I have some charged off credit cards, do you have any suggestions for negotiating repayment plans?
I have some charged off credit cards that I cannot afford to pay for. Do you have any suggestions for negotiating repayment plans that will stop the interest?
“Charge off” is an accounting term used by creditors, meaning that a creditor has transferred an account from its “accounts receivable” books to its “bad debt” ledger; credit issuers are required to do this by the federal Office of the Comptroller of Currency, in an attempt to prevent banks from inflating future earnings statements with old and defaulted accounts. For the consumer, the only real consequence of an account charging off is that the account will report as a negative item on the consumer’s credit reports; it does not mean that the consumer no longer owes the debt. Despite what it sounds like, an account being charged off does not forgive the consumer for liability for the debt in question. Creditors can continue their collection efforts to secure payment on charged off accounts.
Resolving the charged off account appearing on your credit report should have a positive impact on your credit rating. The past delinquency will not be removed from your credit report, but it should reflect a $0 balance on this debt. While the past delinquency and charge off will continue to negatively impact your credit rating, the impact should be much less if you resolve the outstanding balance. Resolving this account should remove an outstanding balance from your credit profile, and it will reduce your “debt to available credit ratio,” which should also have a positive impact on your credit rating. Because I do not know the other details of your credit history, I cannot tell you how much resolving this debt will improve your credit score–the increase in your credit rating may be quite large or very small depending on how many other accounts and other factors are currently being reported on your credit file. For more information about credit, credit reports, and credit scoring, I encourage you to visit the Bills.com Credit Information page.
You may have noticed that I have used the word “resolve” rather than “pay” thus far in responding to your question. The reason I do not like to speak of “paying off” the account is that it implies paying the full balance of the debt. You should keep in mind that many creditors will agree to reduced-balance settlements on delinquent accounts such as yours. In many cases, I have seen creditors accept as little as 30% to 50% of the balance owed to resolve an outstanding debt. Generally speaking, creditors will require any settlement offer to be paid in a single, lump sum payment, though some creditors may allow you to pay a settlement over the course of a few months. Since you are talking about “paying off” this debt, I assume that you have access to adequate funds to pay the account in full. If that is the case, I would strongly encourage you to contact the creditor to negotiate a settlement rather than paying the balance in full. If you are able to negotiate a settlement with the creditor, you should obtain a written settlement offer from the creditor prior to tendering payment. If you choose to settle this account, your credit reports may list an account status of “settled in full,” “settled as agreed,” or “settled for less than full balance.” These account statuses are not considered as positive as a “paid in full” status, but the difference is generally negligible, especially considering the amount of money you may be able to save by settling the debt.
If you would like to read more about debt, and the options available to consumers who are struggling to pay their bills, I encourage you to visit the Bills.com Debt Help page.
I wish you the best of luck in resolving this debt, and hope that the information I have provided helps you Find. Learn. Save.
Dealing with debt
If you are struggling with debt, you are not alone. According to the NY Federal Reserve total household debt as of Quarter Q4 2023 was $17.503 trillion. Student loan debt was $1.601 trillion and credit card debt was $1.129 trillion.
According to data gathered by Urban.org from a sample of credit reports, about 26% of people in the US have some kind of debt in collections. The median debt in collections is $1,739. Student loans and auto loans are common types of debt. Of people holding student debt, approximately 10% had student loans in collections. The national Auto/Retail debt delinquency rate was 4%.
The amount of debt and debt in collections vary by state. For example, in West Virginia, 37% have any kind of debt in collections and the median debt in collections is $1459. Medical debt is common and 24% have that in collections. The median medical debt in collections is $553.
While many households can comfortably pay off their debt, it is clear that many people are struggling with debt. Make sure that you analyze your situation and find the best debt payoff solutions to match your situation.