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Am I Able to Settle My Debts With My Credit Card Companies Even Though I’m Current? – Kaye


“Dear Steve,

I have $25,000 in credit card debt (that I am current on and make the minimum payments each month). Should I file bankruptcy? Am I able to “settle” with any of these creditors to pay off a lump sum amount that is less than what I owe (if I am current on all accounts)?

I am current on all of my accounts and still have “ok” credit right now. Is it best to try to pay these off in full to protect my credit, or go ahead with bankruptcy? I would like to be able to buy a home in the next few years as well as go to graduate school, in which I may need to have credit available to take out additional student loans. Please help! Thanks!



Dear Kaye,

The reality is that many debt settlement companies are criticized for telling consumers that they need to fall behind on their debts in order to get better settlements. And doing that will hurt your credit score, credit report and wind you up in collections.

But the reality is that creditors don’t care to even give you the time of day as long as you are current on your debts. As you fall further and further past due you will be offered better settlement deals. I assume it is that once you are past due you have demonstrated the risk involved in your debt and that it might be better for the creditor to consider something rather than nothing.

If you do decide to go down the debt settlement route and you have more than one creditor, please make sure that you get the settlement offers from all creditors in hand before you pay any of them. It does no good to settle with two if the third won’t play nice and decides to sue you.

I would guesstimate that you are going to need $13,000-$17,000 cash on hand to settle these debts yourself. If you use an outside debt settlement company you will wind up paying up to 15% of the total debt or a flat fee of up to $5,000.

If protecting your credit is your number one goal than paying the debts off in full will give you the best credit result.

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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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