Debt Settlement Letters – Myths & Misunderstandings Galore!

In October 14, 2011

In my 14 years as a debt settlement professional, I’ve reviewed thousands upon thousands of debt settlement letters. Last year alone we had about 1,200 of them to review and approve on behalf of our clients. If there is one subject I know well, it’s how to document a settlement! There is nothing especially difficult about it, but I continue to be astonished at the amazing amount of bad information floating around on the Internet about this subject. In this blog post, I will set the record straight. If you want advice on how to protect yourself during a settlement transaction, you’ve come to the right place.

A word to the wise: You can either listen to someone like me, who reviews settlements on a DAILY basis, or make your decision based on some discussion forum where amateurs rule the day and the occasional “expert” weighs in with his or her opinion. I have seen cases where the exact opposite of the correct advice was given by so-called experts. So ignore my advice at your own risk!


I have only one unbreakable rule for this game we call debt settlement. No letter, no deal, no exceptions, ever! In the course of negotiating settlements, you will sometimes run into lazy or misinformed debt collectors who refuse to grant a proper letter. They may use a variety of excuses, such as “There isn’t time and we need to get this handled today,” or my personal favorite: “This is a recorded line, sir. It’s all on tape, so you won’t need a letter from us.” This, quite frankly, is nonsense. If there were a problem later, how would you ever obtain a copy of that recording? You’d have to file a lawsuit against your creditor and obtain it through the discovery process. Good luck with that approach! It can be a real heartbreaker to think you have a good settlement, only to have the creditor take your lump-sum and treat it as a regular payment on the full balance and later deny ever having approved a settlement. Without a proper agreement letter, that is precisely the risk you take. The good news, however, is that getting a settlement letter is easy enough to accomplish.

The most important point to bear in mind here is that a settlement is a CHANGE IN CONTRACT between you and your creditor. The creditor’s own agreement language (i.e., the fine print on your credit card application) will always insist that any change to the agreement must be approved by the creditor and put in WRITING. So when necessary, you can apply some verbal ju-jitsu and use the creditor’s own policy to get what you need. When verbal agreement has been reached but the collector is balking at sending a letter, take this approach:

YOU: “If I accept this settlement it will modify the terms of my contractual agreement with XYZ Bank, correct?”

REP: “Yes.”

YOU: “Well, doesn’t the fine print in your original agreement state that any changes must be made in writing?”

REP: “Um, uh, let me get my supervisor for you.”

Escalate politely if necessary, but stick to your guns all the way up the food chain. If you don’t have a proper settlement letter, then it’s your word against theirs and you should not fund the settlement, period. By following this simple rule, you will save yourself a lot of grief.


The majority of settlement letters are forwarded via fax, and this is totally fine for the purpose of documenting the transaction. The creditor may or may not follow with a hard copy by post, but the fax copies have stood the test of time and consumers have been able to safely rely on this method for years. I cannot think of a single instance where a settlement was later disputed by a creditor when the only issue was documentation via facsimile rather than hard copy.


In the past decade-plus, I have overseen more than 10,000 settlements. In ALL cases without exception the agreement was documented on the LETTERHEAD of the CREDITOR, collection agency, or collection attorney representing said creditor, and NEVER on the consumer’s own letterhead. This is the correct method for the consumer handling their own negotiations, and it’s also the method employed by virtually all professional negotiation firms. Only inexperienced negotiators use the method of trying to get creditors to sign self-generated settlement letters.

There are books, e-books, websites, and a number of online “coaching” programs (aka inexperienced people trying unsuccessfully to copy what I do at ZipDebt) that claim you should mail a stream of offer letters to your creditors. This is a BAD IDEA! I don’t care if there are a few examples here and there where a creditor did agree to sign an offer letter as proposed by the client. The problem is that 99% of the time this method will FAIL. The reason is that all the major credit card banks have existing template language for documenting their settlements. The language has been pre-approved by the creditor’s legal staff. So you’re not going to get a manager at one of these banks to sign your stupid settlement letter and agree to your terms! And by insisting on doing it this way, you’ll be potentially costing yourself good settlements.

The correct technique is to verbally negotiate your settlement by telephone, and then to request a proper settlement letter be faxed to you before you present payment.

Aside from the reality that bank executives won’t sign off on your settlement letter, another reason I am opposed to working it the other way is the FOOTPRINT problem associated with any letter writing campaign. If you are using some type of “settlement system” that you purchased, think about how creditors will react when they start receiving the exact same letter over and over again from lots of different consumers. Their computer systems will catch on to this quickly, and before long, these letters will be classified as THIRD-PARTY generated. That is the kiss of death for a good settlement. Once the bank realizes you are using a system – a system that they are very much NOT in favor of! – then you can expect your account to be flagged for a different track of collections than the usual one. I’ve even seen this approach trigger early lawsuits or arbitration filings by the creditor.

Let me put it this way: Sending a series of pre-formatted settlement offer letters to your creditors is like repeatedly whacking a sleeping rhinoceros on the top of the head. Sooner or later the beast is going to wake up and have you for breakfast!


Here is a simple checklist on what a proper debt settlement letter must include:

• The letter must be on the bank or agency’s letterhead
• The letter must be dated
• Your account number should be clearly identified (it’s fine if they only show the last 4 digits)
• The transaction must be described as a “settlement” or “settlement in full”
• Amount of settlement payment is stated correctly
• Payment due date(s) are stated clearly and correctly
• Individual payments sum correctly to the total amount to be paid on the settlement

Notice what this list does NOT include. It does not include a requirement for a physical signature. Surprised? Don’t be. About 99% of settlement letters don’t get physically signed. Trust me on this. It’s ok. Just like I have never seen a single settlement go sour because the creditor sent the letter by fax, I’ve also never seen a settlement go bad because the letter lacked a physical signature.

Guess what else is missing from this list? You’ll notice that there is nothing about how the settlement gets reported to your credit report. Why? Because it doesn’t matter. You can argue until you are blue in the face, and you’ll never get a creditor to alter the language by which it reports settlements, nor should you care in the first place. All settlements get reported as “settled for less than full balance,” or words to that effect, and they carry the same credit score code no matter what words are used. If it doesn’t get reported correctly, you can dispute the entry later on with the three major credit bureaus. But you can forget trying to have your creditor forgive 50% or more of your debt and also help you clean up your credit at the same time! It simply doesn’t work that way, and many an amateur has blown a perfectly good settlement over this point. Negotiate your settlements, THEN worry about your credit!

If you need professional advice on documenting your settlements, steer clear of the myths and misunderstandings you’ll find online, and give us a call at 866-515-2360. What we do is not based on theory, but rather on what has WORKED and has proven EFFECTIVE for thousands of clients in resolving problem debt.

Update: October 31, 2013

ZipDebt now offers document review for settlement letters and collection letters or notices. Have your document reviewed by Charles Phelan for a one-time low fee of $100. One business-day turnaround. Click here for more information or to order document review.



  1. You indicate that all settlement letters should be in writing from the creditor snd faxed letters are ok. How about letters provided via promotions/programs via an online banking website? Is downloading and printing the letter at home valid as a form of the settlement in writing? Once a letter is received, is it possible to negotiate down the settlement amount that the bank has noted?

    • In reply to MJ, yes to both questions. An online letter that you print out from a bank’s website is just as good as a fax for documenting the settlement terms. However, the online offers are rarely the best that can be achieved. The technique that I teach involves negotiating by telephone, and you can use the standing offer as a “door opener” to discussing a better settlement. Of course, if you do work out a better deal than what was offered, you’ll need to obtain a fresh letter with the revised terms before presenting payment.

    • Great info Charles! Quick question. I received a letter stating the following… Bear in mind the letter meets as far as I can tell all the checklist items but my concern is if the actual wording is sound enough. “This letter confirms your agreement on 3/1/2016 to settle your account in the amount of $1551 on 3/31/2016.” Is that simple use of the word settle enough to protect me from further collection bearing in mind all the other checklist items are there? Cheers in advance!

      • Ryan, yes, “settle” means settlement. The language does not have to be any more complicated than that.

  2. I started with the program in July and 3 months later I have negotiated my first settlement for 30%. Without the continuous coaching I would have been literally a basket case trying to deal with all the psychological tactics that creditors and CA’s use. Charles, your communication and correspondence have been very valuable and reassuring when negotiating a deal. I knew exactly what I should be offering and countering for settlement and what to expect with that first deal. I was never second guessing myself when the opportunity came to finalize the settlement. So when that settlement letter came at the end of the month with literally hours to seal the deal Charles was there, on call, to double check if everything was in order. I have the peace of mind that I know I won’t get slammed with some kind of formality and having to deal with paying the remainder of the amount due. Thanks Charles for “showing me the light” and holding my hand through this process.

    • Mark, thanks for the comment. Congratulations on a great result with your first settlement! 🙂

  3. Thank you for this fantastic post. I am working on settling some debts right now. I have three debts and two questions.
    1. In the first, the letter includes all of the above, and I feel very confident about it.

    2. For the second, I have a letter that includes all of the above EXCEPT LETTERHEAD… the letter was sent to me by normal mail, and the top of the letter includes my address and account number. The top of the letter just has a grey bar… no name of the bank, no logo, etc. Should I request the letter be sent on letterhead, or is this sufficient to hold up if needed?

    3. For the third, I’ve negotiated a settlement over the phone, (or so I thought) but have been getting the runaround about a letter. I know you suggest not sending a “fill in this letter and send it back” option. What about sending them something in writing that states I am requesting a letter from them?

    Again, thanks for an informative site.

    • TS, glad the post was helpful. On your second letter, it’s unusual for a bank to issue a letter without it being on a letterhead. If this came from a third-party agency, get them to fax you another copy, and then the fax cover sheet and transmission time-stamp should suffice to prove where it came from. On your third letter, there are any number of possibilities as to why they are balking at sending a letter, but the first and obvious thought is that you don’t really have a settlement and they are just trying to trick a payment from you. It’s just not necessary to send a letter saying you want a letter, etc. It’s very simple. No letter, no settlement, period! If you want some assistance on this, please email me privately at and we can discuss further.

  4. Great post!
    We’ve received a settlement letter from a CC (Capital management Services Lp) Via Email. I requested that they send it by regular post mail since I do not have access to a fax. When I received the Letter it was not signed and there was no name at the bottom. I ‘ve repeatedly asked them for a signed letter but they refused stating that they do not sign the settlement letters.
    Is this letter valid?

    • IZ, this point was discussed in detail in the original post. As I said, about 99% of settlement letters are not signed. If the letter they sent otherwise meets the criteria that I laid out above, then it should be fine.

  5. I do not have a fax machine. Should I accept a settlement offer sent by email, or should I insist on a letter by post?

    • Eric, yes, email is fine, but there are any number of free fax receiving services available on the Internet.

  6. I have received a Settlement letter from a CA but have a concern about the wording that was used.
    The words Settlement or Settlement-in Full were not used.
    The CA used the term Settlement Balance Due.
    The dollar amount listed is the verbal “total settlement” amount agreed upon during our phone conversation.

    • DA, I’d have to see the actual letter in order to provide a recommendation, but it sounds like the word “settlement” does appear in the letter. If you want help, please email me and we can discuss a one-time consultation for the purpose of reviewing your letter.

  7. I have received a Settlement Letter from Discover. They had settlement amount in the letter, but did not include original outstanding balance. Is this okay??

    • SL, yes, this is often the case with some settlement letters. As long as the other details are correct, it’s not an issue that the balance is not listed in the letter.

  8. Dear Charles,

    I have been contacted by a Collector regarding a four year old debt which I believe to be legit. The debt currently stands at $2200. I would like to negotiate a settlement with the collector and avoid being sued. How much should I offer him initially? Is it ok to offer to settle in writing? Or do I need to actually call the collector.

    Thank you in advance for any tips you can offer

    • Jay, the first thing you should do is check the Statute of Limitations for your state. It’s 4-6 years in most states, so it’s possible you might be beyond the SOL period. If you’re still within the SOL, then the method that works best is telephone haggling. Once you reach an agreement, get it in writing before you pay a dime. Start 10-15% and see how they counter. Hopefully you can get a good deal here and resolve this old debt.

  9. I have negotiated a settlement amount for about 50% of what I owe. The settlement letter does not include the account number. But everything else you mentioned is in the letter. Does this matter since I only had the one credit card account with them? Although I did have a checking and savings account with them, that were all linked to the same account number. I also have documentation that the checking and savings (maybe $15) were zeroed out to apply to the outstanding CC balance. Thanks!!

    • Dee, in my opinion it does matter. While it’s unlikely they are trying to pull a fast one on you, mistakes can happen later on. If the creditor mistakenly routes this account to an agency or sells it to a purchaser, you would produce the settlement letter proving it was settled and that should put it to bed. But you might get some static where the collector tries to claim you only settled a different account. Then it’s your word against theirs and a real nuisance to resolve. It’s always best to have an account number referenced on the settlement letter, and there is simply no valid reason for it to be withheld from the letter. Sometimes they will show XXXX-XXXX-XXXX-1234 with just the last 4 digits showing. This is fine since it still properly identifies the account with this creditor.

  10. Your article is very informative has helped me a great deal Thank you.

    I am trying to settle a American Express debt by paying two payments of lump sum which the collection agency agreed verbally via phone conversation. However, when we asked settlement letter before we make payment they refused. They said they need payment plan setup via our checking account first and they will send us the agreement letter. I told them I will send them money order for the first payment once I get the settlement letter but they refused to get paid via money order and said has to be electronic payment.

    I have been paying monthly payment for the last two years and now they asked me to increase my monthly payment significantly but I told them I can’t afford. I offered to settle the debt for less amount than what i owe them which we agree to do but not getting agreement letter before making my first lump sum payment makes me nervous. What should i do??

    Thank you

    • Teresa, most settlements are indeed paid via electronic transfer, i.e., a “phone check.” What you are describing is what I call the “settlement letter logjam,” where they verbally agree to the deal but refuse to put it in writing until you first make payment arrangements. You don’t want to provide details from your checking account and put funds at risk until you’ve first received a proper letter of agreement though. So how to break the logjam? The easiest method is to use a secondary checking account established for this purpose. It’s fine to give the checking details after reaching verbal agreement provided two conditions are met — first, the payment due-date has to be in the future by at least several days so you have time to receive the letter before they pull the payment; and second, keep the account balance at *zero* until you get the letter and it checks out. *Then* and only then would you deposit the funds needed to cover the post-dated payment. Voila! Problem solved. 🙂

  11. Thank you very much Charles! I will do that.

  12. I am in the process of settling a credit card debt with a debt collector. My settlement letter has all the specifics you have stated (phew). In my reply letter I have repeated the terms of settlement including acct number, etc. I wanted to at this time in my reply/remittance make a request to have this adjusted/removed from my credit report as a goodwill gesture. Is this not the time to make this request? I know that you stated worry about this point later; when is later?
    Thank you!

    • Julie, you didn’t read anything in my article about sending a reply letter, did you? The reason is because it’s pointless, and the creditor will just ignore your request. Sorry, but they aren’t going to deviate from their reporting system just because you ask. You can file disputes with the three major credit bureaus if the settlement doesn’t get reported as such, or if there are other errors. But if it’s reported correctly, you’re not going to get a creditor to remove the trade line from your report. I know there are a bazillion websites that claim otherwise, but 99.9% of the time settlements get reported as just that, “account settled for less than full balance.”

  13. I have started to negotiate a settlement for my HLOC with E-Trade. They e-mailed me a “settlement package” They want some basic info. Income, what the bal is on the first, Etc. They told ME to write up a settlement letter and fax it to them along with the docs they requested.

    • Richard, you seem to be confusing a settlement *proposal* letter with a settlement *agreement* letter. They are asking you to write a letter proposing a settlement, something that is quite common with mortgage or HELOC settlement situations. If and when you actually reach agreement on a settlement figure, you will still want a proper settlement letter as described in the above article.

  14. We have been trying to settle with Bank of America for months. I’m currently writing a request for settlement that I’m hoping will prompt a settlement offer from them. We’ve tried 3 times over the phone and they refuse to settle for even 50% of the debt. Is there anything else we should do to try and settle this account?

    • Sarah, you don’t give any indication of account status — current or delinquent. The best settlements usually come in the range of 120-180 days late, as the account approaches the 6-month charge-off deadline. I suspect your problem is that you are trying too early in the collection cycle.

  15. Thank you so much for this information. I was able to negotiate a settlement for a little less than 35% of the total debt by telephone and I am waiting for the settlement agreement letter to be faxed. When it is, I will make sure it contains all the information you stated in your article. My question is, if the debt has already been filed with the courts and the next step would be for the agency to refile a Request for Default (I didn’t file an answer within the 30 days), should the agreement include something about the agengy filing a dismissal of the case or is that not necessary?

    • Christina, yes, it would be a good idea to ask that the letter include a statement that the lawsuit will be dismissed if you pay the settlement amount.

  16. Hello Charles!
    Thank you for this wonderful information.
    I am beginning the process of clearing up my debts with collection agencies and I have a few questions.
    I can pay off my debts in full as they are,(totals only equal about $2500) should I call the collection agencies, and tell them I intend to pay the amounts in full and then ask for a settlement letter?
    I suppose I’m a little confused as to whether the settlement letter is strictly for a reduction in payment, or if it can be used for payment in full as is.
    I am of course doing this to repair my credit, so I would still like documentation from the agencies in return for my full payment, but I’m unsure as to whether or not that is still considered a “settlement letter”.
    I really really appreciate your straight forward answers. Finding information about how to approach all of this has been a real nightmare.
    Thank you.

    • Leila, glad the information was helpful, thanks. If you are paying in full, you really don’t even need a settlement letter. However, it’s still a good idea to ask for a letter that confirms the correct payoff balance in writing, so there is no possibility of renewed collection activity in the future. So you just want a letter that states the exact amount that will fully satisfy the obligation.

  17. Hi Charles,
    I’ve received a settlement offer letter from GE Capital and following is the wordings that they used in the letter.
    “As discussed in our recent telephone conversation regarding your CARECREDIT/GECRB account, if we receive all the payments set forth below by the indicated dates, we will consider this account settled for less than the full balance.”
    Amount Due Date
    $897 9/20/2012
    $897 10/21/2012
    $924 11/21/2012
    And it does not mention the total settlement amount which is the sum of bove three amounts, $2718…do you think this is good settlement offer letter?

    • Sue, as long as the sum of the three payments matches the total amount that you agreed to verbally, then it’s not necessary for the letter to indicate the total amount. As long as it otherwise meets the checklist presented in the article, then it’s an acceptable letter.

  18. Charles, your article and advice were really helpful. Thank you!

  19. I did not agree to a settlement. Collection agency has no proof of third party conducting settlement with my permission. Original creditor has no information either. I’ve offered to pay the rest of amount, but OC has declined additional payment.

    • DTH, this is an article on settlement letters. If you didn’t agree to a settlement, what is your question please?

  20. Recently I was contacted by a collection agency regarding a debt that is nearly 6 years old. The original debt was for $280, but they were saying I owed over $1000 due to legal fees, collection fees, etc.

    Let me also say that I was not contacted for a long period of time regarding this debt. I only learned about their attempts as they called and left a threatening message at my parent’s address (where I have no resided for over 10 YEARS – and I have had mail forwarding each time I moved). Anyway my parents freaked out because the message said that I was being sued and that they were attempting to locate my address in order to serve me for a “civil lawsuit”. They did not identify themselves in the message as a collection agency.

    When I called the phone number and explained to them that I had not lived at that address in 10 years, they claimed they sent letters to 3 different addresses with a “Settlement offer” for the $280 that I owed, but since 30 days had elapsed, they weren’t “sure” if they would still settle. I asked for them to mail a copy of this letter to my current address, but they refused saying they “only can mail the letter once and can’t mail it to me since it is expired”.

    I asked them to mail me the current offer (since it was repeated they could probably still do this) to settle for $280 and they refused saying I needed to give them my credit/debit card number or the offer would be void and I would be sued for the $1000+ amount. I said I will not give them access to my credit card or debit card, nor will I make any payment unless I have a statement from them agreeing to accept this as payment in full.

    They said I need to go purchase a prepaid debit card and then contact them and once I give them the payment, they will fax or email me a copy of the settlement. I feel this is backwards. I also feel that so much time has elapsed that they could not even sue me. I furthermore feel that they are practicing questionable collection tactics by scaring my parents half to death and I feel this was all intentional. I mean really… contacting me somewhere I haven’t lived for 10 years and leaving a message threatening lawsuits on my parents machine. Is that not a violation of my privacy and harassment of an uninvolved third-party?

    My question is that it is only $280. Should I just get the pre-paid card and settle it, or do I need to demand the letter FIRST or should I tell them to take a hike and file a complaint against them with the NYS attorney general for harassing my parents and using unethical/questionable tactics?

    I believe they are refusing to mail me the letter because I have seen these letters before on old debts and it states clearly in small print at the bottom that the debt is too old and they cannot sue you, but if they try to sue you, then you have to write to the court within 30 days and inform the court that the debt is not legally actionable due to age.

    Also – if I make this payment, won’t this debt re-appear on my credit report for another 6 years? It is off or almost off to to age.

    Thank you for your help.

    • Sabrin514, this sounds like a typical “zombie” debt collection scenario involving a debt purchaser. There is absolutely NO WAY you should agree to just paying the $280 without first having a proper agreement letter sent to you. Otherwise, it could just be a trick to get you to reset the clock on the SOL period, and then they might continue trying to collect on the “balance” of $1,000. If you are in NY, the SOL period for legal action is 6 years, so it’s unlikely they will actually sue you at this late date. If they do, you would need to “answer” the suit and indicate that the debt is now time-barred under NY statute, assuming you are past the 6-year mark when they file suit. To me, it doesn’t make much sense to pay this now, since the original creditor has long since washed their hands of the debt and you are about 1.5 years from having it drop off your credit report anyway. You may see ongoing collection activity well past the SOL, but it’s all bluff tactics at that point. Do feel free to file AG complaints (as well as with the FTC and CFPB) if they are harassing you.

  21. Thanks alot for the info! Loved the article too.

  22. Charles, Scenerio: What if I have the settlement offer in writing and it specifies a date by which I have to pay them the agreed amount. However the bank waits to take my payment (out of the secondary checking accnt I have set up) then claims that the payment was not received by the date agreed on the settlement offer and now claims that seetlement offer is not valid and considers my payment as a regular payment on the accnt.

    • AJ, if this is an actual scenario and not just a hypothetical question, then your best bet is to provide the bank with proof (in the form of a bank statement) that the funds were available on-time, per the settlement agreement letter. Give them one chance to correct their error, and if they still refuse, then file formal complaints with the FTC, the CFPB, and your state’s Attorney General.

  23. Is it okay to pay my settlement via phone with a check number? I already received the settlement letter via email and it has all the necessary info per your great article. Thanks so much!

    • A, yes this is how most settlements get paid. See comments 19-20 above for further info.

  24. Charles,

    My wife is trying to resolve her Credit Card debt. We have waited 6 months and recently talked to a supervisor. Discover said they would settle if we sent $152 to keep account open, so that they could then send a settlement letter. I told her that would start the whole process over again and NOT to send anything without a settlement letter. Now, we have received a settlement letter of sorts that has everything you mentioned. BUT, there is a clause that mentions that “we have agreed to accept this amount by November 30, 2012 once a holding payment of $152 has been received by Oct. 31, 2012.” Well, we didn’t receive this letter by Oct. 31, so does this mean Discover has to send whole new letter, without clause, and request for an initial $152 payment?


    • Jeff, yes, you would need a fresh letter from Discover. You want the terms spelled out in the letter to precisely match what’s been agreed to verbally.

  25. Hello Charles,

    After calling the Bank millions of times to send me my debt settlememt letter, they finally did but I am very much suspicious of it as in the whole letter, the word “debt settlement” is not mentioned at all, neither the total amount to be paid on the settlement. Instead the Bank refers to “the recent payment arrangement”. On top of it, the letter states, ” In addition to this (Bank refers to the recent payment arrangement”), you must ensure that you cover any charges and interests due”. What do they mean charges&interests due????sounds like a proper scam! and then it continues saying, “As you are unable to keep within your limit/credit on you account, we are obliged to report this to the Credit Reference Agencies, and that you have entered into an arrangement with us to restore your account balance into an acceptable level.This may affect your ability to obtain credit from other lenders. These are the statements they put into so called “debt settlement letter”. Can you please help me out what am I supposedc to do. And another question, as there is another person involved in this debt I owe without her own fault (my joint account holder), may I cancel this agreement and agree to pay the full amount in order to have a clean credit score?Thank YOU

    • Silvia, what you are describing is not a debt settlement letter at all. There appears to be some misunderstanding between you and the bank. You know the rule from my article — no letter, no deal. Stick to your guns. Call the bank and confirm their system shows this as a settlement. If yes, ask them why they sent a letter that is not a settlement letter, only referring to a payment agreement you haven’t actually agreed to. All you can do is be persistent. Regarding your other question, yes, you can always go back to full repayment. However, if the account is so late that the bank is talking settlement, damage to the other person’s credit score has already been incurred. You need to decide whether the goal is settlement, or payoff with the least amount of damage overall to your credit report(s).

  26. Hello Charles,

    I have $55,000 in credit card debt on 4 cards. I make $120,000 a year and my credit score is 672. I have no late payments but I’m at the brink – the minimum monthly payments along with mortgage payments and debts owed in my divorce have turned my monthly budget upside down by $1,000 a month. Should I contact credit card companies now and try to negotiate while my credit is still good or should I let my payments go late several months before contact? Thanks.

    • Wayne, I wish it were otherwise, but I can tell you with certainty that it’s totally pointless attempting to settle with any of the major credit card banks while current or near-current. The best settlement opportunities usually come in the range of 120-180 days late, as the accounts get closer to the charge-off deadline. You can settle these accounts on your own without hiring a firm to do it for you, but it will be far less stressful if you get some training first and coaching support along the way. That is precisely what my ZipDebt program is intended for. If you’d like to get in touch personally with me and discuss in more depth, I offer a free 20-minute phone consultation.

  27. Thank you Charles for your helpful feedback.

  28. I spoke with a debt collection agency and offered to settle for half of my deceased mother’s debt to which they agreed. They insisted that I had to pay by e-check by the end of the day, and provide my bank account and routing number to do this. If I didn’t accept this, I forfeit the settlement amount. They were going to email me the settlement offer.

    Luckily, I did a bit of research first and went with my gut feeling on this. I called back and told them my terms. I needed a document mailed to me with the settlement offer, and that I would mail a money order for payment. They said no deal, they’ll wait until the estate settles and get the full amount.

    I did the right thing, didn’t I? I figure they will contact me again and I’ll have another opportunity to settle for a lesser amount.

    • Karen, yes, you did the right thing. As I said in the article, no letter, no deal, no exceptions, ever! That said, I’m fine with an email version of a settlement letter, but they would have had to send you the email first. You should never make a same-day payment on a settlement without first having a valid agreement letter. And yes, you will have other opportunities to settle it. Also, I want to make sure you’re aware that you are not directly responsible for your mother’s debts. If it’s a large estate that is being probated in court, then it often makes sense to settle the creditor’s claims prior to the estate being probated, since you can often achieve discounted settlements vs. full-payment via probate. But in many cases, there is nothing left in the estate for the creditors to collect against. IRAs, for example, will usually pass through to the beneficiaries outside of probate, and not subject to any direct attack by creditors.

  29. Hello, can you tell me if a collection agency has to provide proof of ownership of debt.

    • Del, under the FDCPA provisions, a third-party agency has to verify that they are collecting from the right party, but it says nothing about proof of ownership. There is a lot of Internet mythology on this topic. First, it’s important to understand the difference between the assignment of a debt to a collection agency and the sale of the debt to a purchaser (which may do their own collection effort or assign to a third-party). If it’s just an assignment, then your original creditor still owns the debt. When the debt has been sold, then sometimes proof of ownership can become an issue in the context of a court case. But generally speaking, outside of a lawsuit, they only need to show that they are not attempting collection from the wrong individual.

  30. I received a letter with a proposed settlement for about 40% in August. I am eager to settle the debt now but one issue I had was the wording on the letter. It said that the “CA may accept this as full settlement.” – but the word “may” has me worried that they will say that the offer was only for that period of time in August. I called and asked the CA to send me a current settlement letter and include that we have come to an agreement but they will not send the letter. Should I wait for a revised letter or is that August letter ok?

    • Ryan, the issue isn’t so much the word “may” as the fact that the offer has expired. If the collection agency is now refusing to send a fresh letter with a future due-date for the 40% settlement, then you should not proceed with payment. You definitely need a new letter with a new expiration date before proceeding.

  31. I am in NC and have several credit cards that just passed the 3 years since last payment. Does that mean I can forget them? If I move to TX where it’s 4 years, I think, does that give them another year to sue? Does it matter if I opened some of the accounts when I lived in MA 7 years ago? Also, I have one that did get a judgment. Can I still settle with them? Do I have to do something differently to get them to drop the judgment? Also, can I still settle the others after the 3 year period just because I want them to show settled? Finally, I had a house foreclosed in 2011. Is there any way to get on top of a potential deficiency judgment and settle it?

    • Steve, the technically correct answer to your question about SOL periods is that creditors can theoretically go for a judgment in the state where the account was originated, and then seek to convert this to a judgment locally in your current state of residence. In practice, however, creditors usually go by the SOL for your current state of residence. So you are *probably* not going to see any further legal action in NC, but this is not the same thing as the debts being resolved. They will still show on your credit report up to 7.5 years from the point of default. Yes, such accounts can be settled for the purpose of showing them as resolved. The one that went to judgment already could potentially still be settled, depending on the creditor and your overall exposure to judgment recovery. On the deficiency associated with the foreclosure, yes, this type of account can often be settled as well.

  32. This is an excellent post, thank you! I have received a settlement letter via email from the lawyers office that is representing the bank. The subject line is the lawyer’s file number. The letter begins with Re: Bank V. ME and the court registry number. It doesn’t say anything about my visa account number. Is it okay that it refers only to the court registry information or do I need to ask the lawyer to include the visa account number?

    • Ginger, the letter should cross-reference your visa account number. Many lawsuits don’t specifically list the 16-digit account number, so it’s problematic to tie back the settlement to the right account if a mistake were to happen down the road. So it would be best to simply have the letter refer directly to the visa #.

  33. Great article!
    We have just gone through foreclosure in CA. The house was sold at auction by BOA. We have a HELOC that was assigned to an out of state bank before the notice of default was filed by BOA.
    Now a collection agency(realtime resolutions) is trying to collect. We have offered 10 %. They want to see a detailed disclosure of our assets down to the kitchen sink. We can’t do that.
    Any advise? Thankyou.

    • Robert, please see my blog post on settlement of HELOCs. This topic has come up a number of times in the comments I’ve fielded from people trying to settle mortgage notes. In general, it’s quite difficult to accomplish without providing some level of financial disclosure justifying the need for relief. If that would work against you, then all you can do is play the waiting game, make offers from time to time to keep the ball in play, and monitor any collection activity.

  34. I am glad I found your blog, as the information you share is very helpful. Original debt was about 980 but it had balloned into 2250 with interest and late fees. I am trying to settle this 5 year old cc debt that is now assigned to a third party collection agency. I called the cc company but I was told to deal with the collection agency. I asked the collection agency to send me a break down of the charges but they said they didn’t have tha information. They offered a 50% settlement in writing without me agreeing with it. After a few phone calls that’s the lowest they are willing to go. Should I try to get a settlement witht the cc company or continue to negotiate with collection company?
    Thank you,

    • Marc, the original creditor won’t speak with you if it has been assigned to a collection agency. But you should determine whether or not it has been sold to this company you are dealing with. Also, check the Statute of Limitations for your state — it may be that you are past the SOL period. Anyway, 50% is quite high for a debt this old, so take your time until you get a deal you are comfortable with.

  35. I received a letter stating my debt was
    Settled but that it doesnt mean the credit card company cant persue the entire amount. Can the collection company then send me another letter voiding the first letterand ask for an additional amount. If they first letter was a mistake as they claim?

    • Nicole, I would need to review the actual letters that you received in order to advise you. But in general terms, a settlement agreement letter is a type of contract, and if you honored that agreement and paid the settlement amount on-time (and can prove it with a bank statement), then you should be able to successfully dispute any further collection activity.

  36. Hello Charles, I received a settlement letter from a collection agency stating the terms of our phone conversation. The letter contains all the requirements you mentioned above and shows the original creditor name, our client name, original account #, our account # (agency), current balance and the settlement offer. My conceren is the wording in the body. They stated “We have been authorized by our client to offer you a settlement arrangement. Please remit $3,800.00 due by 01/31/13. Upon successful clearance of these funds the above referenced account will be considered settled in full.” Should I be concerned that they do not specify which account they are referring to and “account will be CONSIDERED settled in full…”

    • Ismael, this sounds fine as long as the original account number matches correctly. The settlement letters usually do not repeat the account number multiple times throughout it, but just once in a reference or subject field above the body of the letter.

  37. I kept getting called from someone that showed up on my cell phone as “Unknown,” with no number. They called 2 times one day, 3 the next day, and 2 the next. Once or twice I answered, and said “Hello,” but there was no one on the line, and they hung up. Other times, I ignored the call or answered then immediately hung up. The last time they called, I actually got a real person. It was from MCM. (Later that day, I looked it up, and was Midland Credit Management in California, and their website seems like they are my best friend and they only want to help people resolve their debt and live happily ever after! I read comments from people who dealt with them, that nothing could be further from the truth-MCM, like many other collectors report the payments to them as installment loans and not a settlement, so they can extend the SOL on the debt, or they don’t hold to the settlement amount,) The man told me the amount and the creditor. I told him that I missed a payment on the cc, and the minimum payment doubled to where I couldn’t pay it, and every month for a couple of more months the min. payment was added to. I called the cc, and told them that I couldn’t pay the min. and they asked me to pay 1/2 of the min., then the other 1/2 14 days later. I told them I couldn’t afford that. They didn’t seem they wanted to work with me. I never heard from the cc again, then, several months later, I got a credit alert that the cc charged it off. I got a letter and calls from a different collector than the one who just called me, about the debt. Then, I lost my job. Now, this new collector calls me. I told the new collector that I can’t pay the full amount ($2300+). One time he threatened to file a lawsuit, and another time asked me if I wanted him to have it sent to an attorney. He asked if I could pay $110 a month. A couple of times I told him that I was at work and couldn’t look at my finances, and how do I know if MCM actually owned the debt, and could he send me something in writing of a settlement proposal, so I could review it. He asked if there was another time he could call and said that there would be no point in sending a proposal letter, if I didn’t agree to a settlement amount or monthly payment. I kept talking, but in a lower voice, because, I didn’t want anyone else to hear me, but the man said that he couldn’t hear me. I needed to get back to work, so, I just hung up.
    Today, I got a letter dated the day of the conversation (5 days ago), saying that it confirmed that I agreed to a monthly settlement “in good faith” amount of $102 (not the $110 they offered that I never accepted). This was not a debt validation letter, since, it didn’t let me know that I had the right to dispute it or ask that they validate it. I didn’t get his name or record the call. What recourse do I have if they said I agreed to a settlement amount on the phone, when I didn’t agree to anything?

    • DB, you are not obligated to honor a payment agreement you never actually agreed to in the first place. Debt purchasers play this game all the time. Collections is 99% intimidation, especially on purchased accounts like this one. What I suggest is that you save as much as possible and try to negotiate a lump-sum settlement instead of a long-term monthly arrangement. You should at least be able to get it down to 50%, if not much lower.

  38. Hi
    I am trying to pay off an something that has been on my credit since 2010. I talked to the creditor today to see if they can give me a settlement amount, she did but It is more than the settlement letter they sent me last year. I asked her if I can still pay the amount that was on the settlement letter that was sent to me last year 1/2012 and she said no because they have already sent me three letters within the past 3 years so they wont send me any more. My question is, Is that true? There is a $2,000 difference between the letter and the amount she told me today. Will they send me another settlement letter? Thanks

    • Javonne, I can’t say for sure whether they will send another letter. It would depend on who the original creditor was, who the agency is that’s working the file, whether the original creditor sold it to a debt purchaser, what state you live in, and other factors. But generally speaking, it’s possible to negotiate settlements at lower percentages the older the account has become. As long as there is no direct threat of legal action, take your time and continue haggling until you get a deal that is workable for you!

  39. Today I had a debt collector call my parents and tell them they were going to have someone arrest me at my work today for a Unpaid debt from 5 years ago. They had gave my parents my account information for that bank and everything. After hearing this news I called them. they told me if I did not pay 1217.00 today that I would be served today. They never said arrested to me but they did say they were sending my summons paperwork to the county I lived in and that they would be serving me today. Well, I have never been in any trouble in my life or know anything about it so i freaked out and paid them.. I had NEVER in the past 5 years been contacted about this debt. I called the original creditor FIfth third bank and they said they closed my account in Dec 2008 and sold it to some collection agency and gave me the number. I called the number they gave me and asked why I had not been contacted and they said they do not do outside calling and they had just recently in DEC 2012 Sold my account to another debt collection agency (HW Capital is what it comes up with on my bank account where I paid today. They are who had contacted my family and also the ones that had told me I was being sued today but they stopped it because I paid? How does that work?? I have no idea about anything legal. They also told my family that I was being sued for bouncing checks.. (i’ve never wrote a check in my life) It was just an overdraft on my account. An overdraft for I believe 80.00 from 2008.. I never recieved a letter , a settlement letter or anything.. Also, they sent me 5 hours after I paid an email with a credit authorization form saying I allow them to take the 1217.00 out of my bank account, 5 hours after they already took the money out of my account.. I have not signed the paper yet. Please help!

    • Brandi, if this collection agency threatened you with arrest, discussed your debt with someone not a party to the account, or threatened litigation without actual authorization by the creditor, then these are all violations of the FDCPA. The first thing you need to do is contact your bank and inform them you didn’t actually authorize this payment and get them to open up a dispute file. Next, file a formal complaint with the Consumer Financial Protection Bureau, as well as the Federal Trade Commission, and the Attorney General for your state. Then, go to and find a consumer rights attorney in your area. Call and discuss what happened — the NACA lawyers usually work on a contingency basis, so you don’t have to pay a retainer. They can sue this agency for you and recover damages.

  40. HI

    My husband have 2 “charge off” ,credit cards in his credit report. I going to send a letter to let them know my interest in pay the debt,so they can send me the settlement letter. but to WHO I should send the letter of good intentions to the credit card company or to the collection agency?? (is always calling) The total amount owe is $7000. how much should I pay in a settlement ? your site is great,easy to understand,even for for a English learner (me).
    Thanks so much.

    • Worrymom, we don’t usually send “good intentions” letters to collection agencies, and in the article above I never said to do this! What we usually do is negotiate the settlement amount over the telephone and then get the creditor or agency to write up the settlement on their letterhead. If you need to send a letter due to a language barrier, then address it to the agency. I cannot tell you how much to pay in a settlement without knowing a great deal more about the situation, but in general 50% is very do-able with most agencies, and 30-35% results are quite common, with settlements at 20-25% being possible but more difficult to achieve. It all depends on the creditor, the agency, and the history of the account.

  41. Hi after a lot of phone calls I finally settle the account with Westlake financial, but that guy on the phone told me that their settlement letter is 20 pages long and paralegals need time to make it. So it is going to take them couple days but he wants me to pay 2 days before I get the letter because he was so nice and closed the account already so I won’t get my my repossessed. So he said that he did me a favor closing my account before i even paid. So he asked me to pay as soon as possible so before i even get the letter. What should I do?

    • Alina, I have seen thousands of settlement letters, and I have never seen one that is 20 pages long. If you were sued and this settlement is resolving a lawsuit, then it’s possible a legal stipulation might run a few pages long. But otherwise, the collector may be trying to trick you into making a payment. Stand firm. No letter, no payment, period. This is a modification to your original contract, and you should not pay the settlement until first obtaining a solid agreement letter.

  42. Hi Charles quick question,

    I agreed to settle an alleged debt, and it states “The payment of $XXXX must be paid on or before 4pm on January 30th 2013” I sent the payment overnight, signature required, and it arrived in their PO box on Friday, 1/25/13. They still have not signed for, and picked up the envelope. I am afraid they will wait until after the 30th, then sign for and deposit the check, but void the settlement due to a late payment. What should I do in this situation? Would you advise a stop payment on the cashiers check? I just don’t want them to try to pull a fast one, hearing how shady these companies are.

    What would you recommend?

    • Thebigjdoe, it often takes agencies 2-3 days to process such physical payments. I would just call the agency and confirm they will pick up their mail today and apply your payment. It’s probably just a month-end backlog issue.

  43. Hi Charles,

    I have two credit cards that are supposed to be charged off tomorrow, 1/31. One I am dealing directly with the credit card, and the other I am dealing with a collection agency. Both are telling me I have to make a minimum payment before 1/31 before they will send me a settlement letter. Does this sound right to you? They said they will send the settlement letter within 72 hours of receipt and before I make the agreed lump sump payment though. Also, along with requiring me to make a minimum payment, the collection company is requiring that I agree to a “verbal disclosure agreement” over the phone. She read it to me once and between her accent and it being read fast, I didn’t want to verbally accept anything I wasn’t sure I was agreeing to. She refused to send this “verbal disclosure” to me in writing. Do you have any thoughts or suggestions? I am running out of time since both charge offs are scheduled for tomorrow. However, I’m not sure that matters because I have another one I’m dealing with that already has. Thank you so much for your time!

  44. Charles, thank you, this is by far the most rational and informative site I have found on this topic.
    I am currently being sued by a junk debt buyer who has purchased my original debt. At this point, I have been served a summons/complaint, I filed my answer, and they have served me initial discovery paperwork.
    Is it too late to try to negotiate a settlement with them directly, outside of court? Are there any adjustments to your advice above that would need to be made, once a lawsuit has already been filed?

    • Elaine, if you have been sued by a debt buyer, you should consult with a attorney. Perhaps there have been violations that could be turned to advantage and help resolve the situation. It’s not too late to settle, but after the lawsuit has been filed, it’s more difficult to achieve a low percentage on the settlement. Once you do settle it, the letter will have to include a clause that dismisses the lawsuit.

  45. How can I protect myself in settling the credit card debt, that they will not sell it to any other collection agency after I have paid them the settled in full letter offer?

    • Becky, the entire point of the above article was to describe the essential ingredients of how to document a settlement, precisely for this reason. If your settlement letter meets the above criteria, then it should be fine. If inappropriate collection activity happens in the future, you would only need to send the new agency a copy of the letter, along with proof it was paid on time (bank statement, etc.).

  46. This is best information so far. Thank you so much and God bless/
    I have a question I had cc with Citibank the original amount was about $10k with late fees and 29% interest rate because I was delinquent it ballooned to $14k.I tried making payment but after a while I couldn’t. The account has since been charged off. A debt collection law firm bought the debt (Solomon and Solomon) got judgement and started wage garnishment.To cut the long story short lost job contacted them to make settlement, but they would only offer settlement on the initial balance of $14k not the outstanding balance of about $11k. This is same amount they offered me @ court $6500, told them I didn’t have it then and I don’t have it now.I have recently moved from Jersey and trying to get my life back and am scare they will come for my check again.Am having a lot of sleepless night I just want to pay them, although I recently just got a job offer out of the country and possibly relocating as soon as all documents are signed, but would like to do the right thing. Call Citibank would not deal with me.Should I get an attorney to deal with them.Please help. Thank you

    • Elizabeth, creditors (including debt purchasers) have the right to continue accruing interest on an account, so you will get nowhere arguing that the balance should be the original $10,000 figure. If the account has been sold, then Citi will no longer speak with you, since they no longer own the account. I do recommend you get some legal counsel, since a renewed wage garnishment is definitely a risk here. Get in touch with and see if you can talk to one of their attorneys near your area. In many cases, they can find violations committed during the collection process, and it’s possible they might be able to help you turn this around. If not, then your best bet is to be proactive. Instead of sitting still for a wage garnishment, you should think in terms of negotiating a long-term payment arrangement within your means. Of course, you should get any such agreement in writing, with clear terms that there will be no further attempt to enforce the judgment while you are meeting the revised terms per the new agreement.

  47. Thank you Charles. Much appreciated. Will take your advise and contact one on Monday.

  48. Thank you for your post I am trying to settle a debt from 2003 that is a court judgment. This started in 2001 when I was 16yrsold I took my mother’s car from home when she was at work she didn’t have any insurance on the car and I got into an accident. I went to juvenile court and paid restitution to the driver through community service however the Insurance company wanted their money back from the damages caused so they waited until I was 18yrs old to sue me and my mother. I was young and misguided so I did not go to court therefore it was a default judgment for a no-show The court suspended my license indefinitely and ordered me to pay the damage amount plus attorney fees court fees and interest. I have not been facing up to my responsibilities It has been a long time coming I recently got a letter stating that they will take 500 down and 150 a month but I am a single mom, a student and now a care giver to my ill mother I would like to offer a settlement The original amount was almost 5,500 now with all of the fees it is up to almost 12,000. What number should I start with to settle and if they do settle will the settlement be good enough to satisfy the court judgment. Also should I propose a settlement over phone or in writing?

    • OJ, I can’t provide detailed negotiation instructions in a blog reply, sorry. In general, settlements are negotiated by phone and then documented in writing before you pay. You would only pay the settlement if the agreement letter included language specifically stating that the judgment will be satisfied with no further liability to you for the debt. You should also get some legal advice before proceeding. See if there is a local legal aid attorney you can review the paperwork with before you try to resolve this.

  49. My daughter received a settlement letter from a collection agency for approx 40% of the balance owed on a voluntarily surrended vehicle. The need the payment by electronic check, but she doesn’t have a checking account. Is it okay to pay the payment out of my checking account for her? would this jeopordize my checking account at all?

    • Chris, it’s better to avoid giving them your checking details if possible. See if they have a Western Union Quick Collect account, or coordinate payment via cashier’s check by FedEx, etc. As a last resort, you can pay from your personal checking account, but be sure to monitor the transaction carefully.

  50. Hi Charles I have a timeshare debt of 15,000 (2010) the debt is now $21,843 They would only settle for 55% of the debt they wouldn’t go lower. 1. Do you think that is good, or should I have pressed to go lower?
    2. My letter states that they will accept the payment of $12,000 as settlement in full. And remove from credit agencies once the account had been settled in full. Should I be worried about this wording?

    • Timeshare, I really have no idea whether this is a good deal or not. That would depend on a number of factors, like where the TS is located, what it would otherwise fetch for resale, etc. The best answer I can give you is that it’s a good deal if *you* are happy with the outcome and it provides the resolution that you need. The language you have indicated sounds fine, as this would be a settlement in full. Usually, the settlement gets reported as such, not removed, so if they are saying they will actually remove the tradeline after settlement, you can consider that a bonus!

  51. I have been trying to reach a settlement with multiple companies in which accounts have gone into collections. I’ve been talking to the same representatives each time because the company will say that so-in-so is the account rep. We seem to be at a standstill. With one company, even when I ask to speak with a supervisor they seem to be busy. Is is best to deal with one person or multiple? How can I ask for a different rep?

    Another company we have reached an agreement but they are refusing to send a settlement letter. They are using the same excuses you stated above, “the call is recorded.” Besides the terminology and original contract statements, any other tips to getting them to actually send the letter? They keep telling me if I don’t get this figured out by the end of the month it may be transferred and a lawsuit brought about.

    • Meme, I provide a lot of free advice on this blog, but one thing I can’t do is provide detailed instructions without knowing all the background on who the creditors are, the agencies involved, balances owed, where you are in the collection cycle, what state you live in, and numerous other factors. The short answer is we usually work with the assigned rep or wait for a fresh assignment if they are uncooperative. As to the company refusing to send an agreement, they are obviously trying to trick you into making a large payment against the full balance. If you would like assistance, please order one of my training/coaching packages. You are up against professionals, and you need professional advice, not just generic answers on blogs or forums, etc.

  52. I’m desperate to improve my credit score, but my divorce ruined my credit and I have a few debts that won’t fall off for another 3 to 5 years. I’m willing to settle the accounts, and some I could pay off 100%. If I do as you’ve suggested and get the settlement letters with everything you require, and then the creditors report that debt as “settled for less than full balance,” will it improve my credit score? If not, should I just not waste the money trying to settle? How do I get my credit score up?

    • Jenny, settling these accounts will not immediately improve your credit score. Even paying them in full will not remove the prior late payment history. However, credit-worthiness does not only entail your credit score. Lenders also look at your debt-to-income ratio, and every settled or paid-off debt will lower that ratio and thus improve overall credit-worthiness. But the fastest method of improving the score itself is to add back positive payment history as quickly as possible. One way to do that is through the use of secured cards, so positive payment history starts flowing back to your credit report. As time goes by, the junk will age, and the new history will begin to offset the old and boost your score.

  53. Hello Charles,

    I had a Bank of America UPROMISE WORLD MASTERCARD
    to which I stopped making payments summer of 2010. As of this past summer, the Upromise program has changed hands and gone to Barclays Bank. When this happened the account number changed as well. Barclays recently assigned the debt to Enhanced Recovery Company LLC, which has agreed to settle for about 30%. Of the original balance. The payment is due tomorrow and I have received the settlement letter, which includes everything you mentioned. The problem, though, is that the creditor is Barclays (not Bank of America), the account # is not the original one, but the new acct # assigned by Barclays instead, and under product name it says Upromiseconversion and not Upromise World Mastercard. I asked them either to change the above or to include the old names, acct # etc. as well, but they said they could not do that because ” this is the current and legal identity of the account since Barclay’s took Upromise over from BOA. We have a legal obligation to credit you for paying a current and valid account not one that no longer exists.” Under the circumstances I am hesitant to go forward with the payment for obvious reasons. What is your opinion? Your input would be highly appreciated. Thanks so much and have a great day!

    • Mr. Poe, your old account is “nevermore,” quoth the raven. 🙂 When a creditor sells a portfolio to another unrelated bank, all the account numbers have to change, so this is normal. As long as the settlement letter matches up with the identifying account information you have for the Barclay’s product (per any notices or statements you received after the account changed hands), then it should be alright to proceed if the letter otherwise meets the criteria listed above. Product names are irrelevant anyway, and the only thing that matters for ID purposes is the account number itself.

  54. Hello Charles,

    Thank you for all you do. I received a settlement letter from a collection agency that is respresenting a court for traffic violations that I incurred years ago. After giving me a settlement offer over the phone, I pushed until I received a letter and received it yesterday. I just want to make sure the verbage on it will hold up in a court of law if I live up to my end of the agreement and they break theirs.

    In the first paragraph it does list the account number and all cases that are linked to this account. It does mention that the agency will accept a settlement in full for the amount agreed upon (just over 3 thousand)However the verbage goes on to say that upon clearance of ALL funds, it will notify the client that I have satisfied my account. Well at the bottom of the letter, it states “that at the time of this letter I owe six grand and change”. I just want to be sure when they say settlement in full, they are referring to the agreed settled amount and not the amount currently due at the time of the letter. Thanks for any help you can provide.

    • Ron, it’s difficult to approve/disapprove a letter just from a description rather than an actual copy. If it really has the phrase, “six grand and change,” that sounds shoddy and unprofessional to me, but that does not necessarily mean it’s unacceptable. The main thing is that the transaction is defined as a settlement, includes the proper account references, and states that if $3,000 is paid by the agreed date, the matter is settled. It’s normal for the letter to also give an indication of the actual balance at time of settlement.

  55. We are looking to refinance our home and in the process found out that we have a lien on our home due to a debt from my past. 5 – 6 years ago my husband and I paid off any past debt (or so we thought) that I had. We were leeving my credit score alone to allow time for it to clear. My credit score now is over 700! We were so excited until we found out about this lien. The orriginal debt amount was $4500 and with interest, attourney fees and court cost the total is now $11,000. At this point, what is my best option? Do I contact the attorney’s office and try to negotiate a settlement for the account? Thank you so much for your time.

    • Kim, it’s difficult to provide detailed negotiation advice in a short blog reply — my training course on this subject is almost 8 hours of audio material. But the short answer is yes, you will need to negotiate a resolution with the law office that obtained the judgment against you. You can probably settle it for a discounted lump-sum if this lien has been in place for a number of years — the older it is, generally the easier it becomes to work out something within your means.

  56. Hello Charles,
    I am dealing with Midland Credit Management. After 3 calls the rep finally mails me a settlement letter. The letter is dated 3/20/2013, with a due date of 3/22/2013. The letter was delivered today, 5 days past the due date. Is this a debt collection tactic or is it acceptable to pay today?

    Thank you

    • Stephanie, today is March 28th, so you have an already-expired letter, which is totally unacceptable. You should insist that they *fax* you a revised letter with a due date in the future.

  57. Received settlement offer dated today via email today without the due date on it. The letter had everything else on it but the due date and collector null and voided the settlement and hung up on me because I requested that they resend it with the due date and they refused to. I tried to explain it was for my protection so they wouldn’t apply it on the balance instead and try to come after me for the remaining amount owed. The guy told me we were on a recorded line, blah, blah, blah….I told him good ‘cos I didn’t think I was being unreasonable. He said I was stalling and to hurry up and pay ‘cos their office was closing. Do you agree the letter should have the due date? What now?

    • Rio, settlement letters should include a due-date, or expiration date for the agreement, otherwise the agency or creditor could simply say that you were “late” in making the agreed settlement payment. You were dealing with an agency at month-end when the volume is higher, so try again in April.

  58. Charles, great info. Just got a question or two. I don’t got debt in collection, but do you think doing debt consolidation a good route to go? My husband is out of a job and with one income it is hard trying to keep up with all the bills? Is there a good company out there to do debt consolidation with?

    • Bethie, that would depend entirely on what you mean by the term “debt consolidation.” I suspect that you mean something different by this term than I do. Please read my free 32-page download for a full discussion on the range of legitimate options for debt relief, and then email me if you have questions, ok?

  59. I received an email saying “Confirming our recent conversation,our records reflect a current balance due of $6,000 arising from the credit card .We are authorized toca crept 75% of the balance due if paid in one lump have offered to pay 4,000 by end of next week .Is that email is a full settlement from debt collector were they put their name,address and phone number and file number?i hope you can help before I pay them

    • Joey, I can’t review a settlement letter (or email) by blog post, sorry. Email is acceptable in lieu of a fax, as long as it meets the above criteria, but you should request that a hard copy also be mailed to you.

  60. I recived a debt collection letter from a company claiming I owe them money from a account linked to a card I was forced to cancel due to several unappoved charges. everyhing in the letter matches the above critireia. however when i did a little more reserch hardly any of the info on the letter matches what is listed online.the address,phone number,and even the company website do not match up. is this an elaborte scam or does it sound legit.

    • Nathan, I can’t answer your question based on the information you have provided. It would depend on the company in question, whether you’re talking about an agency, a debt purchaser, or the original creditor itself, and so on. But the main thing is that *your* details match up correctly — especially the account number and the terms of the agreement.

  61. I unfortunately made a settlement agreement for three amounts over the next three months.He told me I would receive the letter after the first payment was made. No letter after the first week. Then I called them and told them I had not received a letter. They said it would be sent out in 7-10 days. Still no letter. The second payment hasn’t come out. What are my options, and yes the have my banking information.

    • MTP, it is difficult for me to advise you without knowing a good deal more about the situation. In general, what I would recommend is that you not make the second payment until you have a firm letter of agreement in-hand. Put your foot down and insist. Try the tactic of telling them you are borrowing to make these payments, and the person you’re borrowing from won’t lend you the money to cover payment #2 or 3 without first seeing that you have it in writing. That usually breaks the logjam.

  62. I have a settlement agreement letter in my hand. A credit card company accepted my offer of 2700 on a 4500 debt. (They refused lesser offers).
    Everything that you said to look for on a settlement letter is here. BUT the payment schedule is wrong. It has six payments listed in the payment schedule. These add up to roughly $2000. So there’s $1000 missing. Can I hold them to this printed, signed, payment schedule? It’s wrong, but they agreed to it. It does say the agreed upon amount above, but I’m just wondering how to respond to this error.

    sorry, the pmt schedule is $700 short, not $1000.

    • Bella, I recommend against relying on this error to “save” an additional $700 on the settlement you negotiated. The risk is that they will renege on the settlement unless you pay the full $2,700 agreed to, and then you’re out $2,000 in payments with them pursuing the remaining $2,500 balance all over again. The settlement letter should precisely match what you agreed to in the negotiation. You should contact the agency, inform them of the error, and get an updated settlement letter.

  63. Hi Charles,
    I have a default judgement against me. It is originated on October 2009. The amount of money 3200.00 + 8% annual interest. I am living another state now. I want to settle this paying some portion. I went two lawyers regarding this issue. But they said they are not licened that state.
    I saw your advice helped many people.
    Would you please help me giving some sort of advice how to negotiate and settled the judgement.
    Thank you.

    • Egress, the short version is that you should call the law firm that got the judgment against you, make an offer, and negotiate until you reach a solution that is within your means. Honestly, I cannot condense an 8-hour training course on negotiating settlements with creditors into a short blog reply. If you want help, please order one of my programs, ok?

  64. I recently received a summons from Portfolio recovery. I did answer in magistrate court. What I would like to do now is offer a settlement. The account has been sold from original holder to PRA. Should I call at this point or send a letter? I have 3-4 other cards with a total less than 5K for all debt. I would like to consolidate and pay them off. Is that a good plan>

    • Angela, I can’t provide detailed negotiation advice in a blog post, sorry. You are basically asking me to condense an 8-hour training course into a brief reply. As a tip though, I do recommend you negotiate by telephone instead of letter, as I stated in the above article. But if you have been sued, then you should also get assistance from an attorney. See if someone at NACA can help,

  65. i settled for 30% on my account and i received a letter from CA saying that they can accept a lump sum settlement as long as payment is received, but at the same time this letter has total balance which is 70% of my original balance. also they told me that i will see updated info on my credit within 6o days. is it normal?

    • Olga, the updated info within 60 days is pretty typical, but it’s not normal to have the balance listed incorrectly. It’s not really even a requirement that the balance be listed at all, since the settlement agreement is for the reduced amount. But this type of error can cause a problem down the road if they have the balance listed incorrectly in their system. I suggest you get a revised letter reflecting the balance accurately.

  66. Thank you for an informative article! I have a debt that was turned over to an attorney who has filed suit. The amount is approx 1700. In speaking with him, I offered to pay the debt in installments. He is requesting a letter from me laying out the amounts I am proposing to pay. Is it ok to send such a letter and are there must include wording in the letter?

    • Frank, yes, it’s ok to send a letter proposing a payment arrangement. There is no set language for such a letter, but the basic idea is to start with a few sentences explaining your financial hardship situation, then stating your proposal and asking them to accept your offer.

  67. Thanks for the tips. Unfortunately, I found your advice same night I made a payment without a written agreement but with a close friend credit card because I felt uncomfortable that they were constantly pressuring to give them my checking account info. I called them the day after payment to request a letter and they stated they can only send a receipt; can I send them a letter to have them sign what . If I get 3 settled payments, on three different accounts for less than what was owed in same year, how it affects my credit and for how long? What is your best advice. What should my letter say, since they got the payment first?

    • Nina, since you did not obtain a letter prior to making payment, your best bet is to request a “settlement paid” letter. You don’t need to mail something for them to sign, and they would probably refuse to sign off on your document anyway. Since you paid via credit card, if they give you any static about issuing a satisfaction letter, then you could dispute the charges with the credit card bank and get the payment reversed. To your credit question, settlements are damaging to credit score, but even though negative entries remain for 7.5 years from default, they don’t carry much weight in the scoring formula after approximately two years.

  68. I owe a CA for a broken lease at an apartment complex. I tried to pay the complex direct before they sent it to collections. My ex roommate did not cooperate and I stopped making payments. It has been with the CA since 12/31/2008. I was only called a handful of times and finally received a letter just last month. The original debt was $3,672 and now after interest is $4,354. I sent a letter trying to settle the debt about a week after receiving their letter. The offer was for $1,085. The CA quickly denied the offer and any lesser amount. Should I now call them to try and reach an agreement?

    • Abe, maybe, but not necessarily. It would depend on whether the debt is beyond the SOL period for your state, and also what you are trying to accomplish. There is a difference between settling it to resolve the debt itself (and any potential legal risk associated with it), vs. trying to improve credit standing. If you are beyond the SOL period where they can file suit, then aside from the motivation to resolve an old debt, the only practical reason for doing it is to get any negative credit entry removed upon payment.

  69. Thanks for the reply Charles. The SOL is not up for 2-1/2 years. I want to resolve this debt to eliminate any chance for legal action as well as improve my chances to rent or buy a house in the very near future. I would love to accomplish all of this while paying as little as possible.

    • Abe, then your best bet is to keep negotiating. As long as it’s with a collection agency and not a law firm in your state, then you should still have a chance to work out a settlement.

  70. I received a settlement letter today from a collection agency for the agreed amount of settlement. However the letter states “If you complete this payment plan and our company is reporting our company’s trade line for this account to the three major credit reporting agencies, our company will report this account as settled.” If they reported it as in collections and I settle it don’t they have to report it as settled? Should I insist on it being reported?

    • Brenda, the clause you’re quoting is boilerplate included in many settlement letters. All that it means is that the letter covers situations where an account is already being reported to your credit file, as well as situations where it doesn’t presently appear on your report. If, for example, it was originally a business debt, then it might not appear on your report. If that were the case, then you certainly don’t want it to be reported now! Why add a negative entry for an account that doesn’t appear? Or, it may be that this is a purchased account, and the debt purchaser has not recorded their own entry for the account. So you don’t need to force them to report an entry. If the account does appear on your report, then it will get updated as a settlement after you meet the terms of the letter.

  71. This article is great! SO much information, thank you! I got a settlement offer for a debt that is upwards of $40K, and Option 1 is settle with a one-time payment of $0.00. Option 2 is $400 for six months, and option 3 is $600 for 12 months. Obviously option 1 works for me. Even though this is most likely a typo, are they bound to that amount? I want to send them an acceptance letter with a copy of their letter enclosed. Will that work? Appreciate ANY advice you can give, thank you!!

    • Krystine, glad you liked the article, thanks. I suppose an argument could be made that the creditor is bound by the offer letter, but they would be likely to resist, and fight you on it. To me, it makes more sense to reach a mutually agreeable figure, and then get a fresh letter written up to document the settlement. If you try to exploit their own error to pay nothing, they will probably just sell the debt to some other entity, and then you’ll still have to resolve it anyway.

  72. Thanks for all the info! I received a summons from a debt collector/law office in mailbox. I called them and negotiated a settlement of $2,500 on a $4,500 debt (not bad considering the circumstance). I gave them my secondary checking account info and received a debt settlement letter by email. They withdrew the money within the time frame of the settlement letter, but I received a letter by mail dated one day after the settlement letter stating that I authorized a payment “in accordance with your temporary hardship agreement with our office” and that ‘your agreement is temporary and the balance on the account may be called due in full at any time.” This is certainly not anything to which I agreed. Can they do this somehow? What should I do?

    • Mike, it’s common for creditors to send out two letters, the settlement letter itself, and then a payment authorization confirmation. Because the confirmation letter does double-duty to cover other types of repayment situations (not just settlement), the language can indeed be a bit contradictory or confusing. As long as you have a solid settlement agreement letter, it should be fine, but it’s never a bad idea to reconfirm everything with the creditor just to be on the safe side.

  73. Thanks for the wealth of information.
    I currently have medical bills that have been sold to a collection agency. I only have my credit report to go on so far as the amount I owe. They have never sent me a bill. Should I add up the amounts on my credit report and contact them to settle.? What percentage on the dollar should I offer. The amount is less than $500. I was thinking half. The bills are listed individually (each having a different account number) Should I list all the account numbers and amounts in the settlement letter? Also, the SOL is 7 years in my state for an item to be removed. Is that from the date reported? date opened? date of last payment? what is the status date?
    thanks soo much in advance as I await your response.

    • Susan, it sounds like you are mixing up the 7-year period in which negative items can be placed on your credit report with the Statute of Limitations for legal action by a creditor. The reporting period has nothing to do with the SOL for legal action. Technically speaking, derogatory credit entries are dated from the point of default where you stopped paying. If it wasn’t an account involving payments, then it should be based on the date opened. Also, it’s quite probable that the debts have only been assigned, not sold outright, to the collection agencies. Sales are possible, but far less common with medical debts than with credit card accounts. Regarding how to go about settling these claims, I can’t provide detailed instructions via a brief blog post, sorry. Generally speaking, the correct approach is to call each agency by telephone, verify they are handling the claim, ask the current balance, and then offer around 25% to start. On smaller balances we usually accept 40-50% settlements.

  74. How do you know if you are choosing the right Credit Card Settlement company from the multiple letter you receive in the mail

    • DC, are you kidding me? 🙂 You should not choose ANY of those companies. My entire website is an explanation as to why consumers should NOT hire debt settlement companies! If you need to settle, buy one of my programs, do it yourself, and save a ton of money in fees.

  75. Hi Charles,

    Great information. I have a 17yo default judgement in one state that is now causing me drivers license renewal issues in another state since my old DL is suspended in the first state. My only recourse it seems after talking to a few attorneys and DMV is to settle the judgement to clear up the driving record.

    Any other tips on negotiating a settlement less then whatever it is at this point? Also, years ago, I received a letter from a subrogation company and not the original creditor/lawyer. Should I start by contacting the original creditor/lawyer to find out who owns the debt at this point and who I should negotiate with?

    Thanks in advance!

    • Jeff, I’d start with the law firm that obtained the judgment against you and see if they can tell you where it has been sold. First, you want a clear understanding of the exact current balance, as judgments usually accrue interest while unpaid. After 17 years, I imagine it’s a lot larger a figure than the original amount of the judgment. One approach is to ask if they will take 50% of the amount of the original judgment, and then fall back to paying the original figure at 80-100% without all the added on interest over the years.

  76. Hi Charles, my husband had a wage garnishment sent to his work for one of his creditors. The next day we called the creditor and asked if we could do a lump sum settlement. They agreed to 1500 so as soon as we got the settlement letter we sent them the check and had a signature confirmation put on it. They received the check on Monday but we haven’t heard back from them. My husband as called and left voicemail messages for her and hasn’t heard back. I’m afraid that he’s still going to have money taken out of his check….what can we do if his payday comes and the money is taken out?

    • Amanda, if money is still taken from your husband’s check, then you will need to call the company you settled with to have them reverse the garnishment action. If you can’t reach them or they won’t return your calls, then your best bet would be to file a formal complaint with the Consumer Financial Protection Bureau. You can also look for a local legal aid service to assist in pursuing recovery. As long as you documented the settlement correctly, you should be able to get it reversed.

  77. Hi,
    I spoke to you on the phone last year about this. You gave me the confidence to handle this situation on my own. My business partner and I closed up our business last year and we both had signed personally for 50k line of credit. The funds were not available so the bank, JP Morgan Chase came after us.

    Long story short they recently offered to settle for 25k. I countered that I would pay 12.5k and if they wanted they could go after my ex partner for whatever they wanted. They accepted that and sent me a ‘perfect’ settlement letter saying that they will accept 12.5k as settlement in full on the payoff balance of 51662.15 on the above referenced business loan. I called the agent and she insists that this is just for me, he still has to deal with her. My lawyer says that once I pay this the debt is settled, period. It’s possible but extremely unlikely that my ex partner has already settled with them. Can they continue to go after my ex partner after this is paid?

    I have recommended you to a few friends who have debt problems.


    • Paul, thank you for referring others to ZipDebt for assistance. If the LOC was opened jointly, so that you and your business partner were both equally liable, then a final resolution would normally entail a document pertaining to both of you. If the settlement letter you have from Chase only releases you from any further liability, but does not release your partner as well, then my interpretation is that it would still leave your partner exposed to further recovery efforts.

  78. Hi Charles,

    I received a settlement agreement with the lines “This officer is void if previous settlment arrangements have been made.” Is that something I should worry about?

    The same company sent me a different letter which I declined. That letter also had the same wording.

    • RS, I don’t see this clause as presenting any problems, provided the letter otherwise meets the criteria I listed in the article. The only exception would be a situation where you had actually previously agreed to a different settlement, which might lead to confusion. If not, then it shouldn’t be a problem.

  79. I am helping a family member that agreed to a settlement paid it. The credit said the letter is in the mail but they have a no fax/e-mail policy. This is one of the big banks. My family member is trying to obtain a mortgage and we need the documentation. We were told that we would receive the letter within 10 business days and it’s been 15 business days. This is not the only document they said they mailed and hasn’t been received. Is there any way to demand a copy be faxed or mailed?

    • Jerry, there are some creditors who will only send settlement letters by regular mail, not fax or email. All you can do in situations like this is call the creditor and try to escalate the matter to a supervisor. Explain why you are asking for an exception. Don’t make it about lack of trust. It’s also probably not a good idea to talk in terms of a mortgage application, but you can say that your family member needs the letter to qualify for new housing. If the settlement has already been paid, you can also take the approach of asking for a zero-balance or closure letter, which should prove to the mortgage lender that the situation has been resolved to the creditor’s satisfaction.

  80. Charles thanks for your response. The creditor will not provide a zero-balance or closure letter. They said it would take 30 to 60 days for the letter to go out and that there is nothing they can do about it. We are going to have to wait for it come in the mail and they refuse to fax or e-mail the letters as it’s against their company policy. I assume I have no other rights than to just wait?

    • Jerry, you can always file a complaint with the Consumer Financial Protection Bureau, on the basis that the creditor has failed to provide an agreement letter as they had promised.

  81. Charles. Is forgetting to write “settlement in full” on a cashiers check a bad thing? I’ve got the settlement letter and copy of cashiers check saved of course. I did put the firms file number on the check and use overnight delivery with a signature required. But now worried about forgetting to write “settlement in full”.

    • Bob, it’s not necessary to write anything on the check. In fact, I recommend against putting anything other than the account number on it. If you have a proper settlement letter in the first place, there’s no need to add anything on the check itself. And in some cases, it can be interpreted as a “restricted endorsement,” which can cause the check to be rejected. So you’re fine if the letter met the criteria listed in the article above.

    • Great question Bob. I am up reading your blog at 2:45 am, almost as late as your 4:33 am post. Thanks for posting, I had the exact same issue where I forgot to write the same thing and reading about how if I didnt do it, I’m doomed all over the internet was about to make me have a total nervous breakdown!! Thanks Bob and Charles for allowing me to breath again. BTW, awesome blog Charles about settlement letter myths and how faxing is ok. ur the best….really.

  82. Charles, my husband and I attempted to short sell our home for over a year when we relocated to a new state for work. In the end, the company that held our HELOC for $23,000 sold the loan to a new company and so the short sale was denied (we couldn’t get both banks to agree at the same time). The new owner of the loan has only had this loan for about 6 months, but we have not paid on it since we left, about 15 months ago. I have received a letter or two telling me the balance owed, but no other contact from them. I tried calling them immediately after the foreclosure to ask about settling but they wanted all of our income/bill information and I had read that I should not provide that (it’s not relevant). What should I do at this point? I would like to pay a couple thousand to settle and end this, but since the loan is “new” to them is it too soon to get a good settlement? If it matters, the entire amount of the HELOC was spent to improve the home and we have receipts. The first bank more than covered our debt to them in the acquisition, but they have no obligation to the second loan. Also, if it matters, the first bank that held the HELOC (BOA) was at a couple of points willing to accept about $1000 in the short sale settlement. The agreements on both banks just never happened at the same time.
    Thank you for any advice!

    • Jan, I would need to know a lot more about the situation before I could advise you. The outcome will depend on who bought the debt, where you live, what shape you’re in financially, and various other factors. Via my other website at, I offer a paid consultation for this type of issue. The cost is only $150, and includes a phone session to review everything, as well as 30 days of follow-up support by email.

  83. Hi. I’ve let some private student loans go into default while paying off my federal loans (I know, I know) and recently I got a letter from Real Time Resolutions that says that I can settle for 10% of what is owed – $17,000 – Is this true? I feel like I’m probably being scammed into paying $1700 that I barely have or about to be summonsed to court when I make contact.

    Should I call them and accept settlement? Does this seem on the up and up?

    • Jay, RTR is a debt purchaser, so they probably paid pennies on the dollar and therefore it’s probably a legitimate offer. But I would need to see the offer letter itself to be certain. FYI, I do offer one-time document review for $100, a real bargain for peace of mind. 🙂 Here’s the link where you can order the service.

  84. Hi! I am glad I found your blog. I had stopped paying the minimum payment on my credit card by the end of 2006. Credit One LLC. has been calling me for collection on this debt. I wrote them a letter last month and offered them to pay certain amount. I got their reply today in which they agreed on it and have asked me to pay it by 9/20/2013. Before I read your blog I didn’t know about SOL. I am in the state of Texas and here the SOL is 4 years. Also their letter head only reads their company’s name but no address underneath. Is it okay!
    Thanks for your reply!

    • Nick, on accounts beyond the SOL period, settlement is optional and probably won’t do much to improve your credit score if the damage happened in 2006. In fact, it should already be dropping off your credit report soon anyway. See if Credit One “re-aged” the account by adding a fresh entry on your credit file. If yes, then you should get them to agree to delete this tradeline if you accept the settlement. I can’t say whether the letter itself is acceptable without seeing it, but at least get them to fax it to you with a cover sheet that shows their address.

  85. Thanks Charles! One more thing , is it okay to send them the payment at Post office box address?
    Thanks again! Your input means a lot to me.

    • Nick, yes, P.O. Boxes are normal. Just be sure to use a method like Fed Ex where someone has to sign for the envelope.

  86. Hi,
    Ive been sued by a Credit card lawyer for a CC thats been charged off by Washington Mutual since 2009 and it was $3,893. I appeared in court and the lawyer called me outside and asked me how Im going to pay for it or if i can i pay it.. i explained my situation and I told him if i can settle it,he said to call the agency and to offer and reschedule the court date in 2 months. I sent a dispute to validate the account because i was confuse why it double the amount from the original creditor and went up to $7,609, I did the validation letter even after 30 days of that summon and its been more than a month but no response of my letter.. When I checked my credit score today it says “account information disputed by consumer meets FCRA requirements” what does that mean? and so I sent a settlement offer of $1200 but they did not response… what should I do next?Im not good in conversing in phone,it gets me so nervous and it makes my english go crazy,or should I just wait until the court date next month to meet the lawyer again or should I face the judge? I really need help on this cause I dont wanna go on bankruptcy, Im trying to build my credit again if I can.

    • Jenny, the notation on your credit report means that your validation letter was treated as a dispute, but the creditor reported that the information meets the FCRA requirements. As to what to do next, I can’t provide detailed negotiation instructions via blog post, sorry. Your best bet is to get on the phone with the law firm that sued you and negotiate a settlement within your means. Get some help from a friend on a 3-way call if you have trouble with English when you’re under stress. It would be better to settle it out of court than let it go to judgment.

  87. Charles, I LOVED your ZipDebt CD collection and consultations. Thanks so much.

    I settled and paid off Sacor Financial for $12,000. I asked for a Paid In Full letter. They said they sent it to my lawyer. But my lawyer has never received it. Twice!

    Should I continue trying to get a Paid In Full letter, or does it really matter?

    Again, thanks for your invaluable expertise. Loved the ZipDebt course.

    • Mike, good to hear from you. Glad the course and coaching were helpful to you in getting all your debts resolved. 🙂 Post-settlement letters are something we try to collect as a safety precaution, but as long as the settlement itself was documented properly to begin with, it’s not a big deal. The reason we want them is to make it easier down the road to prove a settlement was paid on-time per the settlement agreement letter, just in case any inappropriate collection activity should take place later. Check your credit report to see if Sacor reported the settlement. If the balance is now showing as zero and it’s listed as a settled account, you’re ok without the closure letter. Also, you could always prove you paid it on time by producing bank statements. So not a big deal.

  88. Charles, I loved your post; allot of useful information. This is the first website I find that actually “makes sence”. Thank you so much. My question is, my husband passed in 2010, and left a debt for an equity line of credit in the amount of $215K plus. The account is in the name of the estate of my husband. When my husband took out the loan, the loan was for interest only payment. I have called the bank to try and put it in my name, and they said NO. They said that it cannot be changed. I want to offer the bank a settlement, since this is causing a financial burden on me. I have tried to re-finance, but I can’t because of my credit. They told me to write a settlement letter, but I don’t know where to begin. Your expert advise would be greatly appreciated. Thank you.

    • DC, settlement of a home equity line of credit (HELOC) is different from settlement of a credit card obligation. The first thing is to analyze whether the situation even makes sense for settlement. If you would like assistance, please go to my other website at and order the $150 consultation package. That will include a phone conversation to go over the situation and come to a conclusion, as well as 30 days of follow-up support by email.

  89. Hello Charles, Great website and information.

    I incurred $70,000 of credit card debt with 4 creditors. The last time I paid was in 2010.

    1) What approach suits 1) the original creditor (ie Discover) versus a company that bought the debt?

    2) If you incurred the debt in one State (Alabama) but moved to another State (New York), which state statute applies

    3) Other than a Chapter 7 filing…


    • RJ, most credit contracts have a “choice of laws” clause that would permit them to shift litigation to your current state, so I would assume the 6-year SOL for NY would apply in this situation. The approach is basically the same whether the debt is still owned by the OC or had been sold. You get on the phone, start low, and haggle the best deal you can. FYI, my view is that debt settlement provides a great alternative to Ch. 13 BK, but if Ch. 7 BK is available to you, that remains the lowest-cost option with the fastest turnaround.

  90. Hello Charles, I recently received my settled in full letter. It has almost all the needed points on the letter except the “amount of payment made” The collection agency did not included the amount paid to settle the account. does this make my settled in full letter invaild, or legally vaild? Just wondering if I should request another with the amount that was paid? Thnx Ron

    • Ron, if you are talking about a letter sent prior to making payment, as discussed in the article above, then it absolutely must state the amount to be paid on the settlement or it’s not a valid agreement document. However, it sounds like you are not referring to a settlement letter, but rather a satisfaction or closure letter, one that came *after* you already paid an undocumented settlement (very risky!). If so, then it’s fine, since it’s just confirmation the matter is resolved. There is a world of difference between these two types of letters, and the above article pertains solely to the letter documenting the agreement before you pay it.

  91. Hi Charles, Thank you for the reply. The question was pertained to “Satisfaction letter”. So from what you stated on your reply, My “satisfied letter” should be ok, right?

    Before my settlement, The prepayment settlement letter did have all the needed points, as you stated in your article.

    Can you give me more details on why you stated “very risky”? or was it because I forgot to make it clear that I already got the settlement offer letter in my original question. Sorry If I left some facts out.

    • Ron, I said “very risky” because your initial post made it sound like you didn’t have a settlement letter prior to having paid the deal. The “satisfied” letter is just an added precaution on top of the original settlement agreement letter which defines the terms of the transaction. It sounds like you are fine now.

  92. Hello and Thank You for the valuable insight. I am currently dealing with a collection agency in a past due cc bill for about $1500 . They offered a settlement over the phone for about 45% of total due, but told me they couldn’t put it in writing. I am sending a letter requesting that they do so before I send any payments (registered mail, of course) any other suggestions for me??

    • Erin, good for you on sticking to your guns. No letter, no deal, no exceptions, so you did the right thing by insisting they provide a written agreement before you pay. When an agency is unwilling to do this, the safe assumption is that they are being tricky or cagey. Documentation of settlements is totally routine, and there is no legit excuse for not providing one to a consumer agreeing to settle. Stay on it, and don’t let them talk you into paying without a letter that meets the conditions I described in the above article.

      • thanks again, Charles… I am grateful for the help. I am still waiting for this collection agency to send me a settlement offer in writing.They call my home , oh about 50 times a day and I tell them the same thing every time, no letter, no deal, no exceptions.They tell me the creditor, GE Capital retail, doesn’t do settlement letters, and they wont send anything. So I am just waiting it out…any other suggestions in dealing with this agency?? I am thinking of going to the better business bureau….

        • Erin, this agency will eventually lose the assignment, and then the file will transfer to a different (and hopefully more competent) agency where you can get a proper settlement letter before paying. FYI, I’ve personally seen many hundreds of settlement documents for this creditor, and it’s no problem at all for the agency itself to send a letter documenting the settlement. So they are just blowing smoke and harassing you meanwhile. BBB is one option, but a better bet would be to file a complaint with the new Consumer Financial Protection Bureau, which is currently looking at the debt collection industry.

  93. Charles,
    First of all, thank you for sharing your valuable knowledge. I have a question for you. I have a judgement against me that I would like to try to settle for about 45% of the judgement. I do not want to spend time on the phone with the attorney of the debt buyer. Should I contact the debt buyer agency or send a letter requesting a settlement letter from the agencies attorney?

    • T, people often try to negotiate by letter because they are fearful of getting on the phone. But it’s very unlikely you will get the result you want via that method, and the creditor will simply refer you back to the law firm if you try to call them instead. The best method is to just get on the phone and haggle! You’ll just be talking to a collector anyway, as it’s rare to actually speak with the attorney outside of court.

  94. Hi, Charles.
    I have multiple collection accounts and am trying to clean up credit. I have read that “Payment for deletion” letters are a good way to completely remove credit entries on your report and that, furthermore, deletion of a delinquent account looks much better to lenders than “account paid” after a lengthy history of collections on a given account. Is it true? The way it has been described to me is that rather than sending a settlement letter to a collections agency, as you also advise against, a letter requesting a credit entry deletion agreement is sent requiring a return letter on their letterhead stating that the collector agrees to remove all information regarding said debt from the credit reporting agencies in return for payment in full. Will this work?

    Thank you

    • Alex, payment for deletion is actually very rare, contrary to lots of misinformation about this online. It mainly only pertains to very old collection accounts past the Statute of Limitations for legal action, but still within the 7.5 year reporting period for negative credit entries. Even then, it really only pertains to companies that purchased the debt and placed their own entry on your credit report, and not the charge-off entry by the original creditor.

  95. Hello Charles! I found your site via Google. I’ve been sued by Persolve for nearly $14,000 (nearly $20,000 with their phony interest/attorney fees). After receiving the summons, I filed my answer with the court (in Calif.). I really don’t expect to win, but figured I could stall judgement for a few extra months, and it would be a summary judgement vs. default judgement. Because of that, I’d like to try and settle with them before a judgement happens. I’ve read that a debtor should offer between 25-50 % of the debt amount to begin. I’ve also read that Persolve does not like to settle. I have a relative who will loan me enough money, but it’s not enough to pay the entire amount of $14,000, by any means. What are my odds in getting them to settle this before judgement? Since $7,000 would be 50%, would it be insulting to them to first offer $3,500 – 4,000, see what they say, and go from there? I could go as high as $10,000, but would prefer to stay well below that, obviously. Any suggestions would be greatly appreciated! Thank you!

    • RevRock, I really can’t help much on an in-progress lawsuit, sorry. But no offer is an “insult” if it’s made sincerely. The general rule is to start low around 20% and see what they counter with. You also should talk to a lawyer though — there may be a violation or two that could form the basis of a counter-action. Talk to a NACA lawyer before you do anything else.

  96. I recieved a letter today from my bank saying they were willing to settle my car loan debt with X amount of money. This is the second letter they have sent but with the amount they are willing to take in the letter sent today, I would be able to pay the loan off and get my car back. I called the guy who is handling this case. He told me that the letter is computer generated and that the amount they will take is not what is on the letter. Its about 3x the amount that is on the letter. Basically he told me to disregard the letter. I wanted to know how this is possible for a bank to send out letters that they have no intention on honoring?

    • Shamekka, it sounds like a bait-and-switch tactic, where they mailed a lowball offer to get you interested and on the phone, then are quoting a much higher figure to resolve the balance. I wouldn’t rely on the strength of that letter when dealing with such an under-handed or incompetent lender, since there must also be confirmation from the rep that the settlement is as stated in the letter. Based on what you’ve reported here, I suggest you promptly file a complaint with the Consumer Financial Protection Bureau, as well as the Attorney General for your state.

  97. Charles,

    I received a settlement letter with all the requirements you describe above it must include. There is however a statement at the bottom that says, “The statements made herein are intended for settlement purposes only and can not be constructed as admitting any of the within information.”

    Discover Bank filed a judgement against me in 2009. They are accepting a 50% pay off if I pay by the 30th of this month. I had an attorney charge me $100.00 to review it and said he is not telling me to agree or not to agree. Isn’t that why I paid him?

    Please advise.

    • Julie, sounds like a typical attorney, hedging rather than providing a clear piece of advice. Maybe you should ask for a refund if you’re not happy with the service provided for $100. A review should include a clear indication whether or not the letter is acceptable. Anyway, without seeing the letter I can’t say for sure, but it sounds like they added that sentence to cover themselves in case you try to have the judgment vacated based on statements they have made in the settlement agreement letter.

  98. I owed on a credit card years ago to capital one and charged off i want to settle and received an email to settle for $500 is this valid enough for them to report to my credit report showing settled and is proof enough i paid? this debt was from 2007, by paying will it renew the statue of limitations or will it be ok and showing settled on my credit?

    June 22, 2014
    Reference number
    Org Creditor: Acct# Amount Due:
    Dear Sir or Madam:
    LVNV Funding LLC Capital One Bank
    xxxx-xxxx-xxxx-1234 $2566.49
    Convergent Outsourcing, Inc.
    800 SW 39th St • Renton, WA 98057
    TEL: 800-###-#### •
    FAX: 206-###-#### •
    Our client has authorized Convergent to settle this account for a total of $520.00
    Payment required as follows:
    Your payment of $520.00 is due in our office by 06-26-14
    You may endorse your payment(s) “Account Settled”. Please note that our offer will expire if not fully accepted and performed per these terms.
    In the event your account has been reported to the Credit Bureau previously, once your payment has been processed, our client will update your credit bureau report indicating that this account has been “Settled in Full”.
    Convergent Outsourcing, Inc Toll Free 866-###-####

    • David, I’m replying to you after the due-date for the letter, sorry. If you did pay it, then it should be fine to document the settlement with LVNV Funding. However, be aware that this won’t affect the original charge-off entry placed by Capital One on your credit file. It’s very likely that LVNV Funding placed their own entry after purchasing the debt, and that is what you are settling. However, given that the charge-off occurred in 2007, it should drop off your credit report after 7.5 years from the date of default anyway.

  99. Hello!
    I received a settlement offer (pre-litigation) from a Collection Agency verbally over the phone. I asked for the emailed copy with terms, which I agreed to.. The letter looked good. It listed the total balance, then said if I paid X by such and such date that it would settle the total balance in full. So I paid the Settlement amount. I then requested a letter from them indicating it had been settled in full. Well, their letter says it was settled in full. But still shows a “remaining balance due” for the difference between the full balance, and that which I settled it for. I have contacted them numerous times requesting a letter indicating $0 balance due, because that was the settlement of the debt. I asked how can your company say I settled it in full, but then say I have a remaining balance due?! They argued with me stating that the only way it would say $0 due was if I paid the balance in full. I want to know if what they are saying is accurate or unethical. And if so, who should I file a complaint with. I have both letters, on their letterhead, dated with all information that would lead a person to believe they were settling the account in full, to be done for good. But now my fear is that they will sell this remaining balance to some other company and I will be pursued, or worse sued for it down the road. Any recommendations or advice would be so appreciated.

    • Sara, I would need to see the document in question, and understand which creditor/agency we are talking about. The main thing is how will it be reported to your credit file? If it shows as settled with zero balance, that is fine. It may be the creditor is only keeping an internal record of the matter. Check your credit file about 30 days after paying the settlement and see how it gets reported. If you want help, you can order my Document Review service for $100.

  100. Charles,
    Thank you for this valuable information. I received a settlement letter from RTR for 15% of my second mortgage balance. The letter meets all of the criteria that you mentioned above. I’m happy to pay the 15% and settle this in full, but I’m concerned that this will affect my credit. There is only 3 months left on the SOL (6 years in my state) and I’d like to negotiate the requested payment for removal of negative credit history. Is this something that you can help me with?

    • R.H., yes, I can help you, but there is more to be considered when deciding to settle a mortgage balance than the impact to credit. It will create a taxable event, and you will receive a 1099-C for the forgiven balance, to be treated as “cancelation of debt income’ unless you are insolvent as defined by the IRS. What I suggest is that you order my consultation package for second mortgages via my other site at The cost is only $150, and it includes a phone session (usually around 45-60 minutes duration) plus 30 days follow-up support by email.

  101. If a settlement. doesn’t have an account number is it legal.

    • Tiffany, it’s not a question of being “legal” or not. It’s a question of properly documenting the settlement. If there is no indication of an account number on the letter, then there would be no way to prove later on that you have settled this specific account. So I would never accept a settlement letter that did not clearly and properly identify the account to be settled.

  102. I reached a settlement agreement with Discover for a one time payment of $2000 on a $8000 debt. I received the settlement letter from Discover and mailed out money orders as payment the next day. They cashed the money orders but then wrote back with two cashier’s checks of $1000 each and a letter stating they were not accepting the agreement. In my letter to them attached with the payment it stated that by keeping or cashing the money orders they were agreeing to our established arrangement and the debt would be considered “settled in full”. My question is, should I return the cashiers checks to them and note I am declining to accept them as by cashing the original money orders sent as payment they accepted our established agreement? I feel, and it was stated in my letter, that if they had any issues/ concerns they were to return the original payment sent (money orders) and notified me of the problem issue.

    • David, the situation you are describing is very unusual. I don’t have enough information to advise you, sorry. I would have to see a copy of the original letter you received from Discover documenting the agreement, and also discuss the situation in more detail with you. If you want help with this, please order my Document Review Service on the A La Carte menu, thanks.

  103. Thanks for all the great advice on here! I had a few questions for you. A judgment was found on my credit report when my husband and I applied for a mortgage recently. I hadnt checked my credit report in a few months and it wasn’t on there back in May. The judgment shows $2491. I called the creditor attorney’s office to try and settle and offered $1200, which was all I had in the bank then. The lady I spoke with said that the actual amount due is $4100 and that this account couldn’t take a settlement…..HOWEVER, she would pass my offer on. This was on a Friday and she told me to call back on Tuesday. So I did and she said they came back with a counter offer of $2500. I can borrow that amount from my mom so I told them I could pay that. But after reading your info (thanks by the way!), I asked for a settlement letter. She said she would email it to me but I have yet to receive it. I know it’s only Friday but I called back and talked to the same rep. She said she would re-send. I have yet to receive it. My concern is that I’ll never get it. Would they delay in getting me the letter for some reason? She gave me her extension to call to make payment after I receive the letter. But I’m not sure how long I should wait for it before calling them and asking for a supervisor to get that letter since it had an expiration date of 9/28. They aren’t aware that time is of the essence because we are closing on our home on 9/30 and I’m in a bit of a panic of getting it taken care of. Any suggestions?

    • Jamie, the first thing I want to mention is that settlement of this judgment will not make it go away on your credit report. I’m assuming that your loan officer understands this and was only wanting to ensure that this obligation was resolved, so there would be no risk of a lien being attached to the property they are financing for you. On your question, there is no logical reason for a collection agency to refuse to send a letter, assuming you have reached a verbal agreement on the settlement. If it’s not getting to you by email, then I suggest you call again and ask them to fax it to you instead. You can easily set up a free inbound fax service online with eFax or equivalent.

  104. What if a release letter was issued by mistake from a Collections Agency? For example during negotiation, the dept collector faxed (or mailed) a signed “‘settled in full” settlement letter without receiving payment. Legally what does this mean? How should this be handled?

    I’ve heard of a case of this occurring recently.

    • Norm, first of all, I’m not an attorney so can’t comment on what it means “legally.” Also, it would depend on the exact content of the letter in question. A standard settlement letter without payment would solve nothing, as it’s necessary to be able to prove payment in order to demonstrate that a settlement offer was accepted and paid per the settlement agreement. If you’re saying the CA sent a closing letter indicating the account had been settled in full, that is a different type of letter. But I personally would never recommend to a coaching client that they try to smoke this by the creditor or agency. That might prompt escalation later on, and then it’s about who can better afford to pay their lawyers. It would be far better to resolve the matter with full cooperation of the agency involved. After all, the entire purpose of debt settlement is to fully RESOLVE each delinquent account so there can be no future possibility of collections, etc.

  105. I received a debt settlement letter from Qualia Collection Services for an old Kohl’s card debt. The only thing missing date due. I am within 30 days to dispute the validity of the debt. What do I do?

    • Justina,

      If you want to accept the settlement as offered in the letter, then just get them to issue an updated letter showing the due-date, so there is no misunderstanding that you did pay the deal on time. I recommend against disputing the validity if you are wanting to settle and resolve the matter. The lack of the due date is a very minor point as long as the letter otherwise checks out ok.

  106. My daughter has a judgement against her since 2011. Midland sent a “special refund tax offer”settlement letter for 65% of debt-3800$ settlement amount. My daughter is having some problems and wants to ignore this but I want to see it paid off as it is harmful for when applying for jobs. The DC office is located locally and would like to negotiate in person. Can a person other than the debtor offer payoffs?

    • DR, I recommend against in-person negotiation, as the agencies are not set up for this. Just get on the phone to do the haggling instead. Since this is not your debt, your daughter will either need to be on the first 3-way call with you to grant permission, or provide you with a letter of authorization that you can send to the agency.

      • The settlement letter is actually from an law firm representing Midland. Would the law firm have the means to adjust the settlement letter for a lower amount? If I went in there with a certified check made out for a lower amount( $3200 for example) and state that is all I have and have them adjust the settlement letter to reflect that would that be a good tacit? Thank you, DR

        • DR, yes, a law firm assigned the file by Midland has authority to negotiate a settlement, although I’m sure they will say they require approval from Midland. No, what you are suggesting would not be a good tactic. I already explained that I do not recommend going in person to negotiate. What I suggest is that you order my Collection Situation Analysis & Game Plan consultation for $150. We would then schedule a phone call to discuss strategy, and 30 days of follow-up support is included. If you’re looking for educational materials for your daughter, then please consider ordering the Basic version of my Debt Settlement Success Seminar, $197.

  107. Hi Charles, first of all, great advice here!

    Hoping you can help me out. I received a letter with all of the pertinent info you describe, except the “settlement” verbage feels weak. The letter comes from a CA and the main bank still owns the account. The letter states that the CA “has been engaged by X and is authorized to accept less than the full balance on the above mentioned account. The settlement offer shall be in the total amount of X. We are not obligated to renew this offer”

    It then lists the payment required along with a date and says “upon clearance of sufficient funds, our records will be updated to reflect that the above account has been satisifed”.

    Is this good enough? I am hesitant thinking because paid in full or similar language isn’t included and that they may be so scummy as to say this was simply a payment on the account. Thanks in advance for any advice!

    • Eric, if the letter has the phrase “settlement offer,” then they couldn’t come back later and say it was just a payment. But you’re right to be wary of collection agencies. Google any one of them, and you’re sure to find many horror stories, etc. Anyway, the letter sounds ok, but I would need to see a copy and know the details to say for sure. I do offer Document Review Service for only $100, well worth it if there is significant money at stake here.

  108. Charles,
    Great Info. I have been attempting to settle a university debt with a law firm with no luck. The original amount was for $3619 and was charged off by the university on 12/22/2011. It will remain on my credit report until 02/2018. I made an offer to settle when they contacted me in October 2015 for $5000 which they refused – with one collector indicating that I have the means to pay the full amount. They are now asking for $6260 which I cannot pay unless I enter into some payment plan thereby reviving the SOL. My fear is that they may report this debt which would harm my already bruised credit score, or worse, initiate garnishment proceedings. What would you advise at this stage?

    • Mo, thanks for your comment. It’s not possible for me to coach you on handling this via blog posts, sorry. I don’t have enough background information to advise you. If you want help with this situation, then I can suggest my Collection Situation Analysis & Game Plan consultation for $150, which includes 30 days of email support following the phone consultation.

  109. Good day sir,

    I just came across your article on debt settlement letter and I really appreciated it. My wife had an accident with my car
    in October, 2015 but she was an excluded driver on the insurance and naturally my insurance said she was
    not covered so we were faced with the other car’s insurance claim. Moreso, from the information at the
    scene of the accident my wife was at fault. The other car insurance sent us a bill of $6750 for repairs and
    we ignored their letters and they transferred it to credit collection agency. After so many calls and mails
    from the collection agency, we agreed to negotiate with them and I pegged settlement at 25% and after
    some phone calls will finally agreed at $2000 for the settlement.

    However, the settlement letter sent to me said the insurance company has agreed on the $2000
    for the property damage but that does not cover any bodily damage. In all our conversation there
    has never been any mention of bodily damage, all they were requesting for his for us to pay.

    Kindly advise on this. Thank you

    • Kay, the article is about documenting settlements on unsecured creditor claims, not car accident insurance claims. Please consult with an attorney, thank you.

  110. Hey bro i need u help i ask for a settlement letter but the letter says You may endorse your payment(s) “Account Settled”.

    But if i pay i fell like my credit will drop instead of going up!!! so should i pay or should i call them to send another letter saying is Paid in full or a promise from remove?????/

    • Wilson, if you are settling the debt for a discounted payoff (i.e., less than full balance), then it’s extremely unlikely you’ll get a removal from credit, or a paid in full report. It will show as settled for less than full balance, or words to that effect. A settled charge-off is better than an unresolved charge-off though, and there is also a benefit in terms of having the balance set to zero. That means it is no longer counted as a debt you owe, so improves your debt-to-income ratio, which is a separate factor in being credit worthy compared to just the raw FICO score. There is also the matter of potential legal risk if you leave it unresolved. However, I can’t advise you whether to accept on the basis of the existing letter without seeing a copy of it, so please feel free to take advantage of my Document Review Service, only $100.

  111. Afternoon. Outstanding information provided here. I have an alleged debt with large bank HQ’d in SD and have received a
    settlement stipulation from a law firm in NY. The stipulation has all elements mentioned
    above but includes language that’s troublesome:

    1. The stipulation asks me to waive my rights under SD 20-7-11 but doesn’t mention bank’s
    mutual release. 20-7-11 is defined as “unknown claims not released by general release. A general release does
    not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing
    the release, which if known by him must have materially affected his settlement with the debtor.” Is this typical?
    2. Release of claims includes credit reporting agencies. According to information furnished by plaintiff, this
    account was first delinquent in 2007. It does not appear on my credit report today. What happens if bank makes
    clerical error and ties a balance of $30k to it, for example, and begins reporting to credit agencies? Do I lose my
    ability to refute any error related to this account?

    Was able to get plaintiff’s attorney to agree to discontinuance with prejudice.

    You are awesome!


    • Ron, a stipulation for judgment is usually a longer document than the simple one-page settlement letters we’re usually discussing on this blog. I would need to inspect the document itself to give a more detailed response to your question. But in general, “with prejudice” is good since it means they can’t re-file the case later as long as you meet the terms of the agreement. There typically is release language included, but it’s usually a mutual release. The language you’re worried about in (1) is normally related to a situation where a person sells a property to yield funds, and where the debt was security collateral for said property. I’ve never once seen a creditor come after someone after the fact once they had paid the stipulated agreement. In theory, your point in (2) is valid, but it’s one of those concerns I would put in the category of arcane theory rather than something that’s likely to happen. Also, I don’t see this as blocking you from filing disputes with the credit bureaus, only litigating a claim against the creditor in question.

  112. Hi. I have a pro bono attorney that was helping me negotiate a settlement with a big bank credit card who I owe a few thousand dollars to. Well, he didn’t put my offers in emails or in letters (he says), he did them over the phone. I found this out when I asked for copies of his letters & their responses declining my offers so that when I go to court I can show the judge that I was acting in good faith & tried to make an offer that I could afford & not get stuck in some monthly payment they wanted that I may not be able to afford. This attorney almost acted like he was working for the other side & not me.

    • Jennifer, sorry to hear about your situation. I think you should request a written explanation from the pro bono attorney documenting his phone conversations and the figures discussed. At least that way, the court will see that an effort was made and it might result in a better outcome for you.

  113. Thank you so much for writing this! I am in the process of negotiating as all of my accounts have been charged off and I do not have the funds to pay everyone. It sounds as though I need to continue to talk them down as at best I’ve been offered 70% and worst 85%. And it’s 100% true that I simply do not have the funds to cover everyone so I should be able to talk them down more. The list of what needs to be on the letter is very helpful! This has all been slightly overwhelming figuring out the best way to handle all of this. Thanks again for the article! I will be using the verbiage suggested to insist on a letter. My one question is in regards to items being removed from my report. I have been advised several times to require this but I see where you are saying that not only is this not going to happen but could hurt your chances at sealing the settlement deal. Is there any exceptions to this or do I need to just accepted it, don’t ask and move on? Thanks again!!

    • Lori, glad you found the article helpful. Yes, you need to accept it and move on. Creditors will not take a loss and then turn around and help you fix up your credit too. It just doesn’t work that way, and anyone who says otherwise is selling something!

  114. I received a letter from ERC that calls it “Settlement Opportunity” offering a “Settlement Amount.” I called and asked them for a new letter that includes “Settlement in Full when Settlement Amount is Paid.”

    They refuse to send another letter, stating the Settlement Opportunity letter is their standardized letter and I will receive a Settled in Full letter 48 hours after payment is received and cleared.

    Is this okay?

    • Polly, if the transaction is defined as a settlement, then we don’t require it say “settled in full.” However, I would need to see the letter to be 100% sure — feel free to order my Document Review service ($100) if you want a professional review.

  115. Hi
    I was given a settlement letter to pay a lump sum which would be full and final settlement. A few days later the collection agent called asking for more money. I told her I received the letter and paid the sum as indicated. She said there had been a mistake and her client would never have agreed to such a low amount (30% of debt). A few days later I got a letter showing the lump sum as only a payment and a balance still owing. I reviewed the settlement letter again and noticed they put an entirely different 16-digit credit card account number! Is this their way of scamming me? Do I have a leg to stand on in court?

    • Holly, it’s unlikely the different 16-digit card number is a scam. It’s very common for creditors to change account numbers, especially on files that went past charge-off and into collections. That said, it’s also unusual for a collector to mess up like this and document a settlement they try to welsh on later. More commonly, people reach verbal agreement, think they have a settlement, and then the letter never comes. What I suggest is that you seek legal help from a consumer rights attorney, via They should be able to review the documentation and determine whether any actionable violation has occurred.

      • Charles, thank you for your reply. I will be seeking legal advice today so we’ll see how this plays out. I did want to mention another thing I learned, in case it might help others. They wrote the legal term “without prejudice” at the top of the letter. I’m sure you know of this term but I did not and feel duped by legal jargon. Apparently, when those words are printed on the letter it can not be used as evidence in court. So, now I have the collection agency telling me it was a “typo” (in 3 different spots on 2 documents) but since they wrote “without prejudice” it pretty much negates the settlement I thought I was agreeing to. Sorry this is so long. I hope this helps others and thank you for what you do to help debtors like me.

        • To clarify: She is saying her typo is the settlement amount. She put $1007.00 in the letter and is saying she meant to put $1700.00.

          • Holly, to me it comes down to what settlement figure was first discussed verbally and agreed to by you. If it was the $1,007 figure then it’s not a typo. If $1,700 was discussed by phone, that is a different story. But they put it in writing at the lower figure, so it really shouldn’t matter at this stage and they should honor the “incorrect” figure. I’m not an attorney, which is why I’m advising you to seek help from one, but I can tell you that “without prejudice” has no place on a standard settlement letter. It’s a legal terms that means a creditor is free to file a lawsuit again at a later date. If this was already an active lawsuit, then the correct dismissal language is “with prejudice,” meaning the matter is closed and they don’t have the option to file again at a later date. You apparently have a rather incompetent and bumbling collection agent and/or rep you’re dealing with. There could be FDCPA violations here, so hopefully a NACA attorney can help you get this resolved.

  116. Thank you Charles for offering me some advice on my situation. My bank didn’t file my settlement paperwork and I never received a letter. Your saying “no letter, no deal” is completely true because my credit report continued to say that I owed them for two years. Luckily, the representatives of the bank compiled with my situation. I’m finally getting a letter back. Thank you again for the advice. It has really calmed my worries.

    • Kelly, glad to help. You’re fortunate the bank will recognize the settlement without an initial letter. No letter, no deal, no exceptions!

  117. Hi Charles.
    I received a settlement letter from a debt collection company and it contains all the information you states that it should. The problem that I have is that it has errors. My first name is spelled Jacqueline. They’ve spelled it Jacquline. Should I have this corrected? It doesn’t have my account number on it either but neither does my summons but both have the file number as well as the check used to pay them. Will this suffice? Thank you in advance for your response.

    • Jacqueline, I would not normally reject a settlement letter just due to a name typo. A totally incorrect name, yes, no good. But a missing letter isn’t an issue, as long as the summons and file number are otherwise accurate, and ditto for the amount settled for.

  118. Hi Charles,
    My husband and I have a HELOC that was sold to BOA and now is in the hands of Real Time Resolutions. The loan was initially taken out on a business we started and the buyers of that business never paid us the full amount and is now tied up in court and doesn’t look like we’ll be seeing much. Our $57k loan is in default and they are now saying we owe $80k. My question is how do you suggest we go about resolving this loan if there is enough equity in our home for them to take at closing? Is there anyway we can negotiate a settlement at this point? We have just listed our home for sale and if we can’t come up with a settlement, we might take off the market. Is there any advice you can give me? Thanks in advance!

    • Angela, thanks for your inquiry. However, mortgage settlements are far too complicated for me to cover in a quick blog comment reply. That’s why I offer a consultation for only $150, which includes 30 days of email support. The short answer is that you might still be able to negotiate a settlement with RTR given the background on this account. However, there is a lot of detail to talk about before you attempt to settle it, and there are pros and cons you need to be aware of before you go down that path. Please order the consultation if you’d like a thorough analysis and game plan recommendation.

  119. Hello Mr. Charles,
    I tried to read all the comments for 2012 to see if you already answered my question but there were just to many.
    I received a summons. I answered the summons and called the attorney/collection office to request for a settlement.
    They sent me a settlemen letter with all the info that u have stated as required.
    I am concerened they may try to continue to collect the remaining balance.
    The letter states the account will be “settled in full”. Is this wording sufficient?
    I was advised the letter should include the words “with prejudices” is this wording necessary?

    I saw that you advised Christina, to ask “that the letter include that the lawsuit will be dismissed if you pay the settlement amt”. If they refuse to include this would it still be a good idea to go through with the settlement offer?

    Thank you for your time and help.
    – Amy

    • Amy, if the letter states “settled in full” then you should be fine. The term “with prejudice” refers to dismissal of the lawsuit without the possibility of filing it again later. But not all settlement letters from law firms contain this language. If you are unclear on the agreement, just call the law firm again and ask them. Normally once an account is settled in full, that completely resolves the matter and it’s highly unlikely they would attempt further collections later on.

  120. Thank you! I appreciate you!!

  121. I have recently come to get a settlement offer from ERC and in their letter it states exactly this:
    “the above referenced account will be settled for less than the full balance.” should I take this as the same thing as if they were to write “settled in full”?

    thank you

    • Fernando, yes settled in full means the same thing as settled for less than the full balance.

  122. Hi Mr Phelan,
    I negotiated a settlement for 20% with ARSI on a AMEX account that was (a judgement) against me after medical problems
    forced me to close my business. The settlement letter came via Email, and the terms “Full Settlement Amount” and the last 5
    digits of the AMEX acct are included in the letter on ARSI letterhead.

    Everything lines up with the article here, is there any issue to be concerned about if I pay on their website with a
    debit card/Mastercard?

    • John, most settlements are paid via phone check, but it’s usually also possible to pay a settlement with a debit or credit card. Just print out a copy of the payment confirmation page for your records and you should be fine.

      • Thank you.

  123. Dear Mr Phelan,

    Great Article! Was hoping for some guidance on my situation:

    I sued XYZ, a software company, for breach of contract. In exchange for the withdrawal of this lawsuit, XYZ forgave all debts owed. We executed this agreement in a fairly lengthy settlement agreement titled “Settlement Agreement and Mutual Release” that included in part “XYZ completely releases and forever discharges from all past, present, and future charges, claims, demands, actions, judgments, liabilities, expenses, costs, damages, obligations, or causes of actions of any kind which the parties now have, will have or which may heareafter accrue on account of, or in any way arising out of or based on the subscription services mentioned, etc”

    Despite this agreement duly executed in 2013, I was contacted by a B2B debt collector who was collecting on behalf of XYZ company. In response to the debt collectors, email I provided the settlement agreement mentioned above. The debt collector has emailed me again stating that I am unresponsive and that I need to acknowledge their correspondence.

    Is my settlement agreement sufficient to extinguish their claims? How do I get them to acknowledge my response? Certified letter to their corporate office referencing the case # assigned to this collection? What is the extent of their power? What else should I know?

    • Jay, your question goes far beyond a normal settlement letter situation as discussed in my post. I’m not an attorney, so this is not legal advice. But it sounds like a potential debt purchasing situation where the party that acquired the balance(s) is not recognizing this as a settled matter. One thing to look at is whether you are past the Statute of Limitations for your state. If yes, then just write to the collector demanding they suspend further effort to collect on the basis of the debt being now time-barred. If you are within the SOL period, then go ahead with your certified letter demanding they stop trying to collect on the basis of your prior agreement with the software company, etc. But it would be wise for you to run this scenario by an attorney to be on the safe side.

      • Dear Mr Phelan,

        You’re assessment is spot on! Thank you for your time and assistance. I will be recommending ZipDebt to all of my peers.

  124. Hi, Great article. I’m not sure if this has been answered previously, however I didn’t see an answer to it. I received a ‘Settlement Opportunity’ letter from ERC. The letter states that ERC has been authorized by the original creditor to settle the account for less than the full balance, and includes a payoff amount. However, the following paragraph states the following, “Please note, as your account would be settled for less than the full original balance, a remaining balance will reflect with [Original Creditor].” Does this mean that this is NOT an settlement offer with a payoff amount and I will still be reported as owing the original creditor money? And since I’ll still have this remaining balance, does that mean that remaining balance can eventually also be sent to collections? Thank you so much for your help!

    • Lydia, I’d have to inspect the letter to be certain, but normally this type of language refers to the creditor maintaining an internal record of a balance, but would not pursue any further collections. What remains an open question is how they will report to the credit bureaus, and I would ask for clarification. You want the balance reported as zero after the settlement payment has cleared.

  125. Hi Charles, I received a Settlement Offer letter. This is what it says: “We have been authorized by the above named client to offer you a settlement
    arrangement on this account. All terms of the offer must be met for the
    settlement to be considered valid. We are in no way obligated to extend this
    offer past its expiration date.” My question is that as they use the terms “settlement arrangement” and “for the settlement to be considered valid”, are these okay because they seem a little sketchy to me.

    • Van Tran, “settlement arrangement” is a very common term and inclusion of that phrase would not ordinarily concern me. Meeting the terms means paying as agreed per the settlement arrangement. If you were to miss the payment date, the settlement is no longer valid, that’s all. It doesn’t look sketchy to me just based on those phrases.

  126. Hi Charles,

    I have a 2 accounts with Chase which are charged off. Last payment was in Sep 2014. They still own the debt and are handling it themselves through their recovery department as opposed to a third party collection agency.

    They are settling at 33% for the total amount on both accounts. They said they do not send settlement offer letters. Is this correct, and if not, how can I get them to put in writing the terms of the settlement agreement?


    • SHS, no, it’s not correct. Chase usually doesn’t object to mailing a settlement letter. However, it may be that they want you to set up the settlement payment first, which you can do over the phone and dated for 14+ days ahead, to allow time for their mailed agreement letter to arrive before the funds get pulled.

  127. Hi, Can I email my Unsolicited Debt Settlement offer letter, or is US Mail what is recommended? Could I email it to the CEO? If I US Mail it, would I send it to the regular payments address? This is for my Citibank CC.

    • Leslie, I do not recommend trying to negotiate settlement via mailed correspondence with any major creditor. It’s never been an effective method of negotiating settlements. Instead, just pick up the phone and call Citibank directly to inquire about the status of the account, whether there are any existing offers of settlement in the system, or if it’s been sent to an outside agency or debt buyer. You won’t get the desired result via email or snail mail regardless of where you direct your offer.

  128. Great article. Thanks so much for the info, it helped me have the confidence needed to get a letter from the debt collector who initially stated that they did not send letters as we were on a “recorded line”. So glad I found this right in time! Question though, I received the email offer letter but it lists an “opportunity to resolve your account for less” and if you pay, you can “resolve” your account. Should I accept this letter as a settlement agreement?

    • Meg, a few creditors or agencies use the term “resolve” rather than settlement. I don’t have a problem with it in terms of language. However, if you want to be 100% certain it’s a valid letter, then please order my document review service ($100) and I’ll review the letter copy for you.

  129. Charles
    My daughter received a settlement letter from national credit services on behalf of the us department of education. The letter states that “this notice confirms our agreement to accept full settlement and satisfaction of your obligation on the debts described above. To take advantage of this offer you must forward secured payment along with the detatchable coupon at the bottom of this notice to the address on that coupon. This payment must be received by 10/27/2019.
    The coupon list the full debt amount with a blank box for the amount to be paid. the back of the letter states ” As of the date of this letter, you owe the amount stated on the reverse side of this letter. Because your credit agreement may require you to pay interest on the outstanding portion of your balance, as well as late charges or costs of recovery, which may vary from day to day, the amount required to pay your account in full on the day you send payment may be greater than the amount stated here. If you pay the amount stated here, an adjustment may be necessary after we receive your payment. In that event, we will notify you of any adjustment in your balance. we encourage you to call prior to making a payment intended to pay your account in full.

    I am confused and concerned that if I send the amount stated that the language of this letter leaves the door open for more charges.

    • Frank, I’ve seen this language on student loan settlement documents, and it didn’t result in an adjustment on the settlement amount, only the interest written off later. But if you want a thorough inspection of the letter before paying, please order my Document Review Service for $100, thanks.

    • I called GE Capital Retail Bank to settle a motorcycle loan. I was transferred to a debt collector who agreed to accept $500 dollars to settle a $6k loan.
      The loan has been delinquent for 5 years and they never were able to recover the motorcycle. The deal broke down when they asked for the money before the settlement agreement was in writing. I refused to pay unless they sent me something. They stated because I had a bankruptcy that they could not send anything. It’s been another two years and I would like to try again. I just want to get the title lean removed.

      • Raw Dogg, FYI GE Capital and/or GE Money Bank is now Synchrony Bank. The problem before was you didn’t grant them permission in writing to document the settlement. Any notices they had sent you making it look like they were trying to collect would have constituted a violation of the FDCPA rules. Try again, but offer to formally release them on communications. Then it should be less difficult to get the requested settlement letter. You can post-date a check-by-phone for 10-14 days ahead, to allow time to receive the mailed agreement letter before you fund the payment.

  130. I am currently trying to settle two credit cards with Credit One Bank that were charged off earlier this month. They say they are being sold to a third party collector on June 1. When I called to try to settle they agreed to settlements but said they cannot email or fax me anything before getting the payment and that is their standard practice. They said they would send a letter as soon as I made my settlement payment. Is this customary for Credit One? I would like to settle to the terms (around 35% settlement) but don’t know if that a smart choice.

    • Ian, if you can settle at 35% on these cards, that’s probably a better outcome than you’ll get if the accounts get sold to a debt purchaser. The letter issue is a common misunderstanding. The rep probably thought you were asking for an “account settled” letter, meaning one that shows a zero balance and no further obligation to you. That will only come about a month after your settlement payment clears the banking system, and they won’t issue that type of letter in advance. What you want to ask for is an agreement letter showing the terms of the settlement. If they still won’t do this by email or fax but agree to post it by mail, then you have the problem of dating payment before the letter arrives. If you can split the payment into May-June, and date only part of it this month, that will allow time to receive the letter before you fund the final payment. See if that approach breaks the logjam.

  131. I have a question about payment terms in my settlement agreement with a creditor. The party I am supposed to pay (in monthly installments) is the creditor’s law firm, but the settlement agreement stipulates that I pay the original creditor.

    What especially concerns me is that the creditor refuses to change this. Could it not later claim I paid the wrong party as a basis for default or non-payment? Or is this somehow standard practice? We’ve been through a lot of negotiations, so I’d like to just be done with it – but don’t want to make a fatal error.

    There is also an agreed order I am supposed to sign that would grant the creditor a judgment if I default on monthly payments – this document correctly stipulates that payments are to be directed to the creditor’s counsel.

    Any insight or guidance you can provide would be greatly appreciated.

    • Stacey, I’ve seen it both ways, with the law firm asking for payments to be made out to the creditor, and also situations where the payment was made in the name of the law firm. I’ve never seen a voided settlement based on this issue. If you are following the directions of the law firm, that should be sufficient to protect you. It’s very unlikely the OC would come back on you later since they were formally represented by the law firm in this matter.

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