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Charged Off Credit Card Debt Advice


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I am looking for some advice on how to handle credit card debt that has been charged off. I have a total of $12,850 debt spread over three credit cards. 

American Express: $2,007.00 ($1,500 limit), last payment made November 2019
Capital One: $10,018.00 ($8,300 limit), last payment made November 2019
Capital One: $825.00 ($600 limit), last payment made November 2019

I am in my late 20s. At the time, I was going through a very challenging financial hardship. I was self-employed, trying to save my business while going broke in the process. Even though I had profitable years prior, 2019 was not panning out that way. I had no income for close to year by November and it got to the point where I had to choose between keeping a roof over my head and a little bit of food on the table or making monthly payments on the cards. I chose the former. Additionally, my vehicle was repossessed, and I had to leave my place of residence because I could no longer afford rent. I have been homeless since bouncing around different friend’s places while I try to get back on my feet—which I am eternally grateful for. I do not have any family in the picture or anyone that I can turn to for help when the going gets rough. 

I was able to scrape enough money together to settle my car loan and get my vehicle back quickly. However, that drained every last dime I had at the time. 

I certainly made mistakes, there’s no question about that. But I believe I managed the best I could given the circumstances and subsequently being overwhelmed with emotions of depression/loss/fear/shame/embarrassment that I was experiencing at the time. For example, I spent nearly a year trying to secure a job elsewhere starting January 2019 but was repeatedly informed that I was not a “good fit” because I had been self-employed despite holding multiple degree. 

Between being homeless, car repo, food insecurity, lack of employment, COVID, depression, anxiety, fear, this has been the most trying time in my life. Before this, I had always paid my bills on time and in full. I just hit an impossible rough patch and honestly was so scared as I was losing everything that my judgement was clouded and made some poor decisions as a result. 

Needless to say, my credit has been destroyed in the process. I am currently sitting at a 537 and need to start the rebuilding process.

Ok, enough with the life story. 

I want to address this credit card debt, but what is the best way to do so? Each of these cards have been charged off for a year and therefore each company has already received the tax benefit from writing off the bad debt. What is the best path forward for my wallet and my credit? I am considering paying off Amex in full since I would I like to retain a relationship with them in the future. Is pay to delete a realistic option?

I am aware that I am still obligated to pay the debt, and for the record I do want to pay whatever I am able to. I very much want to make it right and take no pleasure in owing something I had fully intended to pay. Was just in terrible situation and couldn't dig myself out at the time. I have set aside some capital to pay these off, not enough to pay all 3 accounts in full. I am able pay the Amex and smaller Capital one in full; however, currently not able to pay the $10,018 in full and honestly I do not know when I will be able to. Does anyone have experience settling their Capital One account for less than? If so, by how much? 30%? 50%? 

As much as I would like to pay everyone in full, both parties need to be realistic about my current limited ability to do so. They certainly could sue, but I'm not sure how that would be in anyone's benefit considering I have no assets, am homeless, and have no wages to garnish. Any of the money I have put aside to pay off these credit cards would have to be reallocated to retain an attorney, which would have the effect of reducing any potential settlement amount. 

Any advice is greatly appreciated.

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If I were in your shoes I would seriously consider bankruptcy.  Please consult with a BK attorney.  

Believe it or not, your credit score would bounce back MUCH more quickly after BK than if you settle your debts or just don’t pay.  It took many years for me to get back over 700.  Think 6-7 years of a bad credit score w/o BK vs a year or two with BK.  So with settlement you can have a great credit score in 2026 or so. With BK it could be as early as 2022 or so.  

Here is the thing. 

When I saw that it had been so long since the last payment, I was wondering why you haven’t been sued yet.  

There are two possibilities. 
1- You were sued at a previous address with some sort of alternative service and you just don’t know it yet.  If that is the case, there is probably a default judgment against you of which you are unaware.  That happened to me once.  I only found out when my bank account was frozen. 

2. They aren’t suing you because you are homeless.  

These are two tough OCs to deal with.  Both tend to sue rather early.  

AmEx has an arbitration provision, but they will follow through on the debt to the bitter end.  
Cap 1 no longer had arbitration, but if you opened the account before 2009 you might still be able to use arbitration. 

Here is the thing with AmEx: they are extremely unforgiving.  If you still owe them even a penny you will never get another AmEx card forever.  In some cases people have been denied cards because a close family member defaulted, although I have an AmEx card even though my wife defaulted.  

If you want to ever have an AmEx card again,  you would need to pay them off in full, and even that may not be enough.  Before paying in full please negotiate as to whether you can get some sort of AmEx card back. It might not be a very good card but at least you would have one.  

I understand your concern about AmEx.  I did the same thing with my USAA card.  When I defaulted on over $100k in loans they kept my card active and didn’t raise my interest rate, and I wanted to keep my relationship with USAA.  

The problem is if you pay off AmEx but not C1 that may or may not look bad to a BK judge.  You may have to wait x months afterwards to file BK if you choose to do so.  Which is why I suggested talking to a BK attorney.  

As for settlement, I have no idea what C1 would do.  Would they take a lowball settlement because you are homeless?   Or would they file suit before SOL so they can pounce on you as soon as you get back on your feet?   I honestly don’t know.  If they won’t settle for a lowball amount, you options are to wait until you have enough to pay them off or BK, and hope they don’t sue before you can pay them off.  Unless they already sued.  

Your first step is to go to the courthouse or online. Depending on your state.  Find out if you have a default judgment or an open case. 

Next step is to ask around and find out who is a good BK attorney who will give a free consultation.  

Then figure out your next moves after getting advice from someone who has actually seen your situation.  

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I have not been sued yet, I checked, but I know it's coming. All accounts are still with the original creditor. From what I understand covid restrictions may have delayed many of these suits temporarily. 

I definitely will attempt to negotiate getting a card back with Amex and consider speaking with a BK attorney. 

Does anyone had experience negotiating a settlement with Capital One?

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  • 1 month later...

If you can qualify for chapter 7. I think you should seriously consider BK especially if your thinking of buying a house in 4-5 years. But if your currently in a better situation with solid job making good money trying to settle your accounts you may have to do a chapter 13 which I would not advise as you would end up just paying the debt plus fees all back and have a BK in your credit report.  

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