Anyone deal with credit card and loan debt like this… any tips?

Seeking Advice
1

Last year, I maxed out three credit cards, totaling $21.5k, and stopped making payments. I also have a personal loan of $15k. I was out of work and dealing with a tough situation, so I ignored all the collection calls.

Now, I’ve received a $30k settlement check from an accident and want to pay off my debts to rebuild my credit. I’m hoping to negotiate with the credit card companies and the loan provider to settle for less than what I owe.

Here’s the breakdown of what I owe:

  • Wells Fargo Credit Card: $7500
  • Apple Card: $6000
  • TJ Maxx Card: $8000
  • Reprise Personal Loan: $15000

Any advice on how to negotiate or the best way to approach this?

2

They might lower the amounts if you pay in full. But since you’ve ignored all their calls, they might be less willing to work with you. It’s worth reaching out to explain your situation, though.

3

Most creditors offer a 60-month payment plan. If you settle, be ready for a potential tax bill on the forgiven amount.

4

Adley said:
Most creditors offer a 60-month payment plan. If you settle, be ready for a potential tax bill on the forgiven amount.

Good point. People often forget about the tax impact.

5

If you settle for less than what you owe, it will show on your credit report as “settled.” It’s better to pay the full amount if you can. But since your accounts are in collections, settling could still be an option if you explain your situation.

6

@Skyler
Got it. But if I pay what I originally spent, will it still show as “settled”? For example, my Wells Fargo card now shows $11k because of interest. If I pay just the card limit, will it still count as settled?

7

@Zen
You’d need to talk to the creditor about that directly. They might be open to negotiating.

8

Check out some posts on debt-free forums for ideas. People share lots of stories about negotiating and paying off debt.

9

Even paying a small amount to each creditor could show them you’re serious about clearing the debt.

10

Are the debts already with collection agencies? If so, you can usually negotiate a lower amount to settle.

11

Just call and ask. Many creditors are willing to work something out if you’re ready to pay.

12

If you have $30k, try using the snowball method. Pay off the highest-interest debt first, then move to the next one. For example, if you clear the personal loan first, you’ll still have $15k left to cover most of the credit card debt. Monthly payments on the rest could then be more manageable.

13

They usually won’t lower the balance too much. But it doesn’t hurt to ask. Just know they don’t always agree to big reductions.

14

Gabi said:
They usually won’t lower the balance too much. But it doesn’t hurt to ask. Just know they don’t always agree to big reductions.

Actually, you can negotiate with some creditors. Not all will agree, but many are open to settling for 10–25% of the original debt, especially if it’s with a collection agency. It’s better for them to get something than nothing.