Someone I know has had an outstanding debt (almost $10,000) for a number of years. He recently got a letter from a debt collector saying that if he pays about $2,000 by the end of the month, the debt will be considered paid in full.

Assuming he can, should he go ahead and pay it? Or is there some catch, e.g.

  • Will it tarnish his credit rating (moreso than being incommunicado for a few more years)?

  • Will the debt collector attempt to collect the rest of the money?

  • This type of offer is common in the debt settlement industry, this is what they consider settled in full(SIF). 20% is a low SIF offer but if you can get a letter confirming this along with validation of the debt I would accept these terms. Once you pay this they should send you a letter confirming this to show that your debt has been settled.
    – Styxsksu
    Dec 14, 2018 at 17:53

5 Answers 5


One issue is whether it is a scam or the collector has a right to collect.

Another issue is the statute of limitations period on the debt. If it has expired, the creditor cannot get a court judgement against the borrower (if the borrower contests it). However, if the borrower makes a payment, or promises to pay, the time resets to zero, starting a new period subject to valid court action. In the U.S. the length of this period varies by state. (This period is different from the amount of time a debt can be listed on a credit report.)

  • 4
    +1, the "resets to zero" part is extremely important, AFAIK in some jurisdiction even continuing to discuss the debt over the phone is considered an action that initiates such reset.
    – sharptooth
    Oct 5, 2011 at 6:31
  • 3
    Keep in mind that a forgiven debt is considered income by the IRS: irs.gov/taxtopics/tc431.html Oct 11, 2011 at 22:00

If you pay off a debt through a collections agency, it will damage your credit. Here's an alternative approach. Settling a $10K loan for $2K, shows the lender is keen to settle.

Instead of paying the collections agency, negotiate with the lender and agree to pay 2K to settle provided that they agree to:

  • This is reported to the credit bureau's as paid
  • That you will pay the lender and not the collections agency

This could be a win-win for both. The lender gets to keep full 2K without having to pay the collection agency a fat commission and your credit isn't damaged.

Not saying this will always work, but worth a try.

Pro tip: Get everything in writing before you pay anything.

  • 6
    +1 for getting it in writing. Debt collectors are notorious for reneging on promises.
    – JohnFx
    Oct 5, 2011 at 14:53
  • 1
    And don't pay with an account they can continue to tap into!
    – MrChrister
    Oct 5, 2011 at 15:52
  • 5
    You may be right. But - the lender may have sold the loan already if they couldn't collect. The 20% offer sounds like the collector bought it by the pound. Oct 6, 2011 at 1:05

His credit is likely impacted already for the fact it's in collection. My real concern is that he be 100% certain the debt collector actually has ownership of the debt. At first glance this sounds like it may be a scam, but if the debt was written off, it may have been sold for pennies on the dollar. So to the collector 20% of face value is a tidy profit.


If one does pay, one should only pay after they get a letter stating such a payment fully satisfies the debt.

Then, one should only pay via money order or cashiers check. Never pay by personal check or credit card. Send such a payment via certified mail to ensure delivery.

As stated in other answers:

  1. Confirm they debt is yours
  2. Confirm the debt is within the statute of limitations
  3. Confirm it is a legit debt collector
  4. Negotiate down. $2000 is their first offer. Respond back that you can afford $1000

There might be an issue of honoring your debts, but that doesn't come into play here. You already didn't pay your debt, and the original owner of the note already took money. Paying this debt is only money in pocket of the debt collector. The scammier they are, and the worse they treat you would factor in.


I would accept the offer provided that it is a BONA FIDE offer.

Some issues to consider:

1) Make sure the debt is actually yours.

2) Make sure that there is a meaningful period of time left on the statute of limitations (10 years). Because if this "settlement" doesn't work, the clock goes back to time zero for the debt, minus the amount you paid. In other words, don't pay off a debt "by the end of the month" that will expire on the fifteenth.

3) I'm not a lawyer, and therefore, in your shoes, I would consider consulting a lawyer.

4) If using a lawyer isn't cost effective, then I would set up an escrow account, deposit the settlement amount, and then release it upon receipt of a letter that says that the amount in escrow fully satisfies the debt. Such a letter will help your record with credit agencies. It will also establish a record that you've paid, and paid in full. Based on what you've said about the original letter, the debt collector would be willing to do this. If he reneges, he's "playing games."

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .