Settling with credit card companies for less than 20%

[Zac]

I found out a major bank (one of the big 3) is offering to settle large delinquent credit card balances for 20% and is willing to accept that 20% over 4 monthly payments.  Of course, they will also file a 1099 to the IRS for the debt forgiven so there may be tax liability for the forgiven debt (it's normally considered income).  But, there is an IRS rule that makes the forgiven debt non-taxable if you are insolvent at the time it was forgiven.    I would suggest researching carefully and/or consulting a qualified attorney or tax accountant if you go this route.

Have any of you received offers to settle for less than 20%.  Thanks!

For that matter, have any of you received offers for 20% or 25%?

[PerfectScotty]

No I have not but do you think this will eventually move to mortgages ? I would settle my mortgage for 20%, maybe 30%.

[wordnerd]

Me too 

[Zac]

No I have not but do you think this will eventually move to mortgages ? I would settle my mortgage for 20%, maybe 30%.

I doubt banks would settle mortgages (or auto or other secured loans) for less than what they could recover by repossessing the collateral (house, car, or whatever).  

[Zac]

Bump.

[Maya]

Wow Debt destruction is action!

No debt is no money 

[theudemeister]

I settled one of my cards for 66% of the balance and they let me pay it over 3 months. Good deal if you can get it.

[pkbutrfli]

Notice it's only delinquent accounts that get this special consideration.  The ones paying faithfully and struggling through it all, get higher interest rates, and fatter fees.

[pkbutrfli]

I settled one of my cards for 66% of the balance and they let me pay it over 3 months. Good deal if you can get it.

Were you delinquent, or were you successful while paying on time (kind of a very personal question... I understand if you don't want to answer).

The article talks about delinquent accounts.

[Zac]

Notice it's only delinquent accounts that get this special consideration.  The ones paying faithfully and struggling through it all, get higher interest rates, and fatter fees.

FYI, this particular offer is at 150+ days.  

Also, I'm sure FICO score will suffer severely though I'm don't know how much numerically if the creditors reports the account as "paid as agreed" after settlement.

[skepticus]

Best I've done so far on a cc debt is 47%, but I've settled three others for 50%. 

[Wyle]

How do you go about it? do you just call them up and say you want to try and settle your full balance?  Do you say that you are going to be losing your job and wont be able to pay ontime anymore?   how do you do it?

[theudemeister]

I settled one of my cards for 66% of the balance and they let me pay it over 3 months. Good deal if you can get it.

Were you delinquent, or were you successful while paying on time (kind of a very personal question... I understand if you don't want to answer).

The article talks about delinquent accounts.

If I remember correctly I had stopped payment on the account for 2 or 3 months and they called seeking a settlement. What was awesome was, that was exactly my goal, not pay for awhile and wait for them to offer me a settlement. If you have multiple cards this may not work depending on your income. I can only recommend this strategy one card at a time since I had a $250+ payment for 3 months, but it beat paying the whole $1200+ balance on the account. I don't feel bad about this at all, sure my credit may be shit now, who cares, I'm planning a much more sustainable lifestyle going forward.

[skepticus]

How do you go about it? do you just call them up and say you want to try and settle your full balance?  Do you say that you are going to be losing your job and wont be able to pay ontime anymore?   how do you do it?

You can try negotiating with them yourself, or there are companies who do that for you.  Either way, you won't get very far if you're current on your payments (they see no incentive to lower your balance if they're still being paid).  Technically they can still go after you for the full balance, plus interest, plus legal fees if they bring suit against you.  But these cc companies have bad debt coming out of their asses now <tear drop falls onto keyboard> so most of the time they will settle for less than the full balance if you're sufficiently behind on your payments.  This will ruin your credit, but if you're not planning on getting another credit card or loan then it doesn't really matter. 

[Zac]

They're offering the 20% settlement on business credit card accounts as well.