A family member with Credit Card Debt has missed a few payments. The bank sent a letter saying that they would be willing to settle for 20% less of the current debt.

Question: Can the debt be negotiated?

For example: If he commits to paying the full balance on the card can he try and negotiate with the bank to reduce the debt by 30% (or more)?

Edit: I would like to add that by "commits to paying the full balance" I mean that he will pay off the debt in one payment.

Related: Can I negotiate to have a credit card interest fee waived?

1 Answer 1


Absolutely, it is fully negotiable. No law keeps the bank from settling for 1% or 99% or whatever else.

Note though that the bank is interested to get the maximum out of it, and if they realize he could pay 70% in one go, they might not be willing to settle for it, as they could potentially get the remaining 10% in a month or two. It is a question of negotiation skills.

If the bank agrees to any reduction, this is typically the end of the relation ship with that bank, as they will close the credit card (and anything else), and avoid him as a customer; and his credit score will probably get a significant dent after they report the settlement (it is still a good thing, of course, just understand the consequences)

Also, such agreed reductions are taxable events (considered a gift from the bank), so next year there will be potentially another little chunk to pay to the IRS.

  • 1
    +1 for explaining the implications of settling. Is the "taxable event" taken from any tax returns from withheld taxes? Or is that something someone must calculate and pay to the IRS at the end when they do their taxes? Jan 30, 2018 at 3:36
  • 7
    You will have to list it in your annual tax returns, and it changes potentially the total tax owned. Just consider it like an additional paycheck. That can mean you get less back, or you kight have to pay some. It is still always a good deal - if the bank reduces the doubt by 1000, and you have to pay 150 taxes on that, you still made 850.
    – Aganju
    Jan 30, 2018 at 3:39

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