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Is It True My Creditor Might Take Less Than The Full Balance as Payment in Full? – Larry

“Dear Steve,

I have credit card debt, can afford more than the minimum payments but not the entire balance. Is there truth to the fact that issuers will accept a lower amount as a balance payoff? And is there any formula to this? e.g., would Chase take 2k in one payment to settle a 5k balance that’s been on time for years? is there any strategy to negotiating e.g., should one automatically ask for a supervisor, should I write a letter of understanding re the terms if i can negotiate a payoff deal? please advise. Larry


Dear Larry,

It is true that creditors often do accept less than the full balance as payment-in-full but before you start to jump at the chance you need to understand some key issues here.

  • In order to be in the right department in the bank to get a settlement offer you traditionally need to be 90 to 120 days delinquent on your bill. People who are current or only a bit late do not get settlement offers. The bank is still holding out hope of getting the minimum payment.
  • Going into collection will hurt your credit and lower your credit score. That can cost you a lot more over time than you might save with a settlement offer. A lower credit score or recent collection activity can raise the interest rates on your other cards or lower you credit score which can lead to the higher cost of future credit and insurance.
  • Banks like Chase may only agree to reduce your debt by 40%. On a $5,000 debt you’d still need to have a lump-sum payment of $3,000 to pay if they agree.
  • The part of your debt that would be forgiven will appear as a bad and uncollected debt on your credit report and the account will be closed.
  • The forgiven debt will be reported to the IRS on a 1099-C and you if you are not insolvent you will have to pay income tax on the forgiven amount at your normal tax rate.

So after reading all of that is it something you still want to pursue?

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.


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.

P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

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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.

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