Ken Golde, an entrepreneur who wrote a book about how he settled around $200,000 in credit card debt after a business failure, told Daily Finance he settled most of his debts for about a third of what they were originally worth.
Keep in mind that collection agencies have been known to inflate the amount you owe by rolling in fees and penalties. When you negotiate, make sure you’re starting with the original balance as your baseline, and don’t say “yes” to the first offer the collection agent suggests.
Some debt collectors will agree to let you make monthly payments, but the discount on your original debt won’t be as steep. You have more leverage if you’re negotiating a lump sum payment. “The collector gets paid a percentage of what they collect so if they can get money in the bank, so to speak, then they’re going to be really willing to negotiate,” says Gail Cunningham, spokeswoman at the National Foundation for Credit Counseling.
In his book, Williams also says debtors could have more luck negotiating a settlement at the end of the month, since many agencies give their collection agents monthly quotas. He describes this end-of-the-month crunch as an opportunity for debtors. “With the deadline looming, all efforts focus on bringing in money by the end of the day… The major credit card issuer whose accounts we are working has preapproved a settlement rate of 70 percent off the full balance, good for today only.”