How to Settle a Charged Off Debt

If you fail to make payments on a debt for six months or more, the creditor will generally charge off, or write off, the debt. A charge-off is an accounting procedure implemented for tax purposes. It means that the creditor views the debt as uncollectible and reports is as a loss. Charged-off debts normally fall off your credit report after seven years. However, if you choose to settle a charged-off debt, it's important to follow the right steps.

Instructions

1

Find out who owns the debt. Creditors generally either sell or turn over charged-off accounts to collection agencies. If the original creditor still owns the debt and is willing to negotiate with you, negotiate a settlement. Otherwise, find out from the creditor who is handling the debt and contact the collection agency.

2

Make a settlement offer. Determine how much you can afford to pay and offer less. Credit card companies often settle for 50 percent of the balance on the account. The older a debt is, the more that creditors will forgive.

3

Inquire whether the creditor or agency is willing to report the debt to the credit bureaus as paid in full. Make sure that the person helping you is authorized to approve a settlement.

4

Request a written contract once you agree on a settlement amount. Your creditor may pressure you to pay by electronic withdrawal. You might be told that the offer is only good for 24 hours. Don't give in to the pressure.

5

Inform the associate helping you that you have other debts you need to settle and a limited amount of funds. If you don't receive the written contract within a few days, they will need to wait until you come up with additional funds.

6

Make a copy of the written agreement.

7

Send your settlement check or money order via certified mail. If possible, write on the check that cashing it constitutes acceptance of the amount as payment in full. Save the copy of the agreement. Make and save a copy of the entire check.

8

Wait 60 days after sending your settlement check and check your credit report to make sure that it has been updated correctly.