports hit a dead end. I am skeptical they are going to remove it when you file a complaint with the BBB, or the CFPB. You recognize the debt as from your original creditor, and they do not have to show you a signature on a contract with Cavalry. And you are just not entitled to the stuff you are asking for in your disputes and validation requests. At least not today, or in the general use of those consumer protections, or outside of a court action where all of that becomes discoverable.
Your angle on the amounts being reported as owed is something to maybe try to finesse a dispute about, but probably with the CFPB, not the BBB.
Settling older debts in collections, and having that fact update to your credit reports, can bring some freshness to the old negatives (even though you are doing something the lending and credit world would view as a positive), and may drop the score temporarily. But your stated goal about getting a home loan through in the very near future means you will likely have to settle these, or get removed with your continued dispute efforts. Home loans are getting approved with recent paid collections fairly consistently today.
Yes, you should expect the 1099c from the debt collector after settling. And because you are in the market for a home, I would assume you are more than likely solvent, and would have to count that as income and pay some amount of tax. See this report for more on the issue: https://consumerrecoverynetwork.com/debt-forgiveness-taxes-settled-credit-card/
Okay, thanks, Michael! I appreciate your advice.
Hi Michael,
Just wanted to give you and the other readers an update. I ended up submitting 3 complaints:
1. Better Business Bureau (BBB)
2. Consumer Financial Protection Bureau (CFPB)
3. California State Attorney’s Office
I also sent Cavalry a “cease and desist” letter stating it was beyond SOL after submitting the 3 complaints outlined above.
The California State Attorney’s office forwarded my request to the NYC BBB and Cavalry responded to that complaint by stating that they did nothing wrong, but in good faith, they would remove the item from my credit entirely.
I worded the complaint very closely to what others on the BBB used and focused on the amount argument. I wasn’t overly specific but the thing was that Cavalry made so many errors that I had solid ammunition. I used my Google Number on the DVL that I sent and they left recording messages without stating that they were a debt collector. I downloaded these as MP4 and adding them to the Certified Mail Return Receipt scans and PDF of the DVL to show my case.
Somehow it worked and I”ve been approved to buy a house! My credit score just went over 700 and I have to say, the process worked. It was hard. It took time. I had many doubts, but I refused to capitulate my credit future to these bozos who clearly did not want to settle for anything less than 90% of the original amount + interest that put it beyond my financial means.
Thanks again and I wish all readers the same positive outcome. Don’t give up!
Best,
Luis
Nicely done Luis! Thank you for posting the update and best of success to you in your new place!
Good day. Happy to call your office as well, but a few questions.
I have two charge offs from Chase Bank – DOFD on both was 6/2008-scheduled to drop from my account in 6/2015. I have the names of the CA they belong to, but neither is reporting on my credit report.
I would like to settle both accounts. (Chase has both on my credit report as closed, zero balance and 150/180 days late) When I pay the collection agency, there will be nothing to update on their end as they have not posted on my credit report. However, would they update the accounts(s) and then place them on my report? Would there be any way to get Chase to change their reporting on my credit report to settled? – though a rep at Chase told me the way they have reported is the way the account was at closing. (I would then try to goodwill them off)
I’m mainly trying to pay this debt so that it won’t haunt me in the future. Not looking for any mortgages/loans now, but possibly in the next 3 years or so.
Your advice is most greatly appreciated!
What state are you in Lakitia?
If the time limit for you to be sued for collection on these accounts has passed, there is little benefit to settling at this point, and when you have no major credit or financing goals prior to the collections reaching a point where they can no longer hurt your credit.
There is some risk that the collections would appear on your credit reports once settled with the debt collectors, and even though those same collections do not appear on them now.
Thanks Mr. Bovee.
I’m in NY – the SOL is 6 years, so I am already passed that.
In your opinion, is there any way to get the debt off of my credit report? I’m guessing the only option is to wait out the next 11 months for the collections to fall off. They’re my only 2 ‘bad’ accounts and I just really want a clean report.
My biggest concern is that when I do go for a mortgage in a few years, the lender will pull a factual report showing that I have debt due.
Again, your help is sincerely appreciated!
Paid collections in New York are handled a little differently. So while you are passed collectors using the courts to collect, you would also be passed the point where paid collections can hurt your credit too.
No, I do not think there is a method, that has a high chance of working, to get the unpaid collections accounts off early. What are the total balances?
As long as these collections were not judgments, and based on even today’s tighter lending standards, I do not see you running into trouble over the accounts if they no longer appear on the tri merge reports the lenders will likely use.
How can I negotiate a deal without restarting the SOL clock? Also, I am having an issue where that same creditor is reporting twice on my equifax bureau. I was able to dispute and remove with the others but it seems to only stick on Equifax. The account number is different on both accounts on the cbr. I have tried a million times (not kidding) disputing the account that shouldn’t be reporting. What are my next steps. I contacted Equifax and they told me to contact the creditor. When I asked them I have a right to the info they used to verify the data they said to talk to the creditor.
Concerns about restarting the SOL for a legitimate debt collection lawsuit are a bit overdone. I just do not see that happen to any degree that would warrant how much the concern gets discussed online. Who is the creditor/debt collector you are dealing with? What percentage of the current balance owed are you prepared to pay to settle with the collection agency?
What were the written responses you received from Equifax? Did you make a written request into how they investigated your initial dispute? Did you copy the furnisher (collection agency) with your dispute? If not, do not do that now if you intend to negotiate the account (though they may already have earlier credit bureau disputes logged in their CMS).
Thanks for the quick reply so here it goes!
I can tell you right now the type of loan was a promissory note.
Who is the creditor/debt collector you are dealing with?
Key Education Resources is the original creditor. On the equifax the correct reporting is indeed: Key Education Resources. However the incorrect reporting on the Equifax states “Knight College Resources.” When look harder you can seem to find that it is Key Bank. After all is said and done, the collector at this point is Mercantile Adjustment Bureau. From what I know they are outside the SOL and I simply told them to only contact me only via letter if they want to talk. I have yet to hear from Mercantile since, because it seems the debt they bought was zombie debt.
What percentage of the current balance owed are you prepared to pay to settle with the collection agency?
Approx current balance owed is about 23k and honestly Ill never give them anything beyond 3-4k for it.
What were the written responses you received from Equifax.
Verbatim from Equifax:
We have researched the credit account. Account # 102**** The results are: We have verified that this item has been reported correctly. Additional information has been provided from the original source regarding this item. If you have additional questions about this item please contact: Knight College Resource GR, 745 Atlantic Ave, Boston MA 02111−2735
Did you make a written request into how they investigated your initial dispute?
No but I believe that is the next step.
Did you copy the furnisher (collection agency) with your dispute?
No I didnt. This is me worrying about sol. In fact, since the account number showing is completely wrong, Ive been handling it as its not mine, because ultimately, and in a court of law I can say. I never had an account with Key Bank or Knight College Resources under and account starting under this “102” number.
There is no doubt that the collection agency should not be reporting the account twice (as I understand at this point, they report with an accurate loan number, and again with an inaccurate).
Was this student loan in anyway subsidized by the government?
Thank you for the quick response.
Was this student loan in anyway subsidized by the government?
No it wasn’t.
If it was me, and I am confident that the SOL is indeed passed, I would send a written credit reporting dispute to the debt collector, and copy Equifax. Send certified mail return receipt.
If that does not result in the additional collection being removed, post an update. I would then likely file a formal complaint with the CFPB using a good outline and chronology of events and correspondence.
Thanks for the input!
I will get right on it!
But one last question. Regardless on what happens on the CBR lets say they correct it and remove the inaccurate record. How would I talk a deal with the collection agency after the fact?
I am skeptical you would be able to negotiate a deal with the debt collector for your target amount referenced in your comment above.
Generally speaking, you will reach out by phone and talk to them about your financial hardship, and the willingness to do something to resolve the debt. If the debt is passed the SOL, has been sold, and you have time on your side (no pending financing goals like home loan approval), you may have to wear them down with monthly offers for a bit.
One of the last customer files I worked had a different CRN specialist to start with, who had made several offers for 12-ish months, then I picked it up and made 4 offers in 6 months, before the deal finally got done. Not that this is typical, it’s not, but I point this file out for illustration of the benefit of time being on your side when collectors have really old debts.
Thanks again! Wouldnt almost any conversation restart the SOL? Even a “good faith” payment?
Lastly, I believe Mercantile, doesn’t purchase debt. They are simply a 3rd party collector. Does this change anything in relation to what is happening at this point?
Certainly a payment would, or short of that, a written acknowledgment, or written promise to pay. Ideally you will want to get feedback from an experienced consumer law attorney, with debt defense experience in your state, about case law history in your courts RE resetting the SOL.
If Key still owns the debt it can create a situation where settling requires more money than negotiating with a debt buyer who cannot sue.
Hello Michael.
I wanted to follow up with you on this. I received my results back today and they still left the duplicate incorrect reporting. I sent the information via fax to Equifax. I sent no information to the 3rd party. I am about to submit a formal complaint to the CFPB as you recommended. I am almost thinking lawsuit at this point. What are your thoughts?
Thank you!
I would file the CFPB complaint.
There is often little benefit to the expense of filing an FCRA lawsuit unless you can show damages (you applied for credit and were denied, or paid higher prices than would have been the case otherwise, employment issues resulted etc). But talking to an experienced FCRA attorney in your area makes sense. Most will offer an initial consult at no charge. Are you in Boston?
I am in Delaware.
Oddly enough, I asked for them to set up a login. But they wont email me with the link to create my profile. Seesh, why does this have to be so hard?
I sent you an email with contact details to two attorneys. The first one in the email, Jaworski, has credit reporting consumer law listed as a practice focus. The second attorney did not list same, but does deal with debt collectors on behalf of consumer clients.
Delaware could really use some more consumer advocates.
Michael,
I’d like to ask for thoughts on my credit situation. In a nutshell, I opened a number of accts (mostly right after hitting 18) to put myself through school, and maintained perfect payment history and great credit for approx 9-10 years. Suddenly, I lost my employment around the end of 2011, and eventually went into default/collections on all 8 of my accounts about 6 months later, for an original balance of about $15K. I’m just now back on my feet with some savings (about $6K) and about 2 years into the credit reporting period (so I have about 5 years more on each acct). I anticipate decent income indefinitely.
From what I’ve read, if I settle or even pay my debts in full/as agreed, my credit score won’t go up and furthermore, the accounts become refreshed for reporting purposes and the 7 year clock would restart when I make the full payment on each account. I have no plans to buy a home, finance a car (I can buy with cash), or apply for any loan in the next 5 years. Given that my dismal score cannot be repaired until the accounts age off anyway, is there any incentive for me to address these accounts, even in settlement? Obviously I could be sued, but then I could simply settle and pay at that point as needed (making sure to avoid judgment).
Is there anything I’m missing in this analysis? Your thoughts are appreciated, as I dive into this process.
If it were me, and given the limited information you shared, I would settle all of the collection accounts now. Here is why:
I want to eliminate the risks of being sued. Yes, you can settle when an attorney contacts you, or files a suit, but those settlements can often cost more… sometimes double.
I want to eliminate the stress of collection agencies having the potential to sue, and looking over my shoulder for that to occur.
Even though it is unlikely that all 8 accounts would sue (you can post a reply detailing the balances, original creditors and who is collecting now and I can list your accounts in the priority I would approach them), settling all means you are on a quicker credit reporting recovery track. You mentioned that credit scoring is not bothering you overly much, but that is now, not 12 months from now.
Settling with a collection agency now will not reset the 7 year credit reporting clock. The credit reports will get updated to show you no longer owe any money on the account, and that is what you want, but the collection accounts should still come off at the same time the original creditors reporting will. If that does not occur, you can correct that.
What state are you in?
So to clarify–if for example, I come to an agreement to settle a $2500 debt defaulting Jan 2012 with Bank of America for $1500 today, the acct becomes “Settled” or some variation on my credit report and it still would come off mid 2019? There wouldn’t be a new report (the settlement) that would stay on for 7 years from today (until 2021)?
I live in California now, but the accounts were opened while I lived in MI and MA (although my last payments were made from CA). Presumably the SOL would still be CA’s 4 years, but I understand SOL issues can get tricky depending on the bank involved.
I also have tax debt of about $19K right now (I worked entirely as a contractor from 2008-2011 and didn’t set aside $ for taxes to get by for a few years). It was originally $30K so I’ve made some progress since, but I am a bit concerned about making all these settlements and adding more to my IRS debt. I also have considerable loans from college and grad school to content with.
I go in and out of periods of employment presently (which makes doing regular payment plans difficult), but I appear to earn too much at year’s end to be eligible for bankruptcy, not to mention the bulk of debt isn’t dischargeable (student loans).
I’ll have to do some research to clarify the amounts and creditors, but as far as OC’s off the top of my head, there’s Capital One, Bank of America, American Express, GE Money Bank and Care Credit (also GE I think).
Correct. The accounts would drop off mid 2019.
Assume the SOL for debt collectors to sue of 4 years in California.
I would prioritize the IRS and student debts first, just as you have done. If you are able to add money to savings, while meeting a set repayment with the IRS, and making timely payments on the student loans, but do not have stable income, I might wait to settle the debts, and in a one off manner you originally suggested (wait until you hear from an in state attorney or are sued to negotiate each settlement). This approach will drag on the credit recovery time (worth pointing out even though you mentioned it is not a large concern for you).
American Express and Capital One sue as original creditors. AMEX does not sell debts, Capital One had not been selling much, but appears to be more and more. These creditors are the higher risk. GE Money uses both outside collection agencies, and sells to debt buyers. These debt buyers would be who are more prone to sue for collection. Bank of America uses outside debt collectors and sells charged off credit cards. Your risk is more from aggressive collections from a company buying your BofA account.