Help a Reader: Settling Old Collection Debts

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Reader Shaun sent me an email about an old credit card debt from six years ago that, as a result of not paying, was drawing from his bank account. Technically, it went to court and the courts ordered a garnishment on his bank account. As it happens, since the creditor wasn’t garnishing his paychecks, though they could have, he stopped using that bank account.

In his words:

I have an old credit card debt from 6 years ago that had a judgement placed on it. They garnished money from my bank account only, not my paychecks. It has been 6 years and I have not had a bank account since. I finally have the money to clear up this issue. I have a few questions about what i can do. Can I have a lawyer send them a letter asking to settle for less than the $4000 that i owe? Can they charge me interest on top of the $4000 from 6 years ago? Is it likely that they will settle for less than judgment amount?
Any help would be greatly appreciated!

To be 100% honest, I’m not an expert on credit card debt, especially after you’ve defaulted and it goes as far as garnishment. I do know that this typically happens after the debt is sold to a debt collector and the debt collector can’t collect on it or settle. They simply turn to the court system for garnishment.

Here’s the interesting part… it’s been six years. If you declared bankruptcy six years ago, a lot of the pain, at least to your credit score, will have subsided. The bank account levy (which is the official term) is only on that bank account and I’ve read experts online suggestion that you just open another checking account.

To be 100% honest, I don’t know what the answer is for you. I do know that you should talk to an expert on debt collections before you offer to settle or contact the debt collector.

Anyone have any suggestions?

{ 10 comments, please add your thoughts now! }

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10 Responses to “Help a Reader: Settling Old Collection Debts”

  1. Eastie Sailor says:

    Dear Jim,

    Great blog by the way. I would suggest the reader do what I did with an old fraudulent cell phone charge that got in the way of refinancing. As a disclaimer I am not a lawyer, but just giving my personal experience here and I hope it helps:

    1) Try to resolve the debt with the creditor directly. Do not admit fault, but see if there is a way to resolve the issue. YOU MUST ASK FOR IT TO BE DELETED COMPLETELY FROM REPORT NOT “SETTLED.” There is a huge difference.

    2) If you must deal with collection agency be firm, realize they will do anything to get you to pay and tell them this is not your debt, but you are willing to offer them a payment only if you can get a letter guaranteeing it will be completely deleted off your credit report. They may not be willing to do this for less than $400, but it is worth a shot. If they say no, tell them it will fall off your report anyways (depending on your state) in 7 years.

    3) Report this to the Consumer Finance Protection Bureau ( You may actually want to take this step first, its up to you.

    Bottom line I fought my fraudulent charge tooth and nail with a lawyer, and I was told most of these collection agencies operate just under the law because most people dont have the resources to take them to court.

    I cannot stress enough any negotiation must be in writing, and must be for complete DELETION, a “settled” collection item will actually hurt your FICO by 100 pts.

    Best of luck,

    Eastie Sailor

  2. Andy says:

    It is never a fun situation to deal with, but you have picked the best time try to settle the issue.

    During tax time you usually get the best settlement offers. Since the debt is 6 years old and they already have a judgment I would not involve an attorney unless you want to contest the debt owed and judgment.

    Just remember when you call to discuss settlement arrangements you should not share any information about employment, bank assets, or property. A lot of people do best by calling and saying they are unemployed and going through a divorce. The persons job on the other end of the phone is to gather as much info as possible to try to determine what you can pay.

    You can offer 20% and let the negotiations start, but you should not have to go above 50% of the judgment balance. If you make your initial offer smaller payments over 6 months they should offer you a smaller amount if you can pay now. Just remember as soon as you let them think and offer is reasonable they will not go lower, you will have set the bottom. Also dont pay a single dollar until you get a Settlement letter mailed to you that outlines the terms agreed upon.

    If you dont feel you get a good offer, just say sorry I am going to contact other creditors you owe money too and see if they are willing to accept a fair arrangement.

    I have worked in the creditor rights industry for 14 years, so I hope this is helpful. Good luck…

  3. The first thing your reader should do is check when his state’s statute of limitations expires for credit card debt collection. It’s very likely his debt has passed the statute of limitations deadline. Once the statute of limitations deadline passes, he technically still owes the debt, but the creditor can do nothing through a court to collect–all it can do is (repeatedly) ask the debtor to pay and otherwise harass. In that case, he could send a “cease & desist” letter to the creditor demanding that it stop collection activity and be done with it. Keep in mind the time debts stay on a credit report is a totally separate issue from the statute of limitations question I raise here.

    That said, if the debt is legit and the debtor has the means to repay, he should. Personally I wouldn’t hire an attorney to help with debt settlement–financially, you’d likely be ahead just paying the debt in full vs. paying for an attorney’s involvement. I’d recommend Googling something like “debt settlement letters”. The Internet is full of example debt settlement proposals. I don’t mean to plug myself, but if your reader visits my site, he can download for free my Do-It-Yourself Debt Settlement Guide.

  4. Mike says:


    If you purchased the goods and services (non fraud charges), then you should pay what you owe!!!! Purchase price plus interest charges that you agreed to when you accepted the card.

    Be responsible and accountable!!!!


    What was your intent of this article?

    • Jim says:

      I asked readers for their problems and Shaun emailed me the above question. I didn’t have an answer so my intent was to try to get an answer for him.

      • Mike says:

        Hi Jim,

        The theme (and answers) seemed more geared to escaping responsibility, which is completely opposite of your post that I have been reading for the last year. Your normal theme or “Brand” has been: Be responsible and accountable for you financial future, plus giving us tips to do that. 🙂

        I am not a big fan of folks that do not own their own choices.
        Thanks for the quick reply.

  5. ASM says:

    Andy, Kurt and Eastie Sailor all offer good advice for how to negotiate for a debt settlement IF this debt had not already gone to court and received a judgment. I am assuming Shaun did not hire a lawyer or go to court himself to contest the creditor when he had the opportunity to do so, and in his absence the court granted a default judgment against him.

    His only option at this point might be to appeal the judgment if he has a good reason to appeal and if the time limit to appeal has not run out. Otherwise, the creditor has the legal right to collect the debt through lawful means.

    I am an attorney and although I do not specialize in this area, I have helped family members dealing with debt resolutions and bankruptcy. Nothing you read in a blog should ever be considered legal advice, since the laws applicable depend on your individual circumstances and the state where you live. Bottom line – Shaun should have consulted an attorney BEFORE his debt case went to court, but it would not hurt to consult one now, in the state where he lives, to discuss his individual circumstances and see if there are options for him.

  6. Andy says:

    After reading some of the other readers posts I wanted to add a quick follow up to my previous post.

    I agree that the everyone should be responible regarding credit card spending, but in this case someone fell behind and did not pursue bankruptcy.

    Even though the debt already has a judgment and is not contested by the debtor they should still settle. Since the debt is also 6+ years old I would not worry about a settlement regarding the credit score since I believe the account will fall off most credit reports soon.

    Most companies structure settlements in tiers, and I beleive 6 years after a judgment they are ready to take about anything they can get. If you have an extra couple hundred of dollars contact a local debtors rights attorney and ask them to handle the settlement. They will have already created a relationship with the collection firm and be able to strike a good settlement.

    The last little piece of advice is check who currently owns the account. If it has been sold they likely paid less than 10 cents on the dollar for the account and will accept much less than the face.

  7. shaun says:

    I just wanted to give an update on my situation. I contacted the collections company that owned the debt. I offered $500, they countered with $2000. We finally reached an agreement of $1200.
    They wanted to know my bank account info before they accepted my counter offer and I said “are you crazy” I can’t give you that unless I get the agreement in writing. I received the agreement in the mail and I will be sending a cashier check to pay off.
    Thank you guys for all your input!

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