What percentage can I settle with credit card companies

[pinkpink]

I have been reading around here for awhile and need to try and settle with the four credit card companies that I'm currently 90 plus day passed due on. I think I want to try and settle the debt myself instead of using a company to do it for me, but I don't know what is a reasonable percentage to settle for. I have read that some are able to settle for as little as 20%. Is that realistic? Should I shoot for less than half or is that also unrealistic. I just need a basic guideline of what the credit card companies will typically accept to settle past due credit card debt so that I don't settle the debt for more than I have to.

[wincrasher]

You need to lay out a budget on paper and estimate what you can afford to make in payments and that will help you construct an offer to them.

You have to present an offer to them to consider, not the other way around.

[pinkpink]

wincrasher

Thank you for your reply. I understand I need to make the offer to them and explain why. I can probably manage 50% if I absolutely have to, but I don't want to offer 50% if they would settle for 20%. I was just wondering if there was a standard amount to shoot for which most credit card companies are willing to settle for.

[boosami]

Typical settlements I've seen have been as low as 40%.

20% is too low.

[disneysteve]

Am I the only one who has a moral/ethical problem with this question?

You borrowed money with the agreement that you would repay it. Now, for some reason, you are not able to pay in full. Understood. Stuff happens - job loss, illness, divorce, etc. I've got no problem with that. But at that point, you should be working to repay as much of it as you can, not trying to see how little you can get away with. If you can afford 50%, you should repay 50%. You need to sit down and figure out a bare bones budget that frees up as much money as possible for debt repayment. Present that budget to the companies and show them why it is the most you can afford.

[creditcardfree]

OP, when you settle credit card debt, the amount that you don't pay will be reported as taxable income for the current tax year. You will receive a tax form and will have to show this money as income on your tax return.

Why are you past due? Can you sell something? Can you work more? These are the first questions to ask yourself. What can YOU do different?

[red92s]

Originally Posted by disneysteve

Am I the only one who has a moral/ethical problem with this question?

You borrowed money with the agreement that you would repay it. Now, for some reason, you are not able to pay in full. Understood. Stuff happens - job loss, illness, divorce, etc. I've got no problem with that. But at that point, you should be working to repay as much of it as you can, not trying to see how little you can get away with. If you can afford 50%, you should repay 50%. You need to sit down and figure out a bare bones budget that frees up as much money as possible for debt repayment. Present that budget to the companies and show them why it is the most you can afford.

Post of the day.

Sack up and pay what you can instead of what you think you can get away with.

[wincrasher]

Ease up a bit.

The banks and collection agencies don't have a moral dilemna in trying to figure out how to get the max out of their customers. Many will lie, obfuscate and confuse in order to do it. They don't care if your family is forced into poverty as a result - they only care about getting paid.

There is nothing wrong with trying to pay the least. Or at least to understand how to formulate/calculate an offer that is fair to your family.

The other party has to agree to it you know.

I bet if she posts a proposed budget, some of you will point out things that were missed. Most people think they can afford things because they don't really know where all their money is going.

An ethical problem would be not paying when you have the ability to pay.

First step budget.

[disneysteve]

Originally Posted by pinkpink

I can probably manage 50% if I absolutely have to, but I don't want to offer 50% if they would settle for 20%.

Originally Posted by wincrasher

ethical problem would be not paying when you have the ability to pay.

wincrasher, I agree with you, but what OP said sounds like she is trying to pay less than she has the ability to pay. We haven't seen numbers so we can't comment. Maybe 50% is too much and 45% or 40% is doable. But if she could do 50%, trying to get away with 20% just doesn't sit well with me.

[boosami]

Originally Posted by disneysteve

Am I the only one who has a moral/ethical problem with this question?

Absolutely not. I'm just answering the question

It seems like sometimes we here have a tendency to go too deep in criticizing and examining people's situations, and we get 15 posts in on the thread and no one has actually answered the OP's original question.

[DebbieL]

Originally Posted by disneysteve

Am I the only one who has a moral/ethical problem with this question?

You borrowed money with the agreement that you would repay it. Now, for some reason, you are not able to pay in full. Understood. Stuff happens - job loss, illness, divorce, etc. I've got no problem with that. But at that point, you should be working to repay as much of it as you can, not trying to see how little you can get away with. If you can afford 50%, you should repay 50%. You need to sit down and figure out a bare bones budget that frees up as much money as possible for debt repayment. Present that budget to the companies and show them why it is the most you can afford.

You're not the only one Steve. I agree with you. It sounds like wanting something for nothing. If you signed on the dotted line, as far as I'm concerned you owe the money. You received the goods/services and you need to pay for them. Being financially ruined by some medical disaster or something is one thing (which I can only imagine since I'm Canadian, but I know it can happen in the States), but just being irresponsible and not wanting to do what's necessary to make your debts right? I don't think that's right.

[disneysteve]

Originally Posted by boosami

It seems like sometimes we here have a tendency to go too deep in criticizing and examining people's situations, and we get 15 posts in on the thread and no one has actually answered the OP's original question.

I think that's definitely true, but I think the problem is that sometimes the OP is asking the wrong question given their situation. When someone posts, for example, that they are 20 years old, earn 30K and are looking to buy a 25K car and come here to ask about how to get the best loan rate, it is pretty difficult to just answer the question without pointing out that they shouldn't be making that purchase. I think it would do the person a disservice by just answering the question.

As for this thread, sure, OP might be able to convince her creditors to accept a settlement of far less than she could afford to pay, but that isn't the type of advice I'm willing to give.

[Runaway Finances]

First, I agaree with disneysteve, you should pay your debts regardless how long it takes. I've seen situation where there simply is not enough income to pay off all their debts and live EVEN IF we cut all expenses that are not absolutely necessary. If you can't pay off all your credit card debt within 4 years, then you most likely have a serious problem (this is my general rule of thumb). I then look to see if it is even possible to pay off the credit cards, which sometimes is the case because the interest rates are too high plus all the fees they charge for not paying the minimums. If there is no way to pay off the cards, then I suggest negotiating with the credit card companies. The person will not be able to get further debt in the future as this will pretty much ruin his credit. Hopefully this person will change the spending behaviors that got him in this position. Most people worry about bad credit scores. I believe if you have a bad score then you don't need debt in the first place as you most likely have too much. I realize a good credit score can affect your ability to rent an apartment and even get a job, so I am not saying don't worry about your credit score. But if you have so much debt on your credit cards that you can't pay them off, then your credit score is most likely low or about to be. So, it is too late. Now, all you can do is work on getting your financial house in order by coming up with a plan to work down your debt and control spending.

[tabl333]

Pardon me for butting in but I had to provide my $.02. Those of you who are having "moral" issues with this are thinking the worst possible scenario. I just joined this forum, am a newbie, but it's because I got into CC trouble. I'm a hard working father of 2 children, am a small business owner, and pay every expense that most people with safe jobs take for granted. My 2 children were $10,000 (after tax dollars) a kid and I see others having their kids for "free" (free meaning you and I pay it in extra taxes and higher health insurance). I say these things because every one's situation is different. Lay off pinkpink, you started attacking and you don't even know the story. Yeah, if it is irresponsible spending habits that will keep coming back that's one thing. But these credit card companies are completely innocent here. Universal Default Clause? That's just an excuse to raise your rate, they don't give a darn about you, just the dollar you represent. And DisneySteve, if you say "As for this thread, sure, OP might be able to convince her creditors to accept a settlement of far less than she could afford to pay, but that isn't the type of advice I'm willing to give.", then why the heck did you even respond? I mean, if you don't have an answer why say anything? Go prove your worth somewhere else instead of belittling someone. I thought this was a site to give advice, and the last time I checked nobody likes to be made to feel stupid.

[disneysteve]

tabl333 - Welcome to the site. Feel free to "butt in" as you put it. This is a discussion forum after all. All opinions are welcomed.

I was not criticizing OP for the source of her debt. I think you are absolutely right that situations can vary and sometimes debt was unavoidable. We know that most personal bankruptcies are due to medical bills, for example, not frivolous spending.

However, that wasn't the point of this thread. OP has said that she can afford to repay 50% of her debt but came here to ask if it was realistic to get away with only repaying 20%. You may disagree, but I think when someone comes to a public forum and poses that type of question, they need to be prepared to hear some people say that doing so would be unethical. We all have an obligation to repay our debts to the best of our ability.

[Inkstain82]

Honestly, the only time I would consider negotiated lower payment is if you entered into the debt agreement with the intention of doing it. That's contracting in bad faith.

Other than that, I don't feel any moral obligation to pay debts. (Well, I do, but I don't blame others if they don't). It is simply two actors negotiating with each other, with possible consequences for both sides if they don't reach an agreement. And everyone has the right to try to reach the agreement in their own best interests.

If creditors don't want debtors to have the option of negotiating down or not paying at all, they need to stop charging interest on the possibility of it happening.

[pinkpink]

Just to clarify a bit, the debt was due to medical reasons where my only option was to place it on credit cards or possibly not be here. It was a tough choice to make and I knew I wouldn't be able to pay all the credit card debt I was charging, but when faced with such a situation, sometimes you have to do things that may not seem ethical from the outside.

My two choices at the moment are to declare bankruptcy or try to negotiate a settlement. Due to still high medical costs for ongoing treatment and medicine, I need to settle with the best terms possible. I can probably pay 50% right now as I mentioned, but with the uncertainty of future medical costs it seems wise to settle for the lowest amount possible so I don't end up here again.

[Inkstain82]

To be honest, that was an awful choice. If you knew you couldn't pay the bills, it'd be way better to owe the hospital than a CC company.

[red92s]

welp, here is your roadmap to settelling for a fraction of what you owe: have few assets, and be 4-5 months delinquent.

Behind on Your Credit Card? Now You Can Get Bailed Out - Companies * US * News * Story - CNBC.com

[wincrasher]

There was an interesting article in the USATODAY yesterday on this very subject.

It said that several of the big banks have given their phone operators the authority to cut deals on the spot for settlement. They were throwing up cases of 40% and 50% settlement.

The stipulations were you have to already be a few months delinquent, but not as much as 6 months. At 6 months the banks are required to reduce the amount they carry on their books to zero - consider it uncollectable I guess. So accounts getting near that point I suppose they are adopting the attitude that something is better than nothing.

All very interesting.