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I’ve Got Some Cash on Hand. Should I Settle With Amex? – James

“Dear Steve,

I live in California and have been self employed for 15 years. Long story short, in 2006 business was extremely slow and I acquired a $32,000 balance between two Amex cards. One card is business one personal and have an interest rate of 8% and 10%. I also have two or three other credit cards with zero balances. Like everyone, I am upside down on my house, but can handle the mortgage payments. My credit score is 790, I have NO late payments including Amex.

I sold a vehicle and have $22,400 (70% Of Debt) to pay towards my Amex accounts.

My question is, should I just pay the 22.4K and continue to work on the rest, or should I try to settle my debt with Amex. I have read a lot of the posts on your site and you have indicated that:

1. Amex will not negotiate unless I am behind: Does this change if I indicate to them that I considering bankruptcy to get out from under the debt? I do not want to initiate contact with Amex about settlement unless I am going to go all the way with it.

2. This will reflect negatively on my credit score: How exactly will this affect my credit score and for how long? 40 points? 100 points? Just a notation? If I am not planning on any big purchases, can my score take a hit?

3. I will receive a 1099 from the IRS for the amount I did not pay: With write-offs’ paying taxes on the amount not paid is better than paying it…


Dear James,

Great questions. Thank you.

If you are not having financial problems, as you indicated you are not, then I would suggest that you not settle the debt.

Here’s why. If you don’t have any money is savings, I would suggest that you spend no more than $12,000 paying off one of the AMEX accounts and hopefully that will pay off one of the accounts. Using the money that will be freed up from the paid off account, you can then roll that onto the other account to get out of debt faster.

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This will leave you with $10,000 in a savings account that you could tap in case of an emergency so unexpected expenses did not go back on the American Express card and run the debt back up, eroding any progress that you may have made.

I think lump-sum debt settlement can be a good tool to use when you have the cash on hand and you are faced otherwise with certain bankruptcy, which would expose your cash to the creditors anyway.

The best way to protect your excellent credit rating would be to not fall behind, not settle the debt and not have a negative entry on your credit report.

Now, all that being said, if you just want to take a chance to screw it to your creditors because you don’t want to pay them for some reason, you are not concerned about your credit and don’t care about your credit score, go the debt settlement route. But if you do that, hire a professional debt settlement firm to represent you, otherwise American Express is going to play you. You have no experience in doing this.

My vote, don’t settle.


You are not alone. I'm here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don't give up.

About the author

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.

1 Comment

  • I contacted Amex and spoke with an account specialist. I paid $12,000 on my personal card (was at 10% interest) leaving a balance of under $2,000. They transferred the $2,000. to my business card and lowered that card’s rate to 4.95%. Still $15K in debt, but with it on one card at a low rate I can pay it off in 16 months.

    This is what I had intended to do, but wanted to examine the pros and cons to the options available to me.
    Thanks for the advice and being here for those who need it.


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