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Collections Law/Credit card debt negotiation with an original creditor?


Hello Mr. Hertz:

Thank you for your time in sharing your valuable knowledge to assist others!

If you are able to answer the questions below regarding the best strategy to negotiate credit card debt with the original creditor, it would be most appreciated:

Had 2 credit card accounts that were charged off 2 yrs. ago following relocation to CA while simultaneously struggling to pay both the mortgage on the house in the other state + rent in CA for 5 months until a tenant was found for the house in the other state followed by a 2 yr. period of temporary disability and unemployment.  

The credit card accounts were assigned by both creditors to a series of collection agencies.

Based on a recent credit report, it appears both accounts are still owned by the original creditors.

It appears the most advisable(?) options to settle the debt with the original creditor are:
   negotiate a debt settlement with the original creditor
   hire an attorney to negotiate a debt settlement
Since I am hesitant to attempt to negotiate the settlement over the phone if the creditor will provide no confirmation in writing before payment is made, I contacted an attorney and received the following proposal:

   a $250 file opening fee
   $90/mo. ongoing fee to cover the contingency of legal defense if at any during the settlement process the debtor was sued by the creditor
   a settlement fee of 15% of the total original amount of the debt ($21,800 for both cards)
   opening a trust fund acct. from which monthly payments towards the debt of $444 would be made on whatever total settlement amount was negotiated on an original debt of $21,800 for a period of 2 yrs.  
The questions are:
   do these debt settlement fees appear to be typical/reasonable for a law firm handling consumer debt settlement negotiation cases in CA?
   given the legal fees involved, if it were you in this situation assuming
     ○ you were not an attorney
     ○ the average successfully negotiated settlement amount in such situations is typically around 50% of the original debt,
   would you:
     ○ try to negotiate the debt yourself with the original creditor or
     ○ hire an attorney to negotiate it for you?  

   If in this situation you would try to negotiate the debt yourself with the original creditor, what strategy would you use?
     ○ e.g. as a strategic alternative to attempting to negotiate a mutually agreeable debt settlement amount with a creditor over the phone via a series of phone calls, would the following debt settlement strategy be legally binding in the state of CA?
         a letter sent certified mail with signature confirmation to the credit card company which included:
         □ a proposed settlement offer amount?
         □ a cashier's check for the proposed settlement offer amount including a statement on the check that cashing this settlement check constitutes acceptance of the settlement agreement?

Or if none of the above, what strategy would you use to negotiate a settlement with the original creditor?

Again, thank you for your time and consideration in reviewing this information!

The attorney's price seems rather high; you might want to try someone else as a comparison.

My suggestion is that you try to negotiate the amount of the settlement yourself and see if you can get anywhere.  If you get an "agreement in principle," you can always hire an attorney to review whatever document the collection agency proposes as a means of enforcement.

Certainly the deal should be in writing before you make a payment.  If they write up an offer and you sign and then pay, that means you have rights that are enforceable.

You didn't say whether you have substantial assets and if bankruptcy might not be an option for you.  I'd need more information about your assets and other liabilities to hazard anything on that score.  And so would any attorney trying to assist you.

If you are going to try negotiating, telephone the person representing the original creditor and see what they are offering.  Assuming that you have substantial assets and that bankruptcy is not an option, a 50% settlement with reasonable payments and no or low interest would sound like a solution for you.

When you discuss matters with the credit, make it clear that you are really unable to pay much or quickly, given your circumstances.  But don't let on about what your assets are unless it becomes necessary to make a deal.

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Michael T. Hertz


I can answer most questions concerning bankruptcy, whether business or personal, including questions by debtors, creditors, persons interested in purchasing assets from bankruptcy estates, and the like. Also have expertise in tort law, French and Canadian law.


Practiced bankruptcy for 27 years in California and taught bankruptcy for three years in Maine. This included Chapters 7, 9, 11, 12 and 13 cases, representing debtors, creditors (secured and unsecured), bankruptcy trustees, creditors committees, and persons interested in purchasing assets from bankruptcies. Debtors included persons with virtually no money up to large corporations.

Inactive member of the Bar of the State of California. Nonpracticing member of the Bar of Massachusetts. Formerly member of the Maine Bar and conseil juridique in France. Certified by National Committee on Accreditation in Canada.

Georgetown Law Review; California Bankruptcy Journal; Maine Law Review; Dalhousie Law Journal; University of Toronto Law Journal.

Harvard Law School (J.D. 1970; cum laude) and Pomona College (B.A., 1967; cum laude)

Awards and Honors
Selected as a "Superlawyer" in 2005 and 2006 for Northern California.

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