By: Jeena Cho

One of the most frequent question clients ask me is “can I settle with my credit card?” The short answer is “yes” if you have the money to settle. A typical conversation with my client goes like this.

Client: Can I settle my debt?
Me: Yes. How much do you have in your bank account?
Client: Well, not much.
Me: You need money to settle.

The general rule is you need to have lump sum cash before credit cards will settle with you. No money = No settlement. Creditors aren’t going to be particularly open to the idea of a payment plan - let’s face it, why would they give you a second chance at a payment plan when you haven’t held up your end of the bargain to begin with? So, the real question is, how much can you possibly save up to come up with in lump sum cash? And can you do so before Chase, AMEX, Discover, etc. decides to sue you?

In general, you can expect to settle your debt between 30 - 60% of the total amount owed (plus taxes to the IRS). The older the debt, the less you can settle it for. Typically, you’ll get a better deal from a debt collection company (that bought the debt for a fraction of the amount you owe) than the original creditor.

Debt settlement is best if 1) you only have a few creditor to settle with and 2) you actually have lump sum cash to settle.

Disclaimer: Unfortunately, it is impossible to give legal advice over the internet, no matter how well researched or written. Before relying on any information I give, contact a lawyer to discuss your particular situation. I am a San Francisco bankruptcy attorney. The information given is based on California law.