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.
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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 debts. 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.
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 with your lenders instead of waiting for your accounts to get sent out to a collection agency, or sold off to a debt collector.
Benefits to settling credit card debt fast.
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 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.
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.
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
Get a Settlement Estimate
If you’ve fallen behind on your payments, then we can help you settle your debts with your creditor directly through our platform.
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3 cards with chase total 27,000. Reasons, Divorce, ex husband used my cards unbeknownst to me he was court ordered to give me 5,000 towards it which He did. I had back surgery can’t work. Home foreclosed on and living with family until I get on my feet. I offered chase 8,000. I explained all of this and they said no deal. I am currently charged off with them in collections. What can I do?
We can help you get this resolved. You can click the get debt help tab in the upper right corner of the page and create your user profile (secure and private), and when you get to the part where it says schedule to talk with an expert, bring up that calendar and pick the day and time you would like for me to call you to go over this.
So interesting reading. I have some debt that I am current with Boa Card, and Wells Fargo Card, O Interest card for 14 months I am managing this debt okay. I opened up a Chase Card for my son because he had bad credit and needed a card to travel for his Job. Because of his bad credit I had to get the card and have him on the card as an authorized user. Well he maxed it out on 3 months and I closed the account I never used the card at all. He is now working again, and will to help with this debt. Unfortunately they are charging me 25% plus interest on the card. The debt is $17,000 and I’m 45 days late on paying the full monthly amount . I though if we did a settled term debt and offered $300 or $400 per month for a year that they might bite at it. I have had good credit all my life pay all my bills auto deduct , however my credit slipped from 730 to 650 since i opened up this chase card. There’s lots of scammer’s out there that charge an arm and a leg. Any advise would be great I’m trying to protect my credit score and get it back to 750 but feel if i don’t do something soon it will be to late. Chase told me to pay $200 per month for 4 months and then they would look at a Hardship case, but i don’t think i want to go that route. Is there away to improve my credit ? and what are your fees
You would immediately want to catch this account up if your focus is all credit score. DO not let it fall another month behind.
If you are trying to settle the account, it will hurt your credit score more than it is already, and you will likely want to be several more months late if you are tryign to settle for the best savings.
We can help you with the settlement if you need it, and we charge nothing until we are done, and you pay the deal we get you. Your negotiation service fee is 15% of what you saved in the settlement.
Mr. Bovee;
I am a disabled veteran who can no longer afford to juggle all my debit from active duty. My income is VA Disability as well as social security, I believe in my state (Virginia) that means I am non garnishable. I was wondering if this is something I should bring up to the debt collectors to make them want to settle faster or cheaper.
It can be. I often want to outline the hardship scenario that caused the inability to pay then, and now. There are times when sharing with debt collectors that you are an informed consumer and know that they cannot collect from you, even if they got a judgment, is a good idea, and times where that is not going to result in anything different than if someone was not judgment proof.
Your ability to get the best settlement savings is often going to be more about who you are dealing with, that what you are dealing with.
Who are the creditors, balances, and length of delinquency on each account?
Mr. Bovee,
I have (3) “charge-off(s) as bad debt” showing on my credit reports. Ironically, enough they were all reported by Synchrony Bank (SB). The (3) accounts were originally (1) Lowes, (2) Amazon and (3) Home Depot, which I assume SB was the underlying original creditor. I have the money to pay them in FULL for all (3) accounts. My questions are:
1. How would I know if they have sold the debt yet?
2. Should I call SB and see if they will do a Pay-for-Delete (PFD)?
3. When calling in to SB do I ask to speak to a 1st line supervisor or would the 1st line even have the authority to make such an arrangement (PFD)?
4. If SB sold off the accounts already, is it too late at that point to have the original reported information removed or at least reduced to something less negative? (assuming I have paid the new debt holder either in-full or at a reduced amount).
You can call Synchrony and find out who they sold or placed your accounts with. They will tell you.
Synchrony will not do a pay for delete.
Talking to a supervisor about pay for delete is a wast of time.
Once the debt is sold you may have an additional credit report item to contend with, and there will be nothing you can do about Synchrony still.
Hi Michael,
1. My question is how will I know if my accounts are in the 2nd stage — meaning, I have received a letter from a Collection Agency that indicates that the account has been placed with them by the original creditor, in this case Bank of America. Does that mean that BOA still holds the debt and that this Agency (Gatestone) did not legally purchase the debt from BOA? I have some other accounts in which I have just received similar letters.
2. I had placed my account with a 3rd party debt settlement company. They did settle one account with Barclays. The original amount was $9,000. They settled it for $4,447; however, I paid them 22% on the $9,000 for a service fee. I have decided that this is too much money to pay them and that I would rather try to settle these accounts on my own. What is your advice regarding Debt Settlement Companies.
3. FYI, I live in Texas
Thanks for your help!
Yes, BofA still owns the debt they sent to Gatestone. Check out this video about negotiating your settlements with Gatestone.
I typically suggest people inclined to settle debt on their own to try the DIY approach. Be sure to read that article link. It is one piece of a 10 part series about settling debt yourself. Some people should get help, but I have helped tens of thousands with DIY negotiations.
When it comes to settling with BofA, if you are concerned about your ability to negotiate a 20 to 30 percent deal, call in for a consult, or fill in the talk to Michael box in the right column, and I will email you to set up a call.
Thank for this series! Im am so thankful I found CRN.
I have a question about what state laws apply to me? We have moved several times due to my husbands career. My three accounts from US Bank that are going into charge off this month were opened on CO. I stopped paying in KS, and now we are living in IA with a chance we could move again way before this debt is resolved.
What state do the take the debt collection laws from? Also what if we live in IA but have asset in CO (house)? Or if the statute of limitations “expires” because of a move to a new state?
You have plenty of moving pieces Jessica. Typically the the state you live in at the time a creditor is looking to sue you will apply. But that can change based on certain things too.
Before you focus too much on the SOL and where you can be sued, think about what you will do to resolve the debts going forward. What are the balances on the 3 accounts with US Bank? What are your goals for resolving them?
Hi Michael, I just had a simple question. If I settle on my credit card after is pay off whats happens to that Line of Credit that I had with the back. Do I still have it or they take it out of my hands becase I settle with them insted of paying it all off?
I do not understand what you are asking. Please post a reply and rephrase your question or concern.
What happen to the line of credit when you settle with the bank to pay of that credit card. Does the bank take that away, can you keep using it after is paid or what.?
I am not sure what you are asking here, but any account you stop paying in order to settle is typically closed before you are able to negotiate your settlement. In the instances where that was not the case, the settlement closes the account.
If you have an LOC with the same bank you have a credit card with, and you are settling the credit card, it is fairly common to have the other open and current account closed.
Hi Michael,
Sooo glad I found your site. Hoping you can advise me on best route to take….trying desperately to clean up my credit and ordered annual reports. Wells Fargo is one I would like to tackle ASAP. My credit limit is 2000 closing balance is 2559. My date of last payment is 10/2014 but it hasn’t showed up as a collection account yet. Would like to prevent this and get this account in a better standing than its current “charged off” status. Was going to write them a letter and try to settle but watched your video and it says not to write them, should I call them instead? What is my best course of action to remedy this credit card debt? Btw I live in Florida.
Thanks so much in advance
I would call to negotiate the settlement with Wells Fargo, but get the agreement from them in writing before you pay it. They can mail or fax a settlement letter to you.
Located in California and Losing my job, so will no longer be able to pay credit cards. Would like to settle. I can probably keep making payments on the 2 smaller accounts if that will be less harmful to my credit, Is it best to just stop making payments on the Discover, or on all 3? Also, do I bring up the topic of settlement after a few months, or will they reach out to me? I have family willing top lend me some money to get rid of the debt
Discover:$ 14,000
Citi: $4,900
B of A: $2,500
If I had no source of income I would likely want to resolve all 3 accounts.
How long have you had the Discover card? Is any of the balance owed from a balance transfer or cash advance in the last 24 months?
The topic of settling is something to bring up in month 5 of non payment, and typically not before. If they bring it up, you still want to wait until the time to settle is right.
Thanks for the quick response! I have had the Discover since 2009. Just a slow build up and not making large enough payments. The B of A balance is a transfer from the Discover on a promo interest rate. No balance transfers or exceptionally large purchases. Citi card member since 2012, and the B of A since 2007.
Do you want help getting the settlements, or are you a DIY-er all the way?
If you want help call in for a consult at 800-939-8357, ext 2.
If you are a DIY-er, be sure to read through this entire article series (all of the links at the bottom of the post above). Ask questions in the comments along the way.
Live in texas..
Have 6300 bank of America cc
12300 unsecured loan one main fin.
27000 unsecured best egg loan
30000 unsecured lending club loan
Can not afford these anymore…
Am 2 months late on all…
what order should I try to negotiate and when
.
Assume you need 28k to settle them all. How soon can you raise that money? I can better answer your questions when I understand the resources you have to work with and when.
so i have given info to fresh start legal, us enrollment group and freedom debt relief. i have gotten varying figures and payoff times. some cards they say can be included and some that cannot. freedom debt relief rep tells me i need to include every card i have but save maybe one with an under 500 balance and to try to keep out others which i have been current on is of no value because all the ones i put in a program will see that i am still paying on others and won’t settle if they see i can still pay on others. however, the other companies i have spoken to have not told me that i need to do that. for example, say i have two cards with two stores but its the same main bank that owns both cards and i am current on the one but not on the other, whats the best thing to do there. i just cannot catch up on all of them but i would like to catch up on as many as i can.
There are opportunities to keep cards current with minimum payments while you settle others. But it can make a difference which ones you try that with.
I think we are scheduled for a consult a little later today so I will get more into the details then.
can i get your opinion on using debt settlement companies like us enrollment group? they said they are accredited with bbb but its prime solutions that is with BBB not us enrollment group. they offered a three year payment program. i have more info but id rather discuss is more privately. thank u. about 3 months behind on certain cards but totally current on others.
They are already lost me if I found they told me something that was not true. But the bigger problem with most debt settlement companies are the fees they charge.
Hi. Hoping you can help. Here are our debts:
Husband:
Fifth Third–21,366
Capital One–21000
USBank–4000
Myself:
PNC–9,000
PNC-4500
Chase–4000
Figures are rough estimates. Making minimum payments on all except Fifth Third. It’s roughly 150 days past due. We had a life event and had to live off our credit cards. Mortgage is also through Fifth Third. Fifth Third will only take 10000 off for a settlement. Offered 6500 which is 30% settlement. Not quite sure how to make even the minimum payments to pay all the basics we need (house, food, gas for work, etc.). Thanks in advance.
Call me for a consult Marie. I can dig into the details and make some suggestions based on some answer to my questions. You can reach me at 800-939-8357, ext 2. You can also submit the “talk to Michael” form to the right on this page.
Hi Michael,
I have 2 credit cards that I want to settle and I am so happy I came across your website. I have BOA credit card and citi card. I have not been late yet on those cards and please advice how many month do I have to wait to settle directly with them? Also can you advise me approximately at what amount can I negotiate if I have 12,000 BOA and 10,000 citi. Thank you so much.
You will typically find the best settlement outcomes with major credit card lenders (like Citi and BofA) when you are negotiating when the banks consider you more 5 months late.
Things have changed and/or changing as it relates to when to settle with the bank, or letting it go to an outside agency in order to get a much better settlement.
I would encourage you to call in for a consult about your particular situation. You can reach me at 800-939-8357, extension 2 rings to me. I will ask you some collectability questions (how debt collectors would view you), and suggest where you can land with a settlement range of between 20 and 40 percent of those balances.
Hi Michael,
I have a very complicated and hopefully interesting story for you! I would LOVE your advice if you have the patience to read this!
I moved out of the country to do some paid volunteer work. I Ignored my credit cards and opened a foreign bank account and closed my BOA account. I came into some money and wanted to start paying, so I tried to open a new bank account but was declined by chexsys.
Shortly after, I was informed that my previous company records had been compromised and that they had purchased lifelock for everyone to freeze credit, which we did. I figured a security freeze would buy me time and that no one could report negative things to my file.
Before closing my account, my ex-finance setup 2 installment loan accounts connected via ACH to my now closed BOA right before we moved. We received and used the money, but I was unaware it would be ACH and re-open my BOA account.
When I got back to the US I hired a “Credit repair company”. I sent them the letter from our previous CFO (about lifelock and breach) with my SSN card and license for proof of identity as they requested. The company did get some old collections accounts off ($200-$300) but with Avant, I got a letter saying if there was identity theft I needed to fill out an Affidavit and get a police report and the FBI were going to investigate or something along those lines. I cancelled the service immediately after getting this letter.
Now here is the damage. A credit score around 500, no bank account except a savings limited to 6 withdrawals.
Accounts:
Avant INC- Original Balance 5k, now at 7k. Account opened over a year ago, a payment was never made to them, due to BOA account closed. The account is STILL marked open and reporting negative payments each month. (is it because of the letter the repair company sent?)
Netcredit – Seriously past due date / assigned to attorney, collection agency, or credit
grantor’s internal collection department
Barclays: $3200, charged off, I opened in 2005, and always paid it on time before.
BOA: $789 charge off, account opened 2004, Charged off middle of last year
Discover: opened 2010, $2900 balance. Charged off end of last year.
Capital one- $1400 charged off Deccember last year
Capital one- $2260 opened 2011, was business account, business went under. C/O last year
Credit One- Charge off, Sold to MIDLAND Nov, 2015. Balance- $1000. It was $600 before fees
Midland- $1000, bought from credit one. Opened November 2015
Verizon, and Six flags accounts- identity theft accounts, still on my report.
I have been added to several accounts as authorized users, and have a secured credit card now, so my debt to credit ratio actually looks good now.
I know this is a ton, but what is your advice? I don’t even know where to begin. I feel like all these companies are going to sue me soon, and i’m frustrated I trusted someone else with my financials (she was an accountant). I really don’t know what to do.
Thanks!!!
What state do you live in now?
When did you first leave the country?
Hi Michael,
I’ve been banking with Wells Fargo since 1983 and now the only account I have with them is a line of credit ($25,000). I moved back to Canada back in 2006 and have lived here since. Due to financial difficulty, I stop making payment since Nov. 16, 2015. Until now, I’ve already missed 5 payments and my line of credit is $423.01 over the limit and $1,659 past due. I could come up with $ 8,000 to $9,000 to settle the account with WF. When would you recommend me to contact WF? Also, with what percentage to start with my offer? Thanks
Was this originally a Business LOC with Wells Fargo, or a personal account?
It’s a personal line of Credit. By the way, I just found out that on Dec 31, 2015 WF had posted a payment by me recorded as “Phone Payment VOM #……..”) which I have never made. Thus there are only 3 non-payments shown on my account now instead of 5. Since I don’t know how my payment history really shown on WF book, should I be using Jan. 2016 as my first non-payment month instead of Nov. 2015. Please advise. Thanks!
I would go with the original date you stopped payments, but only if it matters to you how quickly you are trying to settle with them. You will likely be better off waiting for the account to be 7 months or more delinquent before you are able to negotiate a deal for less than 50%. It could be longer than that before they relent and accept something on the order to 30 to 35 percent.
It’s a process with Wells Fargo.
I’ll take your advice to wait another few months before contacting WF. for the settlement. Thanks!
Can collectors freeze my bank accounts if they belong to the same institution? Meaning, if my cc debt that I’m not paying is with BOA and my checking and savings accounts are also with BOA, is there a danger of the accounts being frozen?
Not necessarily frozen like can happen when there is a court judgment, but there are risks when your credit card, and other account products with the same bank, contain cross collateral verbiage. This is quite common with credit unions.
If it were me, I would not want a bank I am going to try to settle with, or who I stopped paying, to have visibility into my checking and savings.
How much is the balance owed on the BofA credit card?
How long ago did your payments stop?
Hi Michael!
I need some advice, I have a credit card that was from 7 years ago, it’s said closed on my credit report, now they are calling me saying that they want to settle or go to court!! And they don’t want payment and will not take less then 70% , and if I were to be served and gone to court I will also have to pay legal fee, court cost ….what should I do ? Originally it’s was only 300$ now it’s 1300$ because of interest
What state are you in?
What is the name of the collection agency calling?
When is it you last made any payment on the account?
It could be a debt collection scam.
Hello Michael,
I am a soldier returning from Afghanistan who has been in a medical unit stateside since my return. Last night I received a call from Wells Fargo stating that my credit card had a balance of $188.54 and that the account was charged off. I told them that I did not receive any correspondence from them (besides the current call). It turned out that they did not have my correct address on file. They had my old address in their system. I explained to them that I submitted a change of address card to the post office and was receiving all other mail with no problems. I also asked why this was the first call I received. They said they had tried to call, but was unable to reach me, and did not leave a message. They stated the last payment was received in Sept 2015 for $50 and they sent a demand letter to me on Feb 1st 2016 for payment. I was under the impression that this card had been paid off in full, until they mentioned a purchase that I had made for pain controll after my operation in August.
My question: 1. Why did they charge off the account prior to the GAAP customary 180 days. 2. They said they sent a demand letter on the 1st of Feb. 2016, which was 8 days ago, and still charged off the account before receiving a reply. 3. I offered to pay the entire balance today if they could remove the C/O from my credit report, but they declined.
Michael, is there anyway I would save my credit score from their “less than fair” practices? Should I write a letter to the manager of their recovery department? Should I retain the services of an attorney to work on my behalf? How will that C/O for such a small amount ($188,.54) be evaluated? I’ve worked very hard for my credit score and don’t want it tarnished due to an oversight.
Please help; what should I do?
P.S. I closed a $42K checking account out that I had with them prior to deploying due to less than desirable business practices…they were not happy about that at all and I feel like this is payback of some sort from Wells Fargo.
1. Charge off can happen before 180 days nonpayment. It is just not common. Why Wells Fargo would have done that in this instance I cannot say. When is it they are saying you were first considered 30 days late?
2. A payment demand letter is a fancy term for a collection notice. Wells Fargo will send out collection letters at all stages of the typical collection cycle. It does not matter whether they charged off the account yet or not. This is not something to get hung up on.
I would first look to write the executive unit at Wells Fargo. I would outline what happened with the account you thought paid. You are a military member and being treated in a medical unit since returning home. You would like to pay your balance and are requesting a good will gesture from Wells that they remove charge off from your credit reports. Send your request in writing and keep a copy of it. See what they respond with and let me know.
Be sure to point out that you had no idea of a balance owed.
Make sure to point out if you were deployed during any of the time period at issue.
I am very interested in how they respond to you.
As far as a paid collection that small on your credit reports… it may drop your score for a little bit, but it will bounce back, and I find it unlikely that it would prevent you from reaching a myriad of different financial goals.
Thank you very much for the advice Michael. I did write the letter and I emailed it (via pdf document) to the supervisor representative. She, in turned forwarded it to the manager of the recovery department. She also said to give him a couple of days to review the letter and to make a decision. Finally, she said if I hadn’t heard from them by Monday, to give them a callback.
Thank you again for all the help and I’ll keep my fingers crossed. I’ll let you know what their decision is when I find out next week.
Hi Michael,
My BF has Wells credit card balance of $4,800. For the most part he pays min payment each month. Can he still make an offer to pay off the balance? Or does he need stop paying and be late a few months?? He plans to close the account.
Thank you and look forward to hearing from you.
Kelly
You cannot typically settle with Wells Fargo until your account has gone unpaid for several months. That applies to virtually all credit cards.
Michael,
Love your site! I need your assistance. I have 4k with citi, 2k with visa, 9k with another visa, 18k with another visa, 32k with lending club and 10k with capital one. A lot of debt I can’t pay now. When is best time to negotiate with each and what have you seen percentage wise they agree to? When should I start trying to negotiate with each bank and what percentage of debt?
Thanks!!
The way I rank the top 7 credit card banks for settlements has not changed much. Capital One and Citibank settlements are covered there.
You did not name the banks your other three Visa accounts are with. Post those names and I can offer more feedback.
Lending Club is selling debts now, so you will likely be settling with a debt buyer on this one. The last one I saw went for 40%.
It is sometimes better to settle with the collection agencies your other credit cards may land with.
I would suggest you call in for quick consult about timing all of your settlements if you have the ability to do that, or prioritizing them if you don’t. You can reach me through the hot line, 800-939-89357, option 2 rings to me.
Michael;
Hi there..remember me? Well, I just want to thank you for your information and your support in my attempt to settle with WF on that $39,647 long owed balance of my business equity line. All went exactly as you suggested it would.
I just settled it for $20,000. !!! The process was quick and went smoothly.
wow..I made almost 20k today.
By the way, I’m in Brazil and its beautiful here. Be home in late March.
Was able to conclude business from here.
John Lipka
Here is our debt:
Citibank:$10,095.61 Late as of 11/07/15, Chase: $11,181.30 Late by 3 mo. Chase: 559.02 Current, Paypal:706.59-Current.
Our only income right now is Social Security. I’m on disability and my husband on retirement. We are getting $1581.00 a month and an additional amount that we’re able to use for food purchases as seniors. He’s trying to get work going, but we’ve recently relocated and it’s slow going. Two years ago we sold our home thinking we were moving somewhere else and that fell through. We left his steady income (self-employed) and began an “adventure” but it drained us financially, so here we are.
We have consulted with a bankruptcy lawyer and know what that entails. I’ve also talked with a few debt-relief companies and know what they’re about. I know that I don’t want to go that route. (Can’t afford to!) Also a credit counseling person and it was going to be a good 4 years of $500+ payments after they helped reduce them through the creditors. I’m trying to find the best solution for our situation. My husband is really reluctant to file Ch.7 and keeps thinking, “I’d like to just make enough money to pay them off…..” But, we can’t just wait for that to happen in case it doesn’t happen. Would you please offer a suggestion. I appreciate reading these comments/questions and your replies so much. It’s reassuring to know my problem is such an itty-bitty one by comparison to some! However, it’s big to me because of my low income right now! Yikes! Thank you so much for what you have to offer! P.S. I wrote one time several weeks ago and never received an answer…..
Thanks for writing in again Wendy. I am not sure what happened with your last comment, but the site has glitches from time to time.
If I base my feedback on the details you shared about each credit card balance and your current income there is nothing else to focus on but chapter 7 bankruptcy. I would encourage you and your husband to read my article about looking for a bankruptcy attorney. If you learn something about chapter 7 that will prevent you from taking that direction, whether for right now, or at all, I can then offer some detailed feedback about how to best view your debt settlement options.
There is more information I would like to get from you about your situation in order to offer actionable feedback. You are welcome to call me for a consult at 800-939-8357, option 2 rings to me.
We have been offered a $6900 settlement offer on $22k account. I have saved some and in about 60 days have the ability to pay off more than the offer. I have read where some settlements allow the credit reporting to be less damaging. Is it possible to reach a higher settlement with less damaging reporting?
Paying more in a settlement is not going to yield a better credit reporting result. I would ignore any tips from whoever wrote what you read.
How long ago was it you last paid anyone on the account you are settling?
We spoke on the phone today, and thank you so much for all of your help and for being so available.
I have 6 cards I’m trying to settle.
My retail business closed early this year, virtually ending my income stream.
I own a home in a high value zip code in coastal California, but my house is very underwater and I’m about half way through a 6 month hardship program with my Wells Fargo first and second mortgages.
On public records I probably look very collectible, since there are about 30 free and clear properties in my name, even though they are very all low value properties with unusual problems. These properties are in my name, but only because an investor partner put up the money to acquire them for re-sale, and I owe him for the cost of the properties, and that indebtedness is not on paper, nor is the additional $50k I owe my business partner for other loans he made to me.
I also have the former retail business which closed earlier this year where I owe back taxes of $20k to the State and another $20k to my partner on that business, again these debts probably are not on my credit report, even though the State levied my bank account earlier this year, but there was almost no money in the account.
My partner in the properties business is willing to fund my settlement of the credit cards to avoid entangling the properties, and I will pay him back later as they sell.
I basically have no cash and barely enough income to buy food and gas, but have these assets in my name, so BK is off the table.
I have 3 of my 6 cards cards with Wells Fargo:
Business credit card $10k
Personal card $10k
Wells Fargo Financial $1,700
Also my home mortgages are with wells fargo and my checking accounts, and merchant services for what sales I still can make in the retail business are all also with WF.
When I called WF about settling the business $10k, they offered $4k and they said that I was almost a year behind, even though my records show I’m only 5 months behind.
The pers WF $10k was given to Collection at Law.
I called them and offered $1,000, they came back with a $7k counter offer.
I countered at $1200 and they countered at $7k again and said that was all they would do.
A week later I offered $2000, and they came back with the same $7k.
I told them that the same creditor WF had offered to settle another card of mine with almost the same balance owed, for only $4k, why were they at $7k firm? No answer to that.
By the way, it has been very easy to work with Collection at Law. Once I verified from Wells Fargo that they in fact had hired Collection at Law, and that WF had given them my file, including my social security number, things went better, as Collection at Law would not speak with me unless I confirmed the last 4 of my social, which I didn’t feel comfortable doing, at least not until WF confirmed to me that WF had hired them and that Collection at Law already had my SS number.
Once I was willing to confirm my last 4 of my social with them, they were cordial and easy to work with. I simply tell them an offer, and they say they will present it to WF and for me to call back in a few days to ask what the reply was. No stress, no arguing, polite, matter of fact brief calls.
My question at this point is do I make another offer of like $5k or $6k? or just accept their $7k firm?
You may recall from our conversation that I didn’t want to get sued and end up owing the full balance plus attorneys fees and what not, instead of accepting a $3k discount from the $10k balance.
It was good to talk with you about all of your accounts earlier today.
If it were me, I would take another swing at getting the personal account with Wells Fargo reduced to a better settlement. Something on the order of 50% would be my target in the final push to settle.
Can you tell me how long the Collection at Law office has had your Wells Fargo account for collection?
I have a Note with the PA State Employees Credit Union that defaulted and has been charged off. The Note for a Home Equity Loan was secured by a Mortgage that they have not foreclosed on, I suspect because the value is not in the property. I have not made payments since July 2014 and the not was charged off May 2015. I have been a member of PSECU for over 25 years, so I do have several other loans with them. I had not been able to make payments because I had several unoccupied units and had to use all available money for property repairs. I made several lump sum payments since June and am now current. I called and spoke to the collections department and they said $8k would make my charged off loan current. I authorized her to take $1,500 from an external account, which was their max for phone transfers and to take the balance that currently was in my PSECU account. Both totaled to about $4k. I told her I would transfer in another $4k, the balance, via and external account. PSECU declined to receive the $4k electronic transfer and the next day, I received notice of a lawsuit from their attorney, demanding I respond to the notice to defend or have a default judgement levied against me. My father, who is an attorney, is responding to the notice to defend. When I go online (today), it looks like my account was reinstated and shows the next payment due as 9/1/15. Prior to this, when I looked at my account, the loan in question was removed. I’m not sure if I should make the next monthly payment of $533 as normal or call PSECU back and try to settle with them. The total amount of the loan is $22k.
If you were able to settle with your bank for half of the remaining balance owed, how long would it take for you to put the money together?
I could pay easily within six months. One, if I had to.
If you are motivated to settle the debt, and if your father is up to filing a general denial, but then circling back to see about negotiating a lumps sum payoff, I would take that track to resolve the debt.
I am a big fan of settling in a single lump sum whenever possible. Stretching out the payments can often mean less of a savings, and there is the potential for something to go wrong and the deal be impacted months down the road.
I currently own my own property and have decent equity. However all my businesses went bad in the past 3 years and I have over $500,000 in pass through losses from my K-1 (tax returns).
I owe well over $180k in credit cards from personal to business. Some are 5 months overdue and some are still current as of now. I own a couple investment properties under my Partnership, can my properties be a target of potential lien if I don’t settle with them quickly?
It will be hard to find resources right at this minute. Will selling my personal property right now be wise to cash out the equity for settlement?
I highly recommend you call in for a consult. When you have this much going on it is important to be as strategic as possible to get the most savings from settlements, and to both time and target the right accounts to avoid lawsuit risks as much as possible.
You can reach me at 800-939-8357, choose option 2.
I have a Card from Bank of America, however, its an AMEX and not a VISA or MC.
It’s currently about 160 days overdue. Do I call BoA and negotiate this, or
is this part of AMEX now? What is the realistic percentage for this (40% or lower)?
I am from TX and balance is about $25,000.
You can negotiate the settlement with Band of America still.
The realistic targets for settling with Bank of America are 40% for the most part, but I am seeing accounts get settled for half of that even when done correctly. Do you want help with this?
Hi Michael,
I’ll about $1300 on a Dillards credit card currently held by Wells Fargo. I recently lost my job and have a fairly significant physical disability, I am currently receiving unemployment but that will end in early September and by 1 October I will be back on SSI. Wells Fargo is still holding my account I would like to settle this using my remaining unemployment benefits. If I were to settle how much would you offer Wells Fargo (lump sum) I don’t have much right now but am worried if I don’t settle I will eventually be sued. Although on disability having no assets I will probably be considered virtually judgment proof… Do you think they would see me? I’ve never been in this situation before… any advice would be helpful!
Settling unpaid debt with Wells Fargo before they send your account to outside collections is a good idea. I mostly target settlements with Wells Fargo at 35 to 40 percent.
Wells Fargo might not sue over the debt, but a debt buyer they may sell your account to could. If you have the means to negotiate and settle now in order to avoid later uncertainty, I usually recommend that.
Start your negotiations at something under 30 percent and leave yourself room to offer more as needed. Focus on relaying your limited resources and how that is not set to improve at all.
Michael,
We sold our declining business for only $3k, we have two business credit cards with balances of ~$5k and ~$32,500 from Wells Fargo Business. Now that the business is gone we have no way of covering the payments. These cards has a personal guarantee associated with them as well. I would like to negotiate the balance down as far as possible but my wife, who is a former WF employee, swears you can’t just go into the bank and say I want to pay less on my balance and they are happy to give you a 60% discount. We live in GA if that makes a difference. We haven’t missed a payment yet and there is about $400 in a business account and the monthly payments are something like $550.
Question 1) I was wondering, do I just walk into the local WF branch and start the negotiations or call a phone number and do this entirely over the phone?
Question 2) I ideally want to get a discounted settlement before charge off and just pay off the balance in one lump sum if that is preferable? I would be happy to save 40%, but your comments above talk about a 60+% discount with WF.
Question 3) Would I handle each account separately, or can they be combined in the negotiation?
Question 4) Do I have to threaten Bankruptcy to start this settlement option?
It seems unlikely to be able to get anyone to take me seriously without having a missed payment, but I want to preserve my credit score as much as possible.
Thanks for your advise!!
Joe
You typically cannot walk into a Wells Fargo bank branch and negotiate the settlement.
Calling the collections department at Wells Fargo to negotiate your settlement works best.
It is better to settle the debt with Wells directly, and often before charge off.
The amount you can target when negotiating will vary from one account to the next. It is best to call in and talk over your situation in order to firm up targets that would more than likely be realistic given your situation.
I would look to negotiate both of the Wells Fargo accounts at the same time.
You do not have to threaten bankruptcy, but you do have to show an inability to pay. And that means falling behind with payments.
There is really no way for you to settle your debts with Wells Fargo for any real savings and still keep today’s credit rating. Credit score damage from settling debts for less will vary from one file to the next. How long your credit takes to bounce back can vary too. What financing goals do you have in the next 12 to 24 months that could be impacted by a lower credit score?
It will good to be prepared to share quite a bit of financial information with Wells Fargo collection or recovery departments in order to get that larger balance settled for the best savings. I can talk to you more about that when you call in.
What timezone are you in?
Northern Idaho on pacific time. You can usually reach me as late as 10 pm eastern most weekdays. Leave a voice mail if I do not pick up so that I know to return the call.
Sorry typing this on my phone and accidentally hit the post button. I was trying to thank you for your help back at the end of October when I posted about my debt. I settled 2 cards with Chase both at 35%. I now am trying to settle 3 cards with capital one. Two are mine and other is my husbands. I have 2 days before write off with my two from capital one.
Capital One MC Balance $5,566.
Capital One Visa Balance $4,691.
(Had this visa since 1993)
Husbands is Union plus/Capital One $14,049.(150 days late)
My husbands acct they will settle at 50% right now. Told me to call back tomorrow and check with escalation dept to see if they can give me a better deal. But my cards are a totally different number and they won’t settle at all on the visa & only will go down to $4900 on the MC with 2 days before charge off. I don’t get why they are not willing to work at all with me. Have you heard of this and why wouldn’t they want too? I would appreciate any knowledge you might have on this. I’m just trying to get most of my major credit cards payed off so I can breath again.
I would settle the one they are offering 50% on right now. Capital One rarely goes below 50%. It is often not worth losing the 50% deal to find out if you are one of very few who might get lower.
I know it is weird, but it is common for Capital One to code one account for a not so great settlement deal, while offering the same person a half off deal on another account. In order to get to the bottom of what is happening with each account I would need to speak with you.
So to be safe should I stop ignoring their calls til the 120 to 150 day mark to try to settle? Do you think they would settle on a card that has been recently used. It was used before my last payment, as I did not charge anything after the minimum payment was paid which is now close to $400 on one of the credit cards.. Should I try to borrow money from a relative to continue to make the minimum payments for another month or so? There is only 2 BOA cc that I am not behind yet. My wife is totally behind on hers but I am not “yet.” BOA has totally jacked up my interest and now minimum payments almost doubled.
I am going to invite you to call me for a phone consult Daniel. You can reach me at 800-939-8357,then press option 2. If you get my voice mail be sure to leave a message and include that you and I have exchanged comments on the site.
You can also email the address you get these comment notifications from and let me know some times and a number that are good to reach you.
You have enough going on that I want to have a clear understanding of your situation, and provide feedback to your questions from there.
Michael,
I just want to clarify that the charge off of 180 days “starts” from the last payment you made to the credit card or your last payment due date that you did not make?
Thanks!
Generally speaking it starts from the date you are considered to have missed your first payment. Credit cards typically charge off at 180 days of non payment, while signature and personal loans charge off at 120.
You should also know that lenders can charge off your unpaid debt earlier than those time lines, but most do not.
Hi Michael,
I will be defaulting on my BOA CC real soon. My wife has already defaulted on hers also with BOA about 2 months ago. She owes about $23,000 and I owe about $25,000. We are also behind on an Amazon CC but it’s only about $200. A year ago my wife had to step down from a salary manager and took almost a $30,000 a year pay cut. She moved in her father and is now taking care of him so her available time was limited. Well now her job is cutting hours and it’s getting even worse. I have 2 questions for you if you can help.
Making minimum payments is getting us no where. Some of our minimum is up in the $300’s. So we basically is just throwing money away. We both want to settle with them maybe in the 30% at the highest 40% range but that’s all we can do. How soon should we initiate this settlement? Is that a good number and is it doable? Should we contact them or let them contact us? When should we look forward to this, the 5th month? Do we have to prove financial hardship to them?
The last thing is we use to have a checking and savings account with BOA but 4 months ago we closed it and open with Chase Bank. There were some fraudulent charges made on my wife’s debit card in another state that we didn’t feel comfortable keeping our money with BOA. I make online payments to BOA CC on their bill pay section that I have attached my Chase Checking account to do this. I tried to delete my Chase Checking account info on their bill pay website but the website stated that in order for me to delete a pay from account I have to add a new one. I only keep a couple hundred in my checking account and the majority is in my savings account with Chase. Should I worry that BOA has my Chase Checkign account info on their bill pay or not? Should I go ahead and change my checking account number with Chase bank just in case or just leave it since majority of money is in savings with Chase? But I do have overdraft protection so if they pull money from my Chase checking it will be covered from my Chase Savings, or could they even do that if I did not schedule a payment. Just afraid about this when I default.
Thanks in advance for your expertise!
The best timing of credit card settlements done directly with your bank will often be when you are between 150 and 180 days late. You are too early to have any serious discussion or negotiation with BofA.
The amount you are targeting in your negotiations, 40-ish percent, is realistic and workable. There are opportunities to do much better if the conditions are right, and you can reach me for a consult to discuss those by submitting this form.
When you are at the optimum time to negotiate the lump sum payoff it will not really matter who brings up the subject of settling.
How you cover the details of your hardships that caused the inability to pay will matter when it comes time to getting the settlement deal approved. Privinding documentation is not a common requirement, but it can come up when people make missteps.
I would personally be okay with calling Bank of America and notifying them of the need to stop the authorized payments. I would write down the number I called, the persons I spoke with (first last names and extensions), and would note the date and time of those calls. If anything happened with my account after that I would file complaints with the CFPB.
That is something I would be personally okay with, but that may not be something you are good with. If you are concerned about your Chase checking at all, set up the different account. The savings account should not be a problem.
Michael,
Concerning the Chase Checking account that is listed under BOA bill pay to pay the credit cards, that is something that can only come out when “I” schedule the payments for a particular date. I was afraid of them by having my Chase bank information that they can go into it and take money out without me scheduling a payment, They are not suppose to take anything out unless I scheduled the payments. It’s note auto debited. Another reason why I ask is because my monthly utilities, mortgage, etc is auto debited from my Chase bank and changing my account number will be a headache trying to change everything again. I was just curious if they can go into my Chase bank and debit amounts out without my knowledge when I become late. Thanks!
They do need permission to debit. I have learned to look at any of that as better to be safe that sorry, which is why I would call the bank and take notes like I suggested. It just helps to avoid any later headache should an error occur.
Done correctly, it is a call that I would coach being made with a side benefit of setting yourself up for better settlements with BofA down the road (depending on individual factors).
I know a charge off typically starts 180 days of first missed payment. So that starts the first day of your last minimum payment due date that you do not pay? Do they usually send you a letter letting you know that your account is about to be charged off? Also on the settlement, do they usually settle on the principle balance without the late fees plus interest?
You can sometimes make a less than minimum due payment prior to charge off, but after having already missed payments, that will prolong the charge off. Some credit card banks will send you a letter about charge off, or mention it on the phone to you when your account is about to charge off.
You can call and ask the bank when your account will charge off. Most will provide you with a specific date.
It is best to assume your settlements are going to be based off of the balance due at the time you are negotiating, and that means the balance that is inflated with fees and interest. There are exceptions to this though.
Hello Mike!,
‘ was wondering how to negotiate my current debt ( approximately 10K ) with Discover Card ~ 6K and
5/3 Bank approx. 4K I would like to and can afford about 7k to ELIMINATE these. How should I proceed, Discover Card about 90 days late and 5/3 Bank about 30 days late.
Thank you in advance!
L.P.W.
Start reviewing my article series about how to time your negotiations on credit card debt directly with your bank.
Based on your being only 1 and 3 months late on those two credit cards, you would generally be considered to early in any effort to settle just yet. Read through the article series I linked to above by moving to the next segment I link to at the bottom of each piece. Post your questions and concerns along the way.
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.