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.
Hello, I surrendered my vehicle to Exerter Finance because I lost my job.They sold thevehicle in an auction that is way less than the value of the car causing me to owe them $19,000.00 which is now showing late payment – Charged off account. How can resolved this without filing bankruptcy? Thank you.
Settling for the lowest possible amount that can be negotiated is often the best course in a situation like yours.
Call me for a consult about what settling would look like for you. You can reach me at 800-939-8357, option 2 rings to me.You can also fill out the “Talk to Michael” form in the side rail of this page.
Hi,
I am back! I just wanted to let you know that everything worked out. I covered our collection with NAR.inc and they did removed the negative remark in my husband’s credit score. We had to wait a whole month for the removal to be updated with TransUnion, but everything was settle without any issues. Thank you for all your advise it guided me to the right path during this process!!
That’s great Blanca, and congrats! Thanks for posting the outcome too.
Hi! Lost my job in 2011 and used my Wal-Mart card (not visa or anything, just Wal-Mart) to eat then couldnt pay. It eventially was charged off then went to collections. That was years ago. Now Im back on my feet and I want to pay but both Wal-Mart and the collection agency say theyre not collecting payment. So what do I do now? I have the entire amount and want to pay but it seams there is nothing I can do. This is the major factor killing my credit and keeping me from getting an apartment. Thanks a ton for any help.
Who is the debt collector showing on your credit reports for this account?
Its says syncb/ walmart on my credit report. When I called Wal-Mart to try to pay they patched me through to a different agency (dont remember the name) who I believe was the debt collections. They were the ones that said they were no longer collecting on it. The Wal-Mart operator said they couldnt answer any info. Ill call them back and write down the collection agencies name in the morning. Ty
HI Michael, I got a reply from you regarding American Education Services, and I want to open it but I can’ recall my password. I tried resetting it but nothing happens. can you help me recover my password?
You do not need a password. Just go to this link: https://consumerrecoverynetwork.com/question/aes-student-loan-debt-collector/
Read that page and post in the comment box on that page the same way you do this one.
Hi Michael,
I am a 51 year old woman and thru tough times have created this !
So I have approx.. $32000 in credit cards and a car loan that was reposed
CapOne:$14,000 and collection agency has the account.
Chase:$3000 a collection company has this too.
Chrysler: $12000. car repossessed
All state Insurance: 995.00
And I have a $1200 school debt.
Plus $29,000 in Fed Student Loan which I pay $181 per month on.
I am not sure what I should do to pay them them off.
Please help
Donna
How long has it been since you last paid CapOne or Chase? Who are the collection agencies that are collecting on those accounts?
When was the car repossessed?
Can you pull together money to settle the collection agency accounts? How much money can you put together now? How about over the next 6 to 12 months?
This post has been moved to a new page.
Your post was moved. A new post about dealing with MRS Associates collecting for AES on your student loans was created.
i was sued by a creditor- i went to talk to a lawyer who had agreed to help me. It was about a 2400 debt and they were agreeing to settle for about 1000. I wanted to hire the lawyer for about the same amount of money. I met up with a lawyer who was really nice and a good attorney. I wasn’t ready to set it all up then as I was a little sick. We rescheduled but then I asked to sign everything the next day. I got ready to pay and sign documents, yet the lawyer called me an hour before I was to meet telling me he didn’t feel he could represent me because he said that i stated I had no intent to pay back the debt I had bought on, and he only works with consumers who fall on hard times or lost a job. Again I found it all kind of strange- that had i signed the paperwork he would’ve taken me, plus, im sure I probably did fall on hard times but at the time wasn’t good with credit. the whole situation seemed like a very weird experience. He said I should call the other attorneys I talked to about it.
I’m not sure why someone would even do this, but in my case would settling be the better option then at this point? the other lawyers I talked to didn’t seem like they knew much about what they were talking about. What are my options maybe writing to get them to validate the debt?
Don’t request validation of a debt you intend to settle. It just monkeys up the process. Call me for a quick consult on what to do next. You can reach me at 800-939-8357, option 2 rings to me.
Ok I spoke to them and they will remove it without any issues once it is paid.
The reason for it, seems like workers compensation was denied and the bill sat there for several years. The time that he got hurt was during work and the same company took him to the doctor, how could it still be denied? Do you happen to have any ideas if I still could dispute this or is it too late it was back on 2013?
Ok, I was able to pull his report from transunion,, but it has not been updated and I am not being able to see any information about this debt. I looked up more information about NAR INC. and it seems like it is link to North America Recovery. I called them yesterday but they were gone for the day, before I call them again do you have any suggestions on how I can dispute this and settle it quick because we already got denied a loan because of it and we need to move before April. Thank you so much for all your help!
You bet you can dispute it, or settle it quickly. I would just want to know more details about the underlying debt before I did anything.
Recently me and my husband have been looking into getting a house. We do not have credit because we are still trying to finish school and have tried to stay away from loans. I went online to check our credit scores and this is what I found on his profile:
NAR INC N/A Collection/ Chargeoff $454.00 Feb. 22th, 2016
I have no idea where it is coming from. We have not been contacted at all, and I really need to figure out how we can settle this. Please HELP!
You can call the toll free number for NAR INC that should appear on his credit report. Find out if this is North American Recovery. Ask the debt collector what the debt is all about. Post an update reply with the details before you take your next step.
Does your husband have an outstanding medical bill to your knowledge?
We have not been able to request a credit report because it seems like we can not verify his identity. I do remember him having a 60 dollar bill due in our local hospital and when we tried to pay it online it would show as pending so I figure they were disputing with insurance. After that, we never did received any notices about it being in a collecting agency so we were not aware of it at all! I just tried to request his report again and every time we come down to the security questions we are getting an error.
You will have to make the request in writing. In a situation like this you often want to include a copy of the drivers license and a utility bill.
Hi Michael, my name is Deborah and I have a credit card account with Premier Bank. This is a secured credit card I got to increase my credit score, however it did just the opposite, I say this because I started out paying on the card on time faithfully until one charge I made allowed me to get behind and I was never able to catch up on the payments because I got further and further behind in my payments. My situation now is that the card balance has been sent to a collection agency. The agency is Rushmore Service Center. The I want to pay it off, however I am not able to pay a large payment each month. I want to know all of my options. I also have a problem with judgements and balances with my former husband on my credit. We signed jointly on a home and car earlier before we later divorced now I have these debts on my credit. Any assistance in this matter would be greatly appreciated.
It would help to know the amount Rushmore Service is trying to collect. Post the balances owed on all of the collection accounts you have and also let me know when the last payment was made on each account.
My feedback will be more detailed with that information.
Ok. I haven’t called Target back to tell them which option I’ve chosen, I was waiting for your reply so thanks for doing so. So besides it being morally correct to pay full balance rather than settling on half the amount neither one will have no big effect compared to the other.
I thought I had read that future creditors may look at someone who has paid the full balance off on a charge off more favorably then someone who has settled a charge off.
It is conceivable, but that means you have someone “hand underwriting”. There is far more automation in the underwriting process today, and to the point where the full pay is just not significant like it once was.
Ok thanks for the info. I noticed I had a Target credit card that was charged off as well with a balance of $550. I contacted them and they said they would so a lump sum of $280 and that my credit report would update to paid (maybe she said settled) but less than balance owed. Also gave me option of paying 6 equal installments of full balance and report would update to paid balance in full. Which one would help me the most if either? Also asked about getting it in writing but said they couldn’t because of statue of limitations in Texas had passed. What gives?
The SOL in Texas passing has nothing to do with documenting a settlement. I would take that issue up with the collector’s supervisor when you call back. Let me know if there is still a problem.
You do not really get an extra boost from paying charged off debt in full compared to negotiating a lower payoff. You get the account updated to reflect a resolved collection either way.
Ok, so if contact Capital One and settle both cards with lump sum offers what am I expecting the monthly payment history to show rather than “failed to pay” for each month? From what I gathered from the video the term “charge off” will always be there.
What percent of balances should I strive for?
I generally target settlements on Capital One accounts at 50%. Get everything you negotiate in writing before you pay. Once you pay your credit reports will update to show as paid collections. Your credit can bounce back stronger from that point.
The late pays and charge off do stay for up to 7.5 years from when you originally stopped paying. But your credit is not held back for that long.
I have 2 Cap 1 credit cards that were charged off. On my credit report they say the accounts are closed and show payment status as late. Both cards are showing “failed to pay” under payment history for Feb 2016. . One card shows status updated on 1.1.12 and the other card says 10.1.12. No where do I see a collection agency on the report for these 2 accounts. How do I clear these accounts up and have them update payment history to current.? One card has a balance of 1500 and the other 1000. Thanks.
You cannot settle the Capital One accounts and get them to show as current. You could not pay 10 times what you owe and get the accounts to show that. I just put up a related video about paying collections to remove a charge off. Watch that for a good understanding of why negotiating a lower pay off is all that you need to make progress with improving your credit now that the prior damage cannot be undone.
Hello Sir,
I have disputed quite a few medical debts and had a bunch removed.. I still have the ones below and was wondering if you could provide any insight. Settlement options. If you have worked with any of these companies how are they to work with?
COMMONWEALTH FINANCIAL $1,857 Oct 28, 2014
CREDITORS COLLECTION $372 Sep 14, 2010
STATE COLLECTION SERVICE $56,428 Dec 02, 2011
DIVERSIFIED SERVICES GRO $2,236 Oct 27, 2011
MEDICAL BUSINESS BUREAU $466 Apr 20, 2012
ARMOR SYSTEMS CORPORATION. $966 Aug 20, 2012
CREDITORS PROTECTION SVC $694 Aug 13, 2012
NORTHWEST COLLECTORS INC $615 Nov 05, 2010
REC SOLUTION $610 Feb 02, 2012
STATE COLLECTION SERVICE, INC $610 Nov 07, 2013
The dates are the last time they were reported. Any info will help.
Thank you!!
Were any of the medical bills covered by insurance? It can be a bit more difficult to negotiation lower balance payoffs when that is the case. I have a page up dedicated to negotiating medical bills.
What is the 56k balance with State Collection Services all about?
I need some help. I have an old debt with Bank of America. I have an outstanding balance of $3603. I want to know if there’s anyway to have the derogatory comments removed after I pay the debt?
When did you stop paying Bank of America? Who is the collection agency handling the account now? Is anyone else showing on your credit for that same account?
Let me start by saying that I live in Missouri. A couple of days ago, in searching online, I found that a lawsuit has been filed by Gamache & Myers P.C for the current owner of Midland Funding LLC, where the prior creditor was Citibank. Today, my mother stated that a letter had come for me from Gamache & Myers (she won an appeal against them so she knew who they were). I advised her to read the letter to me, as I don’t reside there, & it was dated 5 days ago & stated that they were in the process of instituting a suit against me, it should appear in court soon & to call if would like to discuss matter. BUT I haven’t been served yet AND it is already in the courts. It is stating the balance as $ I have not received any letters prior, anywhere.
I did have a CItibank card in college & honestly, I don’t remember when a ‘last payment’ was made. I got the card in 2006 & I wanna say that 2012 may have been, & that it taken care of. There is no balance anywhere on their letter.
I went to my credit reports & there is nothing on them from CItibank. Nothing that says charged off, closed, transferred, sold, last payment, etc. CItibank is no where on my credit reports. BUT there is Midland Funding for 6/15.
SO, (sorry for my rambling) I need assistance on what I can do from this point &/or how to do it? I would appreciate any & all suggestions.
You were not clear if Gamache and Myers has filed the lawsuit, or the letter your mom read to you is the typical precursor to a lawsuit.
If just the dunning letter you may want to use this opportunity to dispute the debt as paid if you know it was. Let them then go access data that says otherwise. Citibank has long been one of the better banks at providing account statements and historical data to collection agencies, and that does include debt buyers like Midland Funding.
If a lawsuit is going to progress than you will have an opportunity to draw out all the facts and account history through the discovery process.
If you last paid, or the account was charged off in 2012, it is odd that all of the credit bureaus do not show the Citibank account on them.
Yes, Gamache & Myers has filed the lawsuit, before the letter was received, but I have not been served yet. I thought the same thing about it not showing up on my credit reports, but there is nothing from Citibank on them at all. Midland Funding shows up on there with a date of 6/15 to be cleared 8/19 & amount of $2326.
At this point, seeing that Gamache & Myers filed, but yet receiving a letter after that says they are in the process of instituting a suit, I don’t even know what to try to do or how to go about them. And even more confused that Citibank is no where on credit reports. I’ve looked all through the reports
Since the letter says to call to discuss, even though they already filed the lawsuit, is it too late? With Citibank no where on my credit reports, should I just go to court?
I know that the amount stated on my credit report from Midland Funding isn’t enough to obtain a lawyer.
Confused is an understatement!
You can still call Gamache and Myers.
With Citibank nowhere on your credit reports I would first look for any old statements I had and cross reference those with payment from my bank account. I would want to determine, to the best of my ability, whether this was a paid account and sold to Midland by mistake, and before calling the collection attorney.
If the amount being collected is legitimately owed, settling with Gamache and Myers could cost less than defending the suit.
Hey, I just pulled my credit 1/10/16 and found two medical bills back from 2011 and both are in collections. I thought I got them removed but some how got back on. I have one for 629 and one for 889 both which were co pays for hospital and doc visit. What can I do to get this off. I have called both and they said they wouldn’t take anything less than amount owed. I did dispute this back in 2012. Thanks for any help.
Are you negotiating with the medical billing company or the medical service providers office staff? Do you have the money to pay the bills and care most about your credit reports?
My family encountered some medical issues and I fell behind on credit cards. I have two charge-off accounts which are approximately 1 year old:
HSBC for approximately $3,400
Bank of America for approximately $9,300
My work situation has stabilized, I have cut many expenses and have managed to save up some cash that would let me try to settle with both creditors.
I contacted the last collection agency I received correspondence from, and they said that the “Account is no longer open”. They would not indicate whether the debt was re-sold or returned to the lender. I am unsure how to proceed. Should I contact the credit card company directly, or wait until the next round of collection efforts starts? Any advice you have would be appreciated.
Who is the collection agency you are dealing with? Which account were they collecting on?