Settling each of your credit card debts successfully, and for the best possible savings results, follows a simple formula. The formula is 2 parts math and 1 part timing. The best debt settlement deal available to you with each of your debts can be a moving target when the math (the money you have available to settle) moves your timing. You will sometimes have to adjust your expectations for the deals you can get based on how long it’s been since the credit card was paid; whether your bank has charged off your account, sold your account, or placed it with a collection agency.
NOTE: This post is part of our Debt Settlement Guide. If you’ve missed any of the previous content, or would like to start at the beginning, please see the links at the bottom of this page.
I covered this in more detail in the previous article about winning the debt settlement race. The math involves the lowest amount each creditor or debt collector will settle for, combined with your ability to come up with that amount of money all at one time, or spread out over several months.
In order to get the math to work in your favor, you want to have good timing.
You Must Have an Inability to Pay Your Bills
A basic fact about settling debt is that no settlement will occur with any creditor until there is a proven inability to pay. There is no proof you cannot pay until you actually haven’t paid. Which brings me to some housekeeping:
I cannot instruct you to stop paying your debts. Your decision to do so is your own. Most of you reading often had, or have, no choice in the matter. Running out of money before you run out of month is good like that. I am here to inform you of the consequences and opportunities that will occur along the way.
The decision to stop paying bills is not one that should be treated lightly. If you have concerns about falling behind with a creditor, post about that in the comments below. Lets talk about how you can navigate your concerns with details specific to you. There are often customizations you can build into your debt settlement strategy that will better suit your situation, or the outcome you want to reach.
Because debt settlement typically only begins to be an option after you have missed making the minimum payments due for 3 months in a row, the debt settlement process, once started, can have irreversible implications.
If you have fallen behind with your credit card payments temporarily, and are able to get back on track with some form of normal monthly payments – look into a credit counseling service, or talk to your credit card banks about any internal hardship repayment plan they may make available to you.
Understanding the Basics of Debt Collection
Any bank will be able to tell you that not everyone they loan money to will pay it back. It’s a certainty that is known before any lender opens their doors. Now, add to that the fact that the US economy is credit-fueled and debt-based. Debt and credit is how we roll. This means our entire spend and borrow system must have a debt collection function built into it.
The fact that not everyone will be able to repay their debt gives rise to the multi-billion dollar yearly revenues that the collection industry feeds on.
The debt collection process starts with the attempts your creditors make to collect from you when you miss payments. Your banks collection efforts are centered on how to “lose the least”, while third-party debt collection efforts are centered on how to make the most.
Banks have the option of accepting less than what you owe before they fully mark down your account as a loss. When banks charge off a debt (account for the loss), they will typically do one of three things with your account:
- Assign your debt to a debt collection agency.
- Place your debt with a collection attorney.
- Sell your debt to a junk debt buyer.
Most Banks Offer the Best Deal Based on Timing
Credit card banks will, on average, lose less by collecting what they can from you before they drop your account into one of the three collection buckets mentioned above. That’s why banks settle credit card debt. Not because they’re nice. It’s just math to them.
Take a break from reading and watch this video, where I quickly hit on all the reasons why timing your settlements is important to you and to your bank.
Your credit card debt may be a source of enormous stress for you, but it is an accepted and planned-for statistic for your bank. Just like I am focused on helping you figure out the math that works for you, banks will focus on math that works for them.
Throughout the debt settlement guide, I make references to collection stages. Here is what I mean when I refer to the different stages of collection:
- 1st stage debt collection is when you are dealing with your original creditor. This is generally within the first 6 to 7 months of having not paid your credit card bill.
- 2nd stage debt collection is when you are dealing with a contingency, or an assignee debt collection agency, collecting on behalf of the bank. This means the creditor still holds the debt. Your account was not sold.
- 3rd stage debt collection is when you are dealing with a debt buyer. A debt buyer is a company who has purchased the legal right to your debt.
- 4th stage debt collection, aka “late stage collection”, means your account has been placed with an attorney licensed to practice law in your state, or when collections have reached the courts.
When you commit to negotiating debts for less than the full balance owed, there are often good reasons for settling credit card debt directly with your bank during the first stage of debt collection. It does not matter if you are settling your own debt, or if you hire someone to help you. I want you to understand why, depending on the banks you are dealing with, it is better for you to settle credit card debt with your lenders instead of waiting for your accounts to get sent out to a collection agency, or sold off to a debt collector.
Settling Credit Card Debt Fast – Benefits
Depending on the banks your credit cards are with, there can be benefits to settling with some as early as possible. Some of those benefits can include:
- The best savings (lowest settlement deals) can be had by negotiating with your original creditor.
- Settling early means the account does not get placed in one of the collection buckets that were described in the prior section.
- You can often limit the damage to your credit report by avoiding a charge-off (letting your account go passed 6 or 7 months of nonpayment).
Here are some examples of banks you could have an opportunity to settle with early:
- Bank of America
- Chase (Disney, Amazon, other Chase branded credit cards)
- Citibank (and cards serviced by Citi like Shell, Home Depot, Costco, etc.)
- Capital One
- Discover
- Wells Fargo
- GEMB and GE Capital now also known as Synchrony
- USbank
- First National Bank of Omaha
It’s important for you to understand some of the system that your credit card banks live in, and rules they are forced to live by. One part of the credit card lending system that has a large impact on how debt settlements get done in first stage collection is a not-so-little thing called “charge off”.
CHARGE OFF: The term “charge-off” describes an accounting function followed by your lenders. The meaning of charge-off does not change from one type of account to the next. But the timing of a charge off can change depending on the type of loan you have, and also due to decisions that can only be made by your lender. You do not have much influence on when your credit card gets charged off, other than making a payment to stall a charge-off from occurring (which is only something I would do for a specific strategic purpose, like needing another month to raise the money you are missing to negotiate the final pay off amount).
When it comes to unpaid credit card accounts, a charge-off occurs when the credit issuer either chooses to, or must, recognize an unpaid loan balance as a loss. And for lenders, losses are bad news, so most credit card issuers wait out the full amount of time they are allowed to charge-off your unpaid debt.
The time frame for the bank to recognize the loss on your unpaid credit card balance is outlined in GAAP (Generally Accepted Accounting Principles), and is typically 180 days of consecutive nonpayment, or what the Office of the Comptroller of the Currency (OCC is the primary regulator of national banks) calls “seven zero billings”.
How does charge off affect settling?
Understanding the timing and impact of your credit card accounts charging-off will give you an advantage in your planning and debt negotiations timing. Identifying which creditors to settle credit card debt with using your available cash flow in the first stage of collection is part of the prioritization that I cover in consults, and with clients.
You may be in a position to settle more than one account prior to charge-off. There will often be a specific design to which accounts I identify as the first, second, and third priority. Posting a basic outline of your credit card balances and who you owe in the comments below will help you get specific feedback about prioritizing your accounts. If you do not want to post to the site, you can call and consult with me, Michael Bovee, at 800-939-8357 and hit option 2, or fill out the consult request.
Settling debt in first stage collection with a lump sum, or getting payment terms with your settlement, can be the difference maker. Why wouldn’t you want to:
- prevent more than one account from charging off and going to a debt collector that may be more aggressive?
- negotiate lower pay off settlements with your original creditors if it meant you could save more money in the process?
Many major credit card issuers allow pre-charge-off settlements combined with 90 day payment terms. Depending on your situation, this means you may be able to settle more accounts prior to charge-off than if you were only settling with one time lump-sum payments.
Settling with those 3 month payment terms may also mean you can knock out a high balance credit card before your bank sends your account off to a collection agency. Settlement agreements that are allowed to be paid using installments prior to charge-off can typically only be extended to roughly 90 days. Some banks want to offer better terms, but they can’t due to regulations.
Example: You have a $9,000.00 credit card balance outstanding and the account can be negotiated down to $3,300.00 in your fifth month of missed payments (between 150 and 180 days late). You could set it up so that you make 3 payments of 1,100.00 in a 3 month period to pay off the settlement.
If you use this strategy, make certain you are confident you will have additional money to follow through on payments in months 6 and 7.
Collection Calls or Letters When You Settle Later
You WILL get collection calls! Your patience with the debt settlement process will be tested more by debt collection calls than perhaps anything else that may occur along the way. You need to know how to manage the calls and prepare yourself in advance for them. If you are behind with payments at this time, you already know all about the frequency of collection phone calls. Be sure to read through my article about handling collection calls and how to use technology to limit your exposure to them.
Why do you get so many collection calls?
Unsecured credit cards are… unsecured. Missing credit card payments is not like skipping payments on cars and homes, which can lead to repossession and foreclosure.
In the early stages of credit card collection, there aren’t many teeth behind the debt collector bark. Repeated collection calls and letters from your bank are about the only tool available to the collector (other than suing you in court), in order to get you to make a payment. Until a bank or collector gets a payment, or a plan for payments, the barking continues.
Phone calls are your friend. Certainly not all of the ones leading up to negotiating the deal, but you can literally make thousands of dollars in one, or several well planned and timed calls to your bank. But let’s get prepared with what to say, and not say, before you pick up the phone.
Continue following along in the debt settlement guide with How to Talk to Bill Collectors.
Anyone with questions or concerns about timing your settlements with your banks, and your particular situation, can post in the comments for dedicated feedback.
This Debt Settlement Guide includes:
An Expert Guide to Credit Card Debt Settlement
How and Why Banks Settle Credit Card Debt with You
Types of Accounts to Include in Your Debt Settlement Plan
Why Settling Credit Card Debt is Like a Race
How to Settle Credit Card Debt Quickly (you are here)
How to Talk to a Debt Collector
How to Negotiate Credit Card Debt Successfully Yourself
7 Largest Credit Card Banks and How They Settle Debt
Get Debt Settlement Letters and Agreements from Collectors
Paying Debt Collectors After You Negotiated a Settlement
I have 2 debts, #1 Bank of America Credit card currently listed as charge off last reported 6/13/2012. Balance is $15500. #2 is from One Main Financial balance is $8588 reported as charge off 11/30/2012.
I tried a debt settlement company and it worked for 2 smaller ones, but never got any further. No contact from bank of America ever, One Main still sends bills. Finishing a messy 3 year long divorce has put a financial strain on things. Hoping to clear it up soon. Please advise on how to proceed to get these cleared up and off my records.
Your debts with BofA and One Main are more than likely going to be resolved with third party debt collectors this long after your payments stopped. One Main sending bills regularly could mean they will be an exception.
How prepared are you with money to fund lump sum settlement offers?
I can handle some, but not that strong as of yet. I believe that the statute of limitations is coming up fast for the bank of America card. Governed by the state of issuance (in this case Delaware) the limit for collecting is 3 years. I can handle a payment to the One Main of about 35% relatively soon.
What state are you in? Are you confident your courts have ruled that the SOL of the state where the credit card is issued from will govern in the event of a collection suit?
35% is a good general target on both accounts. There are situations where better deals than that are a reasonable expectation.
You are looking to negotiate these yourself?
I’m in TN and from what I am reading/researching, the law that is used for collections is from the state of issuance. BofA comes from Delaware.
This is the name of the Article that I used:
State statutes of limitation for credit card debt
Read more: https://www.creditcards.com/credit-card-news/credit-card-state-statute-limitations-1282.php#ixzz3YdV8L2ab
Follow us: @CreditCardsCom on Twitter | CreditCards.com on Facebook
Compare credit cards here – CreditCards.com
From that information, the BofA will drop off in 2/3 months and I’ll just ride that out (if I am understand it correctly) I can do a 35% offer for the One Main.
Yes I will be doing it myself, but have helped family members negotiate after my settlement went belly up and have had success.
Be sure to check with an experienced debt defense attorney in TN about whether your courts judges regularly rule in favor of state of issuance SOL arguments. I like the reporting from creditcards.com, but they are not practicing in your courts in front of your judges. If you need contact info for attorneys that focus in this area of law in TN, let me know and I will email you some.
What did you mean by BofA dropping off in 2 to 3 months?
I do not expect you to run into any obstacles when negotiating your settlement with One Main. If you hit a snag, post an update.
I apologize, I should have said 2 to 3 months, but I rechecked, and my last payment was March 2012, so 3 years meant March 2015, but I will gladly take the information of lawyers that do the job here in TN.
Is there a better/more realistic target number to shoot for other than 35% with One Main? It went from $12000 to $8588.
I am wanting to make sure we are talking about the SOL to sue and not the SOL to remain on your credit reports. When you said “BofA will drop off” I wanted to make sure there was no credit reporting expectation.
I would start lower with One Main, say around 20 percent, but be prepared go higher, sometimes even more than 35% depending on how your account is viewed, and who is collecting.
Hi Michael
I am very glad to find your website. It is a very good source of information.
I recently retired from my job, am in a bad position with my credit card balances
I am trying to negotiate a debt settlement with Bank of Am ($14000) at this time.
I am 2 months late at this time and have had call from FIA card services.
i just returned their call, our first conversation. We got the point of an offer of a Hardship program, I turned that down, I didn’t want give them too much financial info, like my house payment amount and utility cost, I politely declined their offer. and asked about a settlement. I was told that was not an option at this time. i was asked what i could offer ,i told them about $4000.
My question to you is, If my only income is Social Security,can I be forced to deplete my 401k ?
I plan using what i have in my 401 to make a settlement when the time comes.
also if my plan is to negotiate a settlement, do I need to disclose my personal monthly expenses?
Thanks
Mike
You cannot be forced to deplete your 401k over this debt even if they sued you and got a judgment.
I am not a fan of disclosing your personal expenses. Of thousands of settlements I have done, or coached people through doing for themselves, I have responded to those types of questions mostly when the amount being targeted for settlement is way below the norm that typically would get approved. Think fixed income, no asset, or debilitating long term health issues.
FIA can be a bit of a bugger on some files, so post updates with your progress as you near the 150 day late mark.
Michael,
First of all, fantastic site and great information here.
I have two high balance US Bank accounts I am planning on trying to settle. A credit card for about $9k and a credit line at about $13k. I can barely afford to keep making minimum payments on them and the balances have hardly budged in years. I have had the accounts since about 2007 and I haven’t used either of them in several months. I intend to stop payments soon and negotiate a settlement within 4 to 5 months. What would be a realistic offer to US Bank for the settlements? Any other advice? Thanks.
I do not see too many credit card settlements with US Bank get done at the month 4 mark anymore. You will more than likely be settling for the optimal amount, and directly with the bank, after the account goes past 150 days late, but before charge off.
Settling the credit line directly with US bank could occur at the 4 month mark.
Juggling the two accounts with potentially different negotiation timelines is not all that complicated. Do you have any checking or savings accounts with US Bank? Any other loans with them? Are there other credit cards and loans that are going to remain current with payments that appear on your credit reports? What about other collections on your credit reports that will further substantiate you are going through a hardship?
Realistic settlement amounts with US Bank are still between 30 and 40 percent. How prepared will you be financially to take advantage of the settlements you negotiate at the 4 and 6 month marks?
Hi Michael,
Sorry, for some reason I never got the notification of your timely reply. I do not have any other accounts or loans with U.S. Bank. I do my banking with Chase and have two credit cards with them, as well as an AMEX card and a Barclay card. No auto loan (car is paid off) and I’ll be purchasing a condo soon in an effort to reduce my housing expense, as it will be actually be cheaper than renting (obviously to be done before attempting any settlements). My credit is actually pretty good, with too many cards with high balances being the biggest negative strike. I have a sizable debt to income ratio, but I’ve managed to keep everything current despite it being a struggle to do so. In fact, the DTI ratio has made it extremely difficult to get a home loan. I’m not sure if large DTI qualifies as a hardship or not. The majority of my income is from freelance work and it really picks up in the summer, so I’m confident I could be prepared to settle at 30, maybe 40 percent of those debts around the 150 day mark. I want to try to keep my other accounts current if possible, especially Chase since I bank there. Please let me know what you think is the best strategy for working through this, and thank you again for your time.
I would encourage you to talk with a specialist about settling your debt. Yours is not an average file where it is clear you hit a financial wall and all payments to unsecured creditors stopped. You are selectively settling, and that is not always going to go off without some challenges.
You can reach a settlement specialist at 800-939-8357.
Hi Michael,
I am trying to help my friend settle her debt. I was successful in settling my own debt back in 2010 – but I had a job and was able to make 3 lump sum payments with the original creditor.
She owes:
$4,900. with BofA
$3,800. with Walmart/Synchrony Bank
She has become disabled due to a back surgery from a degenerative spine issue (not injury) but does not receive disability payments of any kind and has been unable to work for over 6 months. She has run out of money to pay her two credit card payments. As of this month, she is current – she had been using her small savings but has run out. She is hoping to recover enough in the next few months to get another job. Her husband works and pays the mortgage, car payment, and food – and gives her $25. per week for necessities. He refused to pay “her” credit card payments which had been used over the past 12 years to pay medical prescriptions and co-pays for her daughter’s illness. She wanted to file for bankruptcy but her husband has no debt and told her she needs to figure out how to pay it because he is barely able to cover their household expenses. How can I help her? Should I try to settle her accounts at a lower percentage and let them go into collection status first? Trying to settle with the creditor first? Can she file for bankruptcy by herself (without her husband?). I could possibly give her a $2,000. of it out of my retirement.
Would it be ill-advised to get a 0% interest rate credit card to use to pay off a reduced settlement amount? Which I would rather pay than use my retirement.
Thank you,
Jamie
I am not a fan of taking out debt to pay settlements. It is a viable option with some files,but very few. You could accomplish the same thing by saving up and loaning your friend the settlement funds as you have them available.
Assume it will take 4k to settle both accounts. How long until you have the first 2k to settle one of the credit cards?
Yes, she can fie bankruptcy without her husband. But the household income, assets, and exemptions, are factored in whether he is filing or not. I would encourage her to talk about her filing separate of her husband with a local bankruptcy attorney.
Hello, Michael,
I studied your reports and advice to negotiate a settlement with Wells Fargo on 10/1 with the deadline of 10/31. I received the settlement letter, which includes “will be reported as a settled account” and “failure to execute … may result in your account being charged off,” on 10/10 and mailed the cashiers check the same day, which was delivered and posted on 10/14. I just learned that the credit report shows the account status as “C/O” with a note “Account paid in full; was a Charge-off”. The amount was also higher than the amount on the settlement letter due to a late charge they later added. When I called, they said it was charged off on 10/16, and the only thing I can do is to write the executive office to complain.
Qesution: Am I right to believe that C/O is worse than simple “Settled Account” ? If so, what specific action should I ask them to take in the letter to correct the situation?
Congratulations on settling your credit card with Wells Fargo. What percentage did you settle for?
There is very little, if any difference, with Wells Fargo reporting the charge off on your credit reports vs them reporting it settle with out the C/O reference. And I see little to gain by sending a letter to any executive office within the bank about settling just prior to charge off, or the fee that should not have been charged, but that was, as the matter is settled anyway.
Do you have a specific credit goal you are trying to accomplish in the next, say 6 to 12 months?
Do you have other derogatory items appearing on your credit reports beside this one?
Thank you, Michael.
The percentage was 35.726%. No, I don’t have any specific goal. No, there is no other derogatory items on the credit reports. However, I do believe it is a matter of principle (i.e., they did not honor the terms of agreement and charged the account off AFTER the agreement that was completely executed). I will write the executive office to request that they remove the “was Charge-off” and “C/O” status. Thank you!
Hi Michael,
Between my husband and myself we have 6 major credit cards.
Chase Slate $27,945 Charge off date of 10-31-14
Chase Amazon $9430 66 days past due
Capitol One-Union Plus MC $12637 current on pymnt
Capital One MC $5000 Current on pymnt
Capital One Visa $4200 Current on Pymnt
Capital One MC $2000 Current on Pymnt
My Husband & I are unemployeed. 4 years ago my husband was diagnosed with stage 4 cancer and is now in remission but still has many health issues due to the cancer that requires him to see a team of doctors regularly. I lost my job a year and a half ago trying to take care of my family. I also have been having health issues in the past year that has me still unemployeed. My husband gets SSA Disability and I do odd jobs to get some money. We have never been late on a payment of any kind until about 8 months ago. I have been robbing Peter to pay Paul, just to get by. I also have land that I receive Royalties from each month. The amount varies each month between $300-$500.
I contacted AlliedInterstate about my Chase accounts today. I was told they could reduce my debts with them by me paying 35% of my balance in 4 payments.
Chase Slate would be $9781 & Chase Amazon would be $3301= $13082
My husband does have a small amount of money in a vested retirement acct, around $9000 after federal is taken out.
I was wondering if I should cash out his retirement and pay the Chase slate amount off? But then I’m not sure how I would pay the Chase Amazon acct off. I was thinking that at least it wouldnt be charged off then.
I have also spoken to a debit validation company called US Enrollment Group that said I can pay off the whole $60000 with them for $18000 with 18 months to pay at $1000/month. What are your thoughts on this? Ive read that you dont like debt validation companies.
Im thinking that my options are limited with not a lot of cash flow and owning land that I receive a small royaly each month. I dont know a lot about Bankrupcy but I think I own to much property to file.
I have been reading your blog for a few months now & would really appreciate any advice you could give me.
Thank you so much for your time,
Tonya
oh and I live in Michigan!
If you settle the larger balance Chase account with Allied Interstate using the 4 payment option, would you be confident you could raise the other 3300 needed to settle the other Chase account over that many months?
If you intend to keep the Capital One debts current, are you bale to afford those minimums each month? What are the interest rates you are paying on those cards?
That 3600 to 5k extra income each year may prevent you from filing chapter 7 (at least without liquidating the asset and paying creditors, which I would not do). But I am not so sure that it would prevent you from filing chapter 13. I would talk to a bankruptcy attorney to learn more about that so you can compare costs, goals, time, and risks along side settling.
What I suspect you will learn is that liquidating the retirement account is the least costly thing to do set beside whatever repayment the chapter 13 trustee comes up with over 60 months. But I also see the chapter 13 providing legal cover from Capital One if you cannot afford to pay those accounts; must settle; and do so over an extended period of time because you save monthly for it.
As far as US Enrollment Group’s debt help program goes, are they a credit card debt validation program with some debt settlement thrown in? That is what it sounds like. What are the fees they charge you?
It is not that I do not like debt validation. It is a legal right, and an extremely useful tool to deal with debt collectors. But it has a place, and is not something to use with all debts, all the time, like it has come to be applied by some. That approach backfires, and ends up costing people more money and grief than would have otherwise been the case. So… if US Enrollment Group uses debt validation with all accounts, and with original creditors, I do not care for them already. And if they estimate your settlements at 18k, for roughly 60k of debt, with about half of that being credit card debt with Capital One, I would like that to be validated. And I am only be sarcastic because the word play was so obvious. If they have data they can show me that supports that settlement and success rate, folks who want to pay someone to settle credit card debt for them will benefit from third party confirmation.
The thing is, settling credit card debts with Capital One, before or after charge off, with a collection agency, collection attorney, or a debt buyers (CapOne is selling more credit card debts these days), and getting near the percentages needed to back the 18k claim, is just… not… happening…. Not to my knowledge.
You do have a unique opportunity to settle the Chase credit cards while current on the cards with CapOne. And your smaller Chase Amazon card being lumped in with the card about to charge off, even though you have only missed two billing cycles on it.
I know you have to do this quickly because of the charge off set for tomorrow. I will be standing by to see your reply post with answers on the cash flow questions. And it would not be a bad idea to get in touch with a bankruptcy professional for a consult today too.
Hi Michael-
I was a guarantor on a Wells Fargo business line of credit which I signed for 15 years ago. My brother was the primary loan holder and he claimed bankruptcy. I am trying to negotiate the $50,000 balance down and just settle this. They have been tough speaking with and I can’t get a sense for what they will take. They initially suggested they would accept 60% of the loan amount, but I suspect it’s less than that. I want to offer enough so that they don’t take legal action, however I don’t want to offer more than they would have accepted. What do you see Wells Fargo taking on such a loan. They know I have been unemployed for a year now however because I have perfect credit, they keep suggesting I take a loan to pay them back. I insist I can’t make loan payments without income.
Thank you!
Michele
My great case scenario with settling Wells Fargo on balances this high is 35%. It is not the normal settlement process. When Wells Fargo settles balances this large it tends to go up the food chain to a VP for approval.
What state are you in?
Hi Michael.
I have 55oo with wells fargo credit card
I have 4300 with chase credit card
I have 4300 with American Express.
I am a full time student and work part time. I’m wanting to take out student loans which I’ve never done before and pay off these credit cards, as what I make working part time just covers the bills now. I just got a check for 5k and want to charge off 2 of these cards if I can. What do you think?
Thanks,
Shane
Trading student loans that are typically not even discharged in chapter 7 bankruptcy, for credit card debts that can, is rarely a good idea in my book.
If that ship is sailed, 5k would get the Wells Fargo and Chase cards settled. You will need to add to this to settle the American Express card. How much more can you come up with in, say 6 months?
How long has it been since these accounts were last paid?
I could get a few more thousand in a couple months. I see what you are saying, but I don’t forsee ever needing to go into bankruptcy, and I don’t have hardly any assets anyways. My credit score is around 720 and once I graduate I should be able to pay the low interest of student loans fairly easily. Even with the job I have now if I went full time instead of part time.
Amex has been about 45 days, and about 35 days on the wells fargo and chase cards.
Your realistic settlement targets between 150 and 180 days late will be:
Chase 40% settlement with slight odds of negotiating for as low as 30. But Chase no longer goes that low with consistency (but they are with the 40-ish).
Bank of America settlements can range in the 30 to40 percent range. I still see occasional settlements with BofA that are a tad under the 30% mark, but those are now not always worth shooting for if the goal is settlement before charge off.
American Express settlement is likely going to be with an outside collection agency, as AMEX has never really maintained any commitment to building an in house recovery and collection unit for the long term. Settlements on AMEX accounts tend to not go below 50%. And even though you may be settling with a collection agency, you can still often do that prior to charge off, as AMEX may place your account with one after 90/120 days.
Your credit score is not going to remain 720 through any of this, but you can rebuild that.
I am considering doing a debt settlement on $120.000 of credit card debt with B of A and Citibank.
I have air mileage plans with two cards. Am I going to loose my miles and if yes, when?
I am not certain of the Citibank policy. Bank of America mileage plans that I know of with a couple of airlines were never lost, and remained usable.
The only air miles I know to have been forfeited for certain were the American Express miles accumulated with Continental Airlines.
There are a couple of pages here dedicated to settling with Bank of America, and a couple for Citibank too. Be sure to use the search box up top for more details and tips to deal with both banks.
How many accounts are the debts spread across? How many accounts will you be able to negotiate and fund the settlements for prior to the card hitting the collection pipeline? Are you late with payments already, and if so, by how many months?
I have about $25,000 in credit card debt, spread over 3 cards; 2 with BofA, one Discover. For the past 3 years I have been moving the debt from card to card, following the 0% offers. Over that time, I’ve probably paid @$1000 in transfer fees. It’s getting exhausting. My goal has been to keep my monthly payments low; and they’re aroung $375 now. I can’t possibly pay more monthly on them and stay current in my payments.
I’ve recently learned about settling debt, and was hopeful that I could possibly do this, taking a home equity to settle. But don’t have any missed payments (for years), and as I read more about setting, it seems that I’ll have to lapse in my payments to even consider this approach.
I’m not sure consolidation will work for me, as I’m currently paying 0%… any ‘low’ interest rate will be higher! Again, my goal is to keep my monthly payment low so I can keep paying my mortgage and keep a roof over me and my kids. I’m currently married (though separated), so could take a home equity with my husband, but in several months will be divorced and my financial situation will appear on paper as it actually is today.
Does it make sense to lapse in payment in an attempt to settle? Is it possible to settle with a lump sum from a home equity loan?
Thank you for sharing your expertise, I’m finding it very helpful and supportive.
You do have to be behind with payments in order to settle credit card debts. You are a good candidate for settlement if you cannot afford the minimum required payments on your credit cards (even with a zero interest rate), and can access a lump sum of money to fund the offers relatively quickly.
If you post the approximate balance of the Discover account I can give you a rough estimate of how much money you will need to settle.
This is good news, thank you!
I have about $10,000 on Discover, $15,000 over 2 BofA cards.
Which dept at the credit card companies would I want to contact about this? Is there a specific approach to take… Would I just approach them with an offer from my initial call?
Negotiating a settlement on all three credit cards can realistically be estimated at 11k (50% on the Discover and 40% on the BofA). Those deals are best negotiated between 150 and 180 days of delinquency.
For tips and suggestions to get from where you are now, to when your credit cards are settled and behind you, start reading the debt relief guide here: https://consumerrecoverynetwork.com/credit-card-debt-settlement-program/ – at the end of each article will be a link to continue reading. Read through all of those, and then read through all of the critical reports listed here: https://consumerrecoverynetwork.com/debt-relief-program-reports/
Post your questions and concerns in the comment sections along the way.
A bank has offered me a 50% settlement before they sell to a collection agency by August 23. I have let 2 other credit card companies write off
amounts/accounts. I am currently making payment on 2 other accounts. One is closed , one is active and will restart fresh after the next payment. On the one that is closed. They threatened to place a judgement. So I arraigned for the payoff payment plan. I think my credit is messed for 7 years already
because of the write offs and delinquencies.
Money is real right right now.
Should I settle for the 50% with the bank/card, or should I take my chances with them writing off and selling to a collection agency?
Your credit can bounce back mush sooner than 7 years once you resolve your accounts, and be smart with other accounts you have and/or new accounts you open. After all accounts are resolved, I see people approved for home loans, auto, etc., within 12 to 24 months.
If I knew the name of the bank I would be able to offer feedback about settling now vs later.
Fifth Third Bank. They state that after the 23rd, it’d be sold to a third party collection company.
I would try to settle it now if you can somehow swing it. But try to negotiate 10% more off of the 50% they have already said they would accept as settlement.
If your email address (only I can see that in the commenting system) is a tell tale of where you are located, Fifth Third has well established attorney collection networks they use. And just because the banks revery department employee said your account would be sold, does not mean it will. That is just one option they have. Fifth Third could also place the account with a collection agency on contingency, or place your account with an attorney for collection (with authorization to sue).
If you cannot swing the settlement, it just is what it is sometimes. You will have more opportunities to negotiate a settlement later, no matter who has the account.
Do you think they might accept a 3 -4 month payment plan on a settlement, or does a settlement mean that they will only take the lump sum by the date mentioned? If they would have any attorney sue. What is the worst case? The amount is under $1,000.
Michael.
Thank you so much for your help!
I settled with them for a few bucks less than they asked
and arraigned for two payments and a few extra days to pay.
Jeff
Nicely done!
have chase slate card and disney card,do these need to be settled seperatley..slate seems as though they will negotiate..disney says not elgible..14700 ballance on each card.
Who are you currently negotiating with on each account? How long ago did you make your last payments on these accounts? Were there large purchases or cash advances made on either card in the 12 months leading up to default of payments?
25000 credit card debt with chase-disney and chase slate..wife has had critical health issues.last 3 years..not behind on payments right now.but will not be able to make further payments.could get help from relatives to make a 40% percent lump settlement maybe alittle more not sure..
any suggestions how to go about it?
rodney – I saw the request for a consultation with a debt specialist you submitted. I sent that on to Steve who will be reaching out to you. You will get a whole lot more from that one on one consultation than from my comment reply, so I will reserve that feedback for any additional comments you post.
would like to get your opinion before i get into consultation,,,thanks
rodney – Settling with your original bank, Chase in this instance, is outlined in the debt debt relief guide published to this site. The tips and details for this stage of collection can be found starting with this article: https://consumerrecoverynetwork.com/credit-card-debt-settlement-program/.
I also highly recommend reading over the critical reports about settling debt that are all outlined here: https://consumerrecoverynetwork.com/debt-relief-program-reports/.
You can review specifics to settling with Chase covered here.
If by opinion, you are wondering if I think you can settle for 40%, yes, that is a realistic target. Lower may be possible depending on the depth of the medical hardship, if it is ongoing, and you look highly uncollectable on paper. Having said that,as I cover in some of those critical reports I link to above, not all accounts are primed for great settlements due to certain variables (account usage, how long ago opened), and creditor trends.
Michael,
I owe Bank of America about 30k and have never had a late payment. I recently came into some money and wondering if they will settle if I have never been late. Or should I just pay half of it and still work away on the min ?
Phil – If it were me,and I had the ability to pay the debts off, that is the way I would go. Are you confident you will be able to keep up with the lower minimum monthly payments to BofA if you pay down those large balances by half? Is your job secure , etc?
I guess, when you give an answer, it will all show up again. Now I posted again, they showed up once more. I’ll be waiting for your answer. Thanks.
mary – I am not seeing comments or questions other than the one I answered yesterday. I am sorry the sight is misbehaving (it happens). What browser and version are you using?
I have settled 3 credit card debts with BofA before they went to charge off. Settelemnt letter clearly stated that the accounts were going to be reported as “settled for less”. They reported 2 of the accounts as they promised but one was reported as Charge Off. can they do that? and what can I do about it. Calling them did not work. they said they can settle but still report as charge off even though they agreed differently.
Mary – I would not get hung up on the charge off reporting. The main thing is to make sure the balance is reported as zero owed. Bank of America can charge off, and settle your account. And both can show on your credit report, and are likely more commonly reported that way.
Thank you for your reply.
I just wanted to say thank you sincerely for the best consumer protection site I’ve ever seen. Nice work, much appreciated.
Thanks Shana. There are several debt and credit topics for the site that will go live in 2014. Subscribe to the RSS feed and you will get email updates on coming debt collection/debt settlement, credit rebuilding, and other articles.
Should you contact your creditors prior too missing payments letting them know you are in trouble?
There is no compelling reason to do so if missing your next payment is inevitable. Telegraphing you are unable to pay, before you do not pay, may trigger some creditors to talk to you about payment options, or referring you to a nonprofit consumer credit counseling hotline. You can also assume there will be a note or code placed in your file. If you do call, I would not suggest mentioning anything about negotiating a settlement. My experience is that the best time to discuss settlement with credit card lenders is either after they bring it up (which they will not this early), or as part of your calling in periodically, but after several months of missed payments.
Hello Michael, thank you so much for all the great information here. I’ve been researching extensively about how to go about settling our debt. We’re not late as of yet but we’re making a strategic plan to do so.
Since it’s mid August and we would be 30 days late next month, would the timing work out to get a good settlement deal at the end of Dec since it’s an end of quarter. And would it being the end of a year also work in our favor? We have 75k in debt but will work on 40K which is in my spouses name first. We’ll also be able to make lump sum settlements. Thank you.
Jen – If you are just now forced to miss payments, and you are targeting the best and earliest opportunities to settle direct with your credit card lenders, I would expect January of 2014 to be the first month for your settlements. You may have some credit cards that offer the best settlement savings as early as 3 to 4 months late, but that is not the norm.
End of month and end of year strategies to negotiate the best deal are more applicable when settling accounts after charge off, and when accounts are assigned out to collection agencies or sold off to debt buyers. Your original credit card lenders recovery policies have to be built around required accounting principles and the regulatory guidance they live under. This should not be viewed as a complication. It’s not. It actually lends to a predictable process and timeline that you can plan and be strategic around.
Some of the settlement deals you negotiate will buck right up against 180 days late, some a couple of weeks prior. I can offer more specific timelines if you post a reply with the credit cards you are dealing with.
I also have a credit card debts with wells fargo. So the best time to settle is on the 5th month? To whom should i do the bargaining on the 5th month late to the bank or to the collection agencies? How do i deal with the collection letters and calls? Thank u.
Is it hard to get a debt settlement letter from well fargo? What if they wont give any debt settlement letter? What should be done? Does this bank offer an earlier debt settlement of 3-4mos. Period or advisable to wait for the 5th month
amy – I cover how to/when to settle with your bank before charge off extensively. Start reading here, and continue reading through that section of the debt relief guides. There are reasons to be in contact with Wells before month 5. And there can be offers to settle that Wells Fargo may make early, that are as good as they would be in month 5, but probably not a good idea to expect that they will.
Read through the stage one settlement sections I linked to above and post questions about what is covered on each page along the way. That will find you the best prepared.
Dear Michael:
Hello, I want to settle some credit card debts for my friend and I do not want to impersonate him,please tell me what authorization form (the name of it ) I need and where should I get a sample.so ,I can call the banks on behalf of my friend legaly. Also I need a legal contract to write with my friend to charge him a percentage .what/where do I get that? what is that called?
I tried to google it but not much luck.
Thanks
mel – Most firms offering to settle credit card debts professionally use a limited power of attorney. The forms are specialized to the industry. I have always used a simplified LOA (Letter of Authorization), outlining the ability to give and receive information for a specific purpose. A legal forms site should have a generic limited power of attorney you can edit to the purpose.
You can always have your friend on the phone to provide verbal authorization when you are ready to negotiate the deal, and the friend has the money to fund any agreement.
As far as the legal contract to charge your friend a fee, that is a loaded question. Charging a fee for settling debt varies from state to state.