Bad Credit Debt Relief

1. 4 Responses to “What percentage of a debt with an orignial creditor is typcially accepted in a settlement?”

2. By David M on Feb 17, 2009 | Reply

   They want 100% and will go after 100% until such time as you declare bankruptcy or it becomes obvious you will be unable to pay. My guess is you’re far from that point.

3. By bdancer222 on Feb 20, 2009 | Reply

   You can offer a settlement but the original creditor isn’t likely to accept much of a discount. You usually have better luck negotiating lower settlements with collection agencies — they buy the debts cheap and still make a profit.

   The older the debt, the more likely you can settle for less. You could try offering discover 75% but it would have to be lump sum. They absolutely won’t accept any payment plan.

4. By Jesse Niesen, DebtGoToGuy.com on Feb 21, 2009 | Reply

   Hi Carrie,

   Great question. You’ve provided a few important keys about your situation:

   1) “Who” your creditor is.

   Discover is considered an “aggressive creditor” by professional negotiators. I’ll list the average settlements the industry leaders are seeing in a moment, for Discover and other types of debt. Who your creditors are makes a huge difference in the amount of the average settlement and what you should expect.

   2) Your “payment history”.

   Your payment history is a very important part of your credit. However, the difference between a perfect payment history (never reported 30 days or more late / no derogatory items) and missing your VERY FIRST PAYMENT is the biggest difference.

   It’s as if missing that first payment knocks your score out of the sky, but then each additional late payment has less and less of a negative affect.

   Since you’ve been 90 days late 13 times, your payment history is severely damaged. You need to pay the account off to a zero-balance ASAP (along with any other bad debt)! Debt settlement is a great way to accomplish this. Then you can work on repairing and improving your credit.

   3) When the last payment was made.

   This is a critical factor for two reasons:

   One is because we know right now the creditor will not settle (in most cases) for anything less than 100%. The reason why is the fundamental reason why debt settlement works so well. We usually only ever get the best settlements AFTER an account is “charged off”, usually after 180 days late, and especially when it’s then sold to a third party debt collector.

   A “charge off” is an accounting term that means the creditor is taking a tax-break on the account as “bad debt”. This devalues the account, and the creditor begins to “get in the mood to settle”. Once this happens, if you have a lump sum in the amount listed below, you may be able to settle.

   Often, creditors sell the account to a third party debt collector after it has been charged off and lost value. The average amount paid for “bad debt” in 2006 was $0.034. That’s 3.4 cents on the dollar!

   When you offer the amounts listed below… it’s a smokin’ deal to the creditor or collector. A win-win-win deal for all.

   So… there you have a look-see behind the scenes of the exploding debt settlement industry.

   Just be careful because the industry is full of “bad operators”. Debt settlement is a great solution to a serious problem, but it’s a mine field searching for information or companies to help you with it.

   The second reason the date of the “last payment made” is important is because of the time frames involved with lawsuits. To avoid a lawsuit with Discover, an “aggressive creditor”, you want to subtract two months from the maximum number of months before it’s likely a lawsuit will be filed, and be sure you have the money to settle the account well before that time comes.

   This is why companies who regularly offer debt settlement programs over 36 months usually wind up getting their clients sued and upset, costing them far more than expected and resulting in BBB complaints.

   So now you know why the last payment date is so important to consider when estimating a settlement.

   Now with these key factors you’ve provided Carrie, take a look at what professional negotiators at top debt settlement companies are currently seeing:

   (Description of Debt / Estimated Payback %)

   • Credit Cards, Department Store Cards 40%
   • Citibank Accounts 65%
   • Discover Accounts 65%
   • Cell Phones (Collections over $750) 50%
   • Apartment Lease Re-letting Fees 40%
   • Medical Debts, Collections 50%
   • Judgments/Garnishments, Repossessions 80%
   • Pay Day Loans, Signature Loans 40%
   • Collection Balance Greater than $750 Settlements 40%
   • Collection Balances Under $750 Settlements closer to 85%
   • Debts between $750-$1,000 60%
   • Debts under $750 80%

   Keep in mind…

   We still don’t know FOUR Important Things:

   One is your current balance. I provided some guidelines for small balances. Larger balances increase the risk of a lawsuit. Keep that in mind.

   Two is a group of important factors: If and when any cash advances, “gift” checks, convenience checks, balance transfers or large purchases were made, and if so, how many payments have been made since. Such activity could increase settlements about 10%.

   Three is the state you live in. This makes a big difference because of the different laws in each state, sometimes for the better, sometimes for the worse. By the way, Texas is the best state to live in for debt settlement success.

   Four may be the most important… the circumstances of your financial hardship. These are details that may play a huge role in negotiations.

   These numbers are also for professional negotiators representing many clients who may have millions of dollars in debt owed to a creditor in negotiations at once.

   You should not expect these numbers on your own.

   On your own you would be doing well to settle for less than 80% with Discover, but… if you have the negotiating skill, time and nerve, you “could” do even better than the professional averages if you set your mind to it. : )

   If you have over $10,000 of unsecured debt, you may want to consider having a professional handle negotiations for you.

   Why?

   Because including the fees, you will usually save more money than you could on your own because of the leverage and expertise professionals have. You should never pay these fees upfront and should be able to arrange a payment plan much lower than your current minimum payments. Plus you have someone else to do most of the work for you, so you can live your life.

   I hope this helps you succeed in getting out of debt Carrie!

5. By jason_sot on Feb 21, 2009 | Reply

   I cant rate an answer on here but that guy above me seems to know what he’s talking about!!!

   I second that!

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