Settling each of your credit card debts successfully, and for the best possible savings results, follows a simple formula. The formula is 2 parts math and 1 part timing. The best debt settlement deal available to you with each of your debts can be a moving target when the math (the money you have available to settle) moves your timing. You will sometimes have to adjust your expectations for the deals you can get based on how long it’s been since the credit card was paid; whether your bank has charged off your account, sold your account, or placed it with a collection agency.
NOTE: This post is part of our Debt Settlement Guide. If you’ve missed any of the previous content, or would like to start at the beginning, please see the links at the bottom of this page.
I covered this in more detail in the previous article about winning the debt settlement race. The math involves the lowest amount each creditor or debt collector will settle for, combined with your ability to come up with that amount of money all at one time, or spread out over several months.
In order to get the math to work in your favor, you want to have good timing.
You Must Have an Inability to Pay Your Bills
A basic fact about settling debt is that no settlement will occur with any creditor until there is a proven inability to pay. There is no proof you cannot pay until you actually haven’t paid. Which brings me to some housekeeping:
I cannot instruct you to stop paying your debts. Your decision to do so is your own. Most of you reading often had, or have, no choice in the matter. Running out of money before you run out of month is good like that. I am here to inform you of the consequences and opportunities that will occur along the way.
The decision to stop paying bills is not one that should be treated lightly. If you have concerns about falling behind with a creditor, post about that in the comments below. Lets talk about how you can navigate your concerns with details specific to you. There are often customizations you can build into your debt settlement strategy that will better suit your situation, or the outcome you want to reach.
Because debt settlement typically only begins to be an option after you have missed making the minimum payments due for 3 months in a row, the debt settlement process, once started, can have irreversible implications.
If you have fallen behind with your credit card payments temporarily, and are able to get back on track with some form of normal monthly payments – look into a credit counseling service, or talk to your credit card banks about any internal hardship repayment plan they may make available to you.
Understanding the Basics of Debt Collection
Any bank will be able to tell you that not everyone they loan money to will pay it back. It’s a certainty that is known before any lender opens their doors. Now, add to that the fact that the US economy is credit-fueled and debt-based. Debt and credit is how we roll. This means our entire spend and borrow system must have a debt collection function built into it.
The fact that not everyone will be able to repay their debt gives rise to the multi-billion dollar yearly revenues that the collection industry feeds on.
The debt collection process starts with the attempts your creditors make to collect from you when you miss payments. Your banks collection efforts are centered on how to “lose the least”, while third-party debt collection efforts are centered on how to make the most.
Banks have the option of accepting less than what you owe before they fully mark down your account as a loss. When banks charge off a debt (account for the loss), they will typically do one of three things with your account:
- Assign your debt to a debt collection agency.
- Place your debt with a collection attorney.
- Sell your debt to a junk debt buyer.
Most Banks Offer the Best Deal Based on Timing
Credit card banks will, on average, lose less by collecting what they can from you before they drop your account into one of the three collection buckets mentioned above. That’s why banks settle credit card debt. Not because they’re nice. It’s just math to them.
Take a break from reading and watch this video, where I quickly hit on all the reasons why timing your settlements is important to you and to your bank.
Your credit card debt may be a source of enormous stress for you, but it is an accepted and planned-for statistic for your bank. Just like I am focused on helping you figure out the math that works for you, banks will focus on math that works for them.
Throughout the debt settlement guide, I make references to collection stages. Here is what I mean when I refer to the different stages of collection:
- 1st stage debt collection is when you are dealing with your original creditor. This is generally within the first 6 to 7 months of having not paid your credit card bill.
- 2nd stage debt collection is when you are dealing with a contingency, or an assignee debt collection agency, collecting on behalf of the bank. This means the creditor still holds the debt. Your account was not sold.
- 3rd stage debt collection is when you are dealing with a debt buyer. A debt buyer is a company who has purchased the legal right to your debt.
- 4th stage debt collection, aka “late stage collection”, means your account has been placed with an attorney licensed to practice law in your state, or when collections have reached the courts.
When you commit to negotiating debts for less than the full balance owed, there are often good reasons for settling credit card debt directly with your bank during the first stage of debt collection. It does not matter if you are settling your own debt, or if you hire someone to help you. I want you to understand why, depending on the banks you are dealing with, it is better for you to settle credit card debt with your lenders instead of waiting for your accounts to get sent out to a collection agency, or sold off to a debt collector.
Settling Credit Card Debt Fast – Benefits
Depending on the banks your credit cards are with, there can be benefits to settling with some as early as possible. Some of those benefits can include:
- The best savings (lowest settlement deals) can be had by negotiating with your original creditor.
- Settling early means the account does not get placed in one of the collection buckets that were described in the prior section.
- You can often limit the damage to your credit report by avoiding a charge-off (letting your account go passed 6 or 7 months of nonpayment).
Here are some examples of banks you could have an opportunity to settle with early:
- Bank of America
- Chase (Disney, Amazon, other Chase branded credit cards)
- Citibank (and cards serviced by Citi like Shell, Home Depot, Costco, etc.)
- Capital One
- Discover
- Wells Fargo
- GEMB and GE Capital now also known as Synchrony
- USbank
- First National Bank of Omaha
It’s important for you to understand some of the system that your credit card banks live in, and rules they are forced to live by. One part of the credit card lending system that has a large impact on how debt settlements get done in first stage collection is a not-so-little thing called “charge off”.
CHARGE OFF: The term “charge-off” describes an accounting function followed by your lenders. The meaning of charge-off does not change from one type of account to the next. But the timing of a charge off can change depending on the type of loan you have, and also due to decisions that can only be made by your lender. You do not have much influence on when your credit card gets charged off, other than making a payment to stall a charge-off from occurring (which is only something I would do for a specific strategic purpose, like needing another month to raise the money you are missing to negotiate the final pay off amount).
When it comes to unpaid credit card accounts, a charge-off occurs when the credit issuer either chooses to, or must, recognize an unpaid loan balance as a loss. And for lenders, losses are bad news, so most credit card issuers wait out the full amount of time they are allowed to charge-off your unpaid debt.
The time frame for the bank to recognize the loss on your unpaid credit card balance is outlined in GAAP (Generally Accepted Accounting Principles), and is typically 180 days of consecutive nonpayment, or what the Office of the Comptroller of the Currency (OCC is the primary regulator of national banks) calls “seven zero billings”.
How does charge off affect settling?
Understanding the timing and impact of your credit card accounts charging-off will give you an advantage in your planning and debt negotiations timing. Identifying which creditors to settle credit card debt with using your available cash flow in the first stage of collection is part of the prioritization that I cover in consults, and with clients.
You may be in a position to settle more than one account prior to charge-off. There will often be a specific design to which accounts I identify as the first, second, and third priority. Posting a basic outline of your credit card balances and who you owe in the comments below will help you get specific feedback about prioritizing your accounts. If you do not want to post to the site, you can call and consult with me, Michael Bovee, at 800-939-8357 and hit option 2, or fill out the consult request.
Settling debt in first stage collection with a lump sum, or getting payment terms with your settlement, can be the difference maker. Why wouldn’t you want to:
- prevent more than one account from charging off and going to a debt collector that may be more aggressive?
- negotiate lower pay off settlements with your original creditors if it meant you could save more money in the process?
Many major credit card issuers allow pre-charge-off settlements combined with 90 day payment terms. Depending on your situation, this means you may be able to settle more accounts prior to charge-off than if you were only settling with one time lump-sum payments.
Settling with those 3 month payment terms may also mean you can knock out a high balance credit card before your bank sends your account off to a collection agency. Settlement agreements that are allowed to be paid using installments prior to charge-off can typically only be extended to roughly 90 days. Some banks want to offer better terms, but they can’t due to regulations.
Example: You have a $9,000.00 credit card balance outstanding and the account can be negotiated down to $3,300.00 in your fifth month of missed payments (between 150 and 180 days late). You could set it up so that you make 3 payments of 1,100.00 in a 3 month period to pay off the settlement.
If you use this strategy, make certain you are confident you will have additional money to follow through on payments in months 6 and 7.
Collection Calls or Letters When You Settle Later
You WILL get collection calls! Your patience with the debt settlement process will be tested more by debt collection calls than perhaps anything else that may occur along the way. You need to know how to manage the calls and prepare yourself in advance for them. If you are behind with payments at this time, you already know all about the frequency of collection phone calls. Be sure to read through my article about handling collection calls and how to use technology to limit your exposure to them.
Why do you get so many collection calls?
Unsecured credit cards are… unsecured. Missing credit card payments is not like skipping payments on cars and homes, which can lead to repossession and foreclosure.
In the early stages of credit card collection, there aren’t many teeth behind the debt collector bark. Repeated collection calls and letters from your bank are about the only tool available to the collector (other than suing you in court), in order to get you to make a payment. Until a bank or collector gets a payment, or a plan for payments, the barking continues.
Phone calls are your friend. Certainly not all of the ones leading up to negotiating the deal, but you can literally make thousands of dollars in one, or several well planned and timed calls to your bank. But let’s get prepared with what to say, and not say, before you pick up the phone.
Continue following along in the debt settlement guide with How to Talk to Bill Collectors.
Anyone with questions or concerns about timing your settlements with your banks, and your particular situation, can post in the comments for dedicated feedback.
This Debt Settlement Guide includes:
An Expert Guide to Credit Card Debt Settlement
How and Why Banks Settle Credit Card Debt with You
Types of Accounts to Include in Your Debt Settlement Plan
Why Settling Credit Card Debt is Like a Race
How to Settle Credit Card Debt Quickly (you are here)
How to Talk to a Debt Collector
How to Negotiate Credit Card Debt Successfully Yourself
7 Largest Credit Card Banks and How They Settle Debt
Get Debt Settlement Letters and Agreements from Collectors
Paying Debt Collectors After You Negotiated a Settlement
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.