Trying to settle for less than I owe… good plan or not?

Discussion
1

So, my credit has already taken a hit, and I’m struggling to make my monthly payments. I’m thinking of letting my credit card debt go to collections, then trying to settle for less than what I owe.

Does this sound like a good idea?

2

I’ve been doing that—just pay the settlement when you can. It works out.

3

Just remember, if you settle, they might send you a 1099-C form for the forgiven amount, which you’ll owe taxes on.

4

Asa said:
Just remember, if you settle, they might send you a 1099-C form for the forgiven amount, which you’ll owe taxes on.

Yep, getting that form is a real downer when you’re already broke.

5

Try contacting your credit card company to set up a payment plan. They can close the account and set you up with a fixed payment each month, without interest adding up.

6

Flynn said:
Try contacting your credit card company to set up a payment plan. They can close the account and set you up with a fixed payment each month, without interest adding up.

Definitely try this first! I just negotiated with five cards recently, and they all agreed to zero interest.

7

@Lennon
Did they also lower your monthly payments?

8

Rylan said:
@Lennon
Did they also lower your monthly payments?

Yep, they did.

9

If possible, pay what you can now, but if it goes to collections, you might be able to settle for a lower amount. I went through something similar—someone hacked my account and ran up debt. It went to collections, and I ended up paying less than half to close it out.

If you can keep it from collections, that’s better, but if not, settling is an option. It’s just going to affect your credit report. Just sharing my experience, but there’s probably more knowledgeable people on this forum.

10

It’s less of a strategy and more of a gamble, if you ask me.

11

Levi said:
It’s less of a strategy and more of a gamble, if you ask me.

Why do you see it as a gamble?

12

Taylor said:

Levi said:
It’s less of a strategy and more of a gamble, if you ask me.

Why do you see it as a gamble?

Because you’re betting that they’ll accept a lower amount to settle. There’s no guarantee they will.