Home -- Guide's Table of Contents -- Credit Card Debt Blog -- Credit Card Debt Articles -- Court Summons -- Credit Card Companies -- Debt Counseling -- Debt Services -- Junk Debt Buyers -- Debt Collectors -- Credit Card Debt Consolidation -- Credit Card Debt Settlement -- Credit Repair -- Debt Collection Attorneys -- Contact Us -- Privacy Policy

Chapter 1: The Short Story about Surviving Credit Card Debt

The Best Time to Negotiate Credit Card Debt scroll down

Collections and Negotiations of Credit Card Debt before Your Account Charges Off scroll down

Going Into Arrears with Credit Card Debt

If you cannot pay anything on your account, the credit card banks collection efforts will begin, and as each missed monthly payment deadline passes, they will intensify. You will receive letters and phone calls, weekly, perhaps even more frequently. Fortunately, these will be auto-dialers handing off your call to the next available customer service rep. working in the in-house collections department. They will have no knowledge of your account except what is on their computer screen when they talk to you. They are not paid by commission. They are just processing your account as it heads to charge off. If you cannot pay anything, don’t listen to them and hang up. They’ll threaten handing your account over to a collection agency, or possible legal action or arbitration. The Fair Debt Collection Practices Act (FDCPA) does not protect you from original creditors calling to collect, but their collection efforts are usually not that bothersome, particularly if after a while, you do not take their phone calls.

Finally your account will charge off. That means the bank will write it off as a loss. That usually happens after six months of non-payment. The Federal Reserve keeps a tight leash on banks’ bad debts and does not allow too much time for non-performing debts to be carried on their books. Making sporadic payments could prolong this process. That may be beneficial for you, but probably not.

The Best Time to Negotiate Credit Card Debt

The best time to negotiate a settlement for less than the balance is in the weeks leading up to the six-month charge off. One your account is written off it will be placed with the bank’s collection agency (CA), then eventually sold to a junk debt buyer (JDB) for around tens cents on the dollar.

People have negotiated payment in full at as low as 15 to 20 percent of the debt with a credit card bank, also known as the original creditor (OC), or with the bank’s collection agency. I was offered 25 percent right before charge off on a $4000 credit card debt, and I could have probably negotiated that down. But I had no cash to make the payment. Usually you pay a lump sum or negotiate a payment schedule. But, if you cannot adhere to the schedule, the negotiated balance becomes void and interest and penalties are tacked on. Also, the bank is required to issue a 1099 on the amount of the original balance that you negotiated away. So you will have to pay taxes on that portion. However, if you income is low in the year the 1099 is issued, you’ll have some leeway with the IRS.
You can make credit repair part of your negotiations. Everyone gets better treatment on their credit report if they negotiate for it. The issue is how much better.

Collections and Negotiations of Credit Card Debt before Your Account Charges Off

After its charge off (CO) by the bank, before the account is sold to a junk debt buyer, and sometimes leading up to the bank’s charge off of it, the debt is given to a collection agency (CA) to pursue. Here the Fair Debt Collection Practices Act (FDCPA) does protect you. The CA must send you a mini-Miranda statement telling you you have thirty days to dispute the debt and to request validation of the debt. When you do that you can instruct the collection agency per the FDCPA to stop collection efforts including calling you. They must also NOT put a negative listing (trade line) on your credit report. That too constitutes a collection effort. If they do, they are in violation of the FDCPA and liable for $1000 per violation in civil court. Violations like that could present opportunities for you to retain a lawyer on a contingency fee to sue, at no expense to you, the debt collector for their FDCPA violations(s).

During this time, when the collection agency represents the bank and it will receive only a percentage of what they collect from the original creditor, you can continue to pursue negotiations directly with the bank because they still own the account, or with the bank through the collection agency.

Back to Table of Contents --or-- Go to the Next Page of Chapter 1

Subscribe to our free newsletter for the latest information on how you can protect yourself from debt collectors and collection attorneys. You do not have to suffer at the hands of debt collectors when you cannot pay your credit card debt.

Use these free chapters of the Guide to educate yourself about the realities of credit card debt collection operations, settlement, and relief scams.

Then buy the rest of the book including 85 pages in Chapter 6: Defeating Debt Collectors and Chapter 7: Defeating Court Action for the best strategy and language to effectively communicate in writing with debt collectors and collection attorneys to prevent them from pursuing your debt.