How to Negotiate a Charge-Off With the Original Creditor

A charge-off is a debt the creditor considers noncollectible, but does not mean you no longer owe the debt. If you are less than 180 days behind on your payment, the account is likely with the original creditor instead of a collection agency. Thus, you can negotiate a settlement, meaning the creditor will settle for a portion of the debt. Keep in mind this will appear negatively on your credit report and also lower your score; however, you'll be free of the debt.

Instructions

1

Gather all documentation showing the amount due, penalty fees and interest. Understand exactly how much you owe. Review your bank accounts, budget and funding sources to determine the total amount you can pay to settle the debt.

2

Call the original creditor and explain your financial situation. You may get questions about your income, employment status and bank account balances, but are not obligated to provide this information. Explain why you cannot pay your bill and await a settlement offer.

3

Counteroffer the proposed settlement. The creditor will try to get the highest amount possible, and may not accept your offer on the spot. Note the names, dates and times you spoke with each representative. If your offer is not accepted, end the call.

4

Call the original creditor, if you have received no further contact. A creditor who has repeatedly called to collect may decide to accept your offer. If not, ask to speak to a supervisor to discuss your offer. The supervisor may have authority to accept your offer or escalate it for resolution. After some negotiation, come to an agreed settlement amount.

5

Ask the creditor to report the debt to credit bureaus as "paid as agreed." This is more favorable on your credit report than a settlement. The creditor may refuse, but it pays to ask. Before you pay, ask for the settlement agreement in writing.

6

Make the payments to the original creditor per the agreed schedule. Upon completion of the final payment, look for documentation from the creditor that your balance is zero. For credit cards, it may take one to two months before your statements reflect this. Verify that the creditor's system reflects a zero balance and demand this in writing, if you have not already received this confirmation.