Debt settlement percentages vary based on numerous factors.These factors include whether the debt is with a collector, the age of the debt, the financial position of the debtor and many other factors. A debtor might originally offer to pay 25 percent to a collection agency but ultimately settle for 40 percent to 50 percent.
Original Creditors
Original debtors, such as the credit card company itself, are unlikely to want to settle immediately for a small percentage. After 90 days of not receiving payments, they may be willing to waive late fees and interest depending on a debtor's ability to pay.
Age of Debt
Older debt that has been purchased by collection agencies for pennies on the dollar may be easier to settle for a smaller percentage. Some agencies will solicit a settlement and a debtor can mail unsolicited letters to collection agencies, offering to settle for a percentage or a debtor can hire a representative to negotiate for him.
Tip
It is better to deal with collection agencies in writing with return receipt requested than over the phone.
Fair Debt Collection Protections Act
Congress has passed the FDCPA, which prohibits collection agencies from engaging in certain practices.
Warning
Failure to pay bills, settling debts for less and bankruptcy have a negative impact on credit score. Forgiven debt can be treated as income by the Internal Revenue Service (IRS).
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