• FreeAdvice has a new Terms of Service and Privacy Policy, effective May 25, 2018.
    By continuing to use this site, you are consenting to our Terms of Service and use of cookies.

Negotiating settlement of a debt

Accident - Bankruptcy - Criminal Law / DUI - Business - Consumer - Employment - Family - Immigration - Real Estate - Tax - Traffic - Wills   Please click a topic or scroll down for more.

SamiAnna

Junior Member
I have credit card debt that I currently have payment arrangements with through a collection agency. The total amount of the debt when the collection agency aquired it was just under $4000. We've been paying $74.32 a week and now have it down to just under $3000. The plan from one that we'd discussed with the collection agency when first setting up the payment arrangement was that we were going to pay it down as rapidly as we could to take a large chunk out of it, then see about settling it for less than the full amount (I can't think of the exact terminolgy right now, as it's nearly 3am, but the gist is there) when we got our income tax refund. We are on good terms with the collection agency, as we've always made the payments as agreed, and have kept good communication with them. In fact, the original agreement was that for the first six weeks, we were going to do the $75.32/week as a deposit, then lessen it to $50/week once the deposit was made. However, when we spoke to set up the 2nd series of 6 postdated checks, we mutually agreed that since we'd had no trouble working the 75.32 into our budget, we'd just keep doing that amount. So...now that I've rambled, here's the question: I've filed my taxes and will have the refund within the next week or so. I want to negotiate to settle this in full for less than the currently balance due. Logically, I want the settlement amount to be as low as possible. How much can I reasonably expect or hope them to knock off the bill for a large lump sum to be paid to them like this? I know that no one give a precise answer or guarantees (outside of the collection agency), but I want to try and have some idea where I can hope to stand when I go to negotiate with them. If it helps, the credit limit of the credit card was $2000. Thanks for any input....

P.S. By the way...I know, get everything in writing as to the settlement agreement, coorespond via crrr, communicate with the original creditor as well to make sure they agree to the terms also, etc.
 


BizMan

Member
I want to negotiate to settle this in full for less than the currently balance due. Logically, I want the settlement amount to be as low as possible. How much can I reasonably expect or hope them to knock off the bill for a large lump sum to be paid to them like this?
The thing is though is they might not want to settle since you been making payments and haven't had problems with the payment arrangement. Companies are more likely to settle with people that haven't been making payments at all. But I guess it doesn't hurt to try... when I was in debt I always went for 50% of the balance.
 

TigerD

Senior Member
You may be able to get 80 - 90 %

You can start negotiating at 50% but I don't think that is going to help much.

You're talking about 10 months. Not a lot of time value there. And they already have you paying. With a six month track record of on-time payments, they can sell he debt for 40 - 60% so you aren't going to be able to settle for less than that.

If you can get a 10 - 20% discount by settling the account, that's probably as good as you are going to get --- but do you really want to?

With a 20% discount on the balanceof about $4,000, you would save $800. Leaving $3,200. You already paid about $1,000. That means you have to pay $2,200 and then pay taxes on the $800. And your crdeit report will show the debt more negatively than a paid collection. If you are on the line as far as tax brackets go, that extra $800 in income could cost you more than $800.

Given that you have made such progress, I think you should pay the total debt off if you are able with the tax return.

DC
 

SamiAnna

Junior Member
Actually every time I've spoken to this to the guy from the collection agency on the phone (always the same guy), he's always encouraged me if possible to just settle out the debt. He and the credit card company have made it quite clear they'd like to just get it paid off as quickly as possible. As to whether or not I can afford to pay the full amount with my taxes, no I can't. Our taxes are very precisely allocated this year to reduce our debts, pay outstanding loans, and when it's all said and done, we'll be saving nearly $500a month on debts we're paying on currently. At most, we've allocated a max of $2000 to be paid on this one debt. As to why I don't want to just pay the full amount, frankly it's about money. I want to save as much as I can on this while still getting it taken care of. My credit is already thrashed and I'm not getting granted for credit for anything anytime soon no matter what I do with this debt. It's not going to hurt my credit any worse than it's already hurt. Thankfully, we're young (my husband and I are only 23 and 24), and we have plenty of time for our credit to recover. Right now, priority number one is to just get these debts taken care of before we wind up getting sued and having our finances, and our debt level, made even worse. As far as paying taxes on it, we're no where near at a income level or expense level to itemize. We always just take the standard deduction so it really won't matter in that respect. We're just a young married couple with a young child who are only bringing in $40-45k combined.
 

TigerD

Senior Member
Okay, it sounds like you have considered everything -- including the down side, which most people tend to ignore.

I post a how to on negotiating a settlement on this site earlier this year. I think it may help you. Just do a search for it.

Good luck
DC
 

SamiAnna

Junior Member
Update for anyone interested:

I called the collection agency yesterday and left a voicemail letting the rep know that I wanted to discuss a settlement. Within a few hours, a rep from the credit card company called me directly. He said the cc company had to speak to me directly for settlement offers, which was good to hear. He went through a few questions and submitted a settlement offer to the higher ups as well as the collection agency in the amount of $1500. The current full balance was $2827.89. He called me back today to let them know they'd counter offered at $1827.89. That was absolutely acceptable and feasible. Knowing that I only had $1500 upfront right this second, he set up a payment plan, a series of 3 post dated checks, as we had in the past for the payments, as well as a check for today in the amount of $1500. They've faxed over the settlement offer, as well as the payment schedule. So, everything is resolved and neatly in order. :)
 

Find the Right Lawyer for Your Legal Issue!

Fast, Free, and Confidential
data-ad-format="auto">
Top