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What Should I Expect When I Settle My Debts? – Tes

“Dear Steve,

I have several collections & charge-offs on my credit report. I am getting ready to have some money to hopefully pay off several of these. Today, I have contacted 5 or 6 of the companies by telephone. For one, I was told they would settle for almost half. Some of the creditors – mainly collection agencies or attorneys – say they cannot settle for one half. One said they would only take 10% off. I am really trying to get my credit straightened out but have had a difficult past 3 years – after having lost my family’s home to a fire in which we did not have enough insurance to cover our mortgage so now paying off a 2nd mortgage. Also due to lack of insurance on our home plus medical conditions & lack of work, it caused me to get behind on many bills. Your answers would be greatly appreciated. I am hoping to try to get debts paid off within the next week. Thanks so much!

My questions are: 1) Am I better off to go directly to the original creditor, even if with a collection agency or attorney now? 2) Is there a specific percentage these companies will ‘normally take off” if the bill is $5000 or if $500? 3) If I can negotiate an amount on my accounts to be paid off, what is the chance of getting the ‘charge off or collection” taken off of my credit report?

Tes”

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The Answer

Dear Tes,

Debt settlement is not a magic wand that allows you to get x percent off. As you so keenly noted it is a negotiation process. Some will participate and negotiate and others may make you an offer that is unacceptable.

You can most certainly try with the original creditors and/or let the accounts go to an outside collection agency or charge off. But keep in mind that anytime you are past due on your account the creditor reserves the right to pursue legal action to collect.

Considering the liabilities you mentioned I’m curious why you never contemplated bankruptcy to clear the decks of your debt and start over. It sounds like what you could really use is a second chance and fresh start. Even though you have some money coming in you still might want to click here to find a local bankruptcy attorney and discuss your situation.

You may also want to talk to Credit Recovery Network, ZipDebt or Damon Day for experienced third party advice about your specific creditors and settlement offers. Sometimes it’s just best to work with someone that deals with creditors on a regular basis and knows what they are currently accepting. There is no substitute for experience.

I would not expect to have a creditor remove past negative information or to not list part of the debt as settled and part as written off as a bad debt. No matter

Please post your responses and follow-up messages to me on this in the comments section below.

Big Hug!

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About Steve Rhode

Steve Rhode
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

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