How to Pay a Settlement Difference

A settlement difference is actually a specific amount of money a debtor has agreed to pay to resolve a debt. Credit card companies and other unsecured creditors sometimes settle delinquent debts for less than the full balance. The New York Times reports credit card companies will sometimes settle delinquent accounts for 20 to 70 percent of the balance. A settlement at 20 percent would indicate an 80 percent discount off the balance. That represents the difference in the settlement amount and the balance before negotiations. Debtors can negotiate settlement agreements or hire a reputable consumer affairs attorney. The Federal Trade Commission advises against using for-profit debt settlement firms because some engage in unethical business practices.

Instructions

1

Negotiate the settlement by telephone or mail. Letters offer a paper trail but telephone negotiations are much faster. Offer to settle for 20 percent of the balance; paying more won't help your credit score. Keep negotiating if the debt collector balks at 20 percent. Call or write once a month for several months if that's what it takes to get a settlement offer you can afford.

2

Negotiate the terms of the payment once you decide on an amount. Some debt collectors may insist on a lump sum payable within 30 days. Others may allow you to pay in a few installments.

3

Get terms of the settlement in writing, including a stipulation that the debt collector will update your credit report to show the account as "settled."

4

Pay by cashier's check. Obtain a cashier's check from your bank. Make a copy and then send the original check to the debt collector by certified mail, with a return receipt requested.

5

Follow up by telephone after allowing time for delivery to confirm that the debt collector received payment and is updating your credit report. Keep other documentation, such as the return receipt and a copy of the check, for your records.