For the past 18 years, I've committed my career to connecting people to credit opportunities when they need it.
While it's mostly been a rewarding experience, I've always noticed how difficult it is for people with poor credit scores to get approved for just about anything—especially credit cards.
I've always found Capital One to be one of the best banks to work with when it comes to getting a credit card, especially if a person's credit score isn't perfect.
The downside to Capital One's willingness to approve credit card customers with lower credit scores is it has to deal with a lot of defaults.
But rather than selling its unpaid debts to collections agencies (like most lenders), Capital One usually goes the legal action route by suing its delinquent cardholders.
As a consequence, "Help, I'm being sued by Capital One!" has become a popular thread in online forums.
In fact, although Capital One is just the eleventh largest bank in the U.S., it files 40% of all debt collection lawsuits among the major banks.
Compared to other banks, the debt amounts Capital One will go after in court are much smaller.
Lawsuits filed for outstanding debts of $1,000 to $1,500 are not uncommon.
I might be a fan of Capital One, but I'm not a fan of their penchant for going to court to settle small debts.
There are better ways to approach debt settlement for a credit card debt than lawyering-up.
Fortunately for people who have debts with Capital One, in my experience, I find the company quite open to negotiating a reasonable, out-of-court settlement.
So once you start working with Capital One toward a solution, it becomes unlikely for you to find a court summons in your mailbox.
That means you won't see your bank accounts seized or your wages taken away by order of a judge.
Instead, by taking the right steps, you can have your debt lowered and the terms adjusted to make payment more manageable.
No matter what they say, being taken to court is a stressful ordeal, and it's a real possibility for you if you're 90+ days overdue on your Capital One credit card debt.
I've come across stories online of people (most living on low incomes) having a quarter of their wages garnished by order of the court to pay off a $1,000 debt to Capital One.
Before you get slapped with a debt collection lawsuit from Capital One, follow this step-by-step plan.
We'll help you avoid going to court and hopefully save you some money, too.
Capital One's Suing Process
It's an all-too-common story
During the peak years of the most recent Recession (2008 to 2010) Capital One was estimated to have sued half a million credit card debtors each year.
The bank didn't stop suing after the Recession.
In 2014, in the state of Indiana alone, Capital One filed 3,360 lawsuits for outstanding credit card debts.
There's a pattern we've observed. When Capital One sues you for a credit card debt, here's how the story usually goes:
For whatever reason, you've been unable to keep up with the monthly minimums on your Capital One credit card.
First your payment is 30 days late.
Then you get a notice it's 60 days overdue.
When it's 90 days overdue, you'll get another "past due" notice.
The lawyer's letter arrives. Within the next 30 days, you'll probably get another letter from an attorney's office stating you are being sued by Capital One for the overdue amount.
It will say something like "A district court lawsuit is being filed against you for the $1,500 you owe to Capital One."
When you Google the legal firm, you'll notice it's not a collections agency.
It's a law office specializing in suing people for outstanding debts (and Capital One is probably keeping it really busy!)
Going to court seems inevitable. If you ignore the letter, you will get a summons ordering you to attend court to defend yourself against the lawsuit.
At this point you might think you have two options.
First, you can go to court, plead guilty, and somehow pay what you owe.
Or go to court, tell the judge all the great reasons you can't afford to pay, and hope the court shows mercy upon you (which hardly ever happens).
Don't go to court at all. The thing is, neither of those options is the right one.
You should contact either Capital One directly, or their attorney's office, and negotiate on your own behalf with the goal of avoiding going to court and paying less.
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The Basics of Debt Negotiation
Some is better than none in the eyes of lenders like Capital One
Debt negotiation involves people with past-due debts talking to creditors and working together with them to come up with a settlement plan both sides can agree to.
The fact is, most credit card companies like Capital One are perfectly willing to miss out on the full amount of an outstanding debt as long as you pay part of it.
Red flags for going bankrupt are flying. When people sign up for a credit card with Capital One (like its Venture travel rewards card) but can't pay off the debt, it is a sign they might be ready to declare bankruptcy.
If they do go bankrupt, the credit card company misses out on the entire debt.
Can we talk? Knowing this, banks like Capital One are highly approachable and willing to consider taking less as payment, waiving late fees, or making the interest rates or fees more manageable.
The banks have also been known to approve pay-back-over-time plans to make it possible for their defaulted credit card customers to repay them.
What you need to know is that in any situation, Capital One and all the other big credit card issuers are either trying to protect their financial bottom line or maximize economic benefits.
The statistics show Capital One will settle for a lower percentage of a debt than other companies.
Citibank accounts and Discover accounts are settled with an estimated payback of 65%.
Other credit cards, including Capital One, regularly settle for a payback of 40%.
So although you're going to be more likely to get sued after choosing a Capital One credit card, the company is statistically more accommodating when it comes to settlements.
Consider the pros and cons of negotiation. Like most debt solutions, there are pros and cons when it comes to negotiating debt with a bank like Capital One.
In Capital One's case, in particular, a big pro is avoiding having to go to court over your debt.
There are no lawyers to pay and no judges to explain things to.
You don't have to stress out about going to court, feeling as though a sword is hanging over your head as you wait for the bank's lawyer's letter to come through the mailbox.
Another upside is you'll likely save money by paying a negotiated reduced amount rather than the full value of what you owe.
Your credit score will take a hit. The biggest con when it comes to settling a credit card debt with a company like Capital One is the damage it does to your credit score.
Your credit score will have already been battered after several late and defaulted payments.
When you negotiate a lower amount, there's a good chance Capital One will report to the credit bureaus that your debt was settled for less than the full amount.
If that happens, you'll have another negative item on your credit report, and your score will go down even more.
What Capital One is Looking for in a Negotiation
Being prepared will give you the best chance of success
The bad news is, a typical debt Capital One will file a lawsuit to recover is around $1,500, which is three times higher than the suits filed by the other major credit card issuers.
Pros succeed half of the time. The good news is, debt relief professionals who go to bat for their clients against Capital One report successfully negotiating an out-of-court settlement 50% of the time.
Your odds are better than the pros. A lot of people think negotiating debt with a bank yourself rather than through a debt relief professional could be more statistically successful.
The bank will just think you are a regular "Joe Schmoe" rather than a slick negotiator.
Banks also hate debt relief professionals because the repayment plans they put together can take four or five years, which costs them money.
So if a debt relief pro can have a success rate of more than half, it means your odds of success are likely even better than 50-50.
Get to know what the bank wants to hear. If you're going to talk to Capital One or another major credit card lender to ask forgiveness for unpaid debt, you're going to have to know what they want to hear from you.
Generally, there is certain key information they'll be looking for to justify accepting newly negotiated terms.
Tell them your story. There's usually a really good reason when people can't repay the credit card debt they've taken on.
It could be an unexpected illness and the related medical bills, losing a job, or a family crisis that caused you to be unable to pay your credit card bill.
Your creditor will need to learn about the situation you're facing and the reason you're unable to pay your debt.
They will want proof the situation persists, and they're going to look at your credit report to confirm it supports your story.
Keep it realistic and you could pay half. Another thing Capital One or another credit card issuer will be looking for is a realistic settlement amount.
Capital One routinely agrees to settlements where you pay 50% of your debt, and the rest is forgiven.
I've seen situations where people have had to pay a higher percentage of their debt (for example, 60%), but I've never seen it less than 50%.
How to Negotiate Debt with Capital One
Follow these 6 steps to avoid getting sued
As long as Capital One feels you're cooperating as best you can, there's a good chance you won't get hit with one of their lawsuits.
It's important for you to be aware of the options available to a person who owes money to Capital One, so you can propose out-of-court solutions the bank will accept.
Step 1: Know your debt inside out
The first thing you need to do is determine exactly what your debt is all about so you can come up with appropriate solutions.
Who's the creditor? If your debt is with Capital One, jot down the bank's credit card customer service number—(it's 1-800-CAPITAL or 1-800-227-4825).
You'll need it when it's time to negotiate.
Assess your total debt. Since you're going to be working out payment plans and other financial negotiations, it's important you're aware of all of your debts.
Add up all your credit card, loan, and mortgage debts in an itemized list, including the monthly payments and the interest rates.
Then list your sources of income to calculate your debt-to-income ratio.
Figure out who's collecting. If you received a notice in the mail, look at the company it's from.
With a Capital One credit card debt, you'll probably have a letter from a law office specializing in collections.
Here comes the debt collector. Other debts might have been sold to a collections agency, which means you now owe the collection company, not the original lender.
How much do you owe? Before you contact Capital One, break down your credit card debt so you know exactly how much of it is interest, how much are fees and penalties, and how much is principal.
This information will be important when you're trying to negotiate more manageable terms.
Step 2: Explore your options
There are several options for dealing with unpaid credit card debt.
All of these options involve a reduction in the overall amount you have to pay.
A workout agreement lowers interest and fees. With the first option—known as a "workout agreement"—you ask the credit card company to tweak your terms to make it easier to pay the debt off.
One way to make a debt more manageable is to waive or lower the minimum monthly payment.
With a lower minimum payment, it can be easier to stay on top of the debt, with the hopes you'll eventually find more money to pay it all off.
The workout agreement could also lower your APR (interest rate) and remove past late fees, allowing you to pay down the principal rather than the penalties and interest.
Lump-sum settlements erase the debt with a reduced cash payment. The second option is to offer the bank a lump-sum cash payment for less than what you owe.
Now with this option, you'll need to find some cash to pay Capital One up front, which could be a challenge.
But a bank like Capital One is usually very open to the suggestion of getting a bad debt off its books through one simple lowered payment.
Hardship plans are available for people experiencing difficulties. Third, you can request Capital One consider you as a case worthy of a hardship plan.
Crises like a job loss, serious illness or injury, or a family emergency can interrupt your ability to earn money.
Knowing this, Capital One can work with you to set up a plan where your minimum payment, interest, and fees are lowered or waived.
The bank will also probably set up a structured repayment plan based on what you can reasonably afford each month.
Debt management offers non-profit support to become debt-free. The previous options are available when you choose do-it-yourself negotiations.
Debt management involves the use of a not-for-profit debt settlement company offering debt counseling services.
These services often require qualification and sometimes includes a fee.
When you work with a credit counselor they'll contact the bank and negotiate on your behalf, and together with the bank, they'll create a financial plan to get you out of debt.
Rather than submitting your payments to the bank, you give money each month to the counseling agency, where it's placed in a special account.
The agency uses your deposits to pay off Capital One according to a schedule, which usually has to be less than 60 months.
Debt settlement is the final option before bankruptcy. You can also work with a for-profit debt settlement company to negotiate your debt with the bank.
These businesses will contact Capital One and propose a lump-sum settlement that's less than the total of your original debt.
You pay the company monthly according to a fixed schedule, and the money is used to pay off Capital One, as well as provide a fee for the service.
The fees are high, and your credit score gets pummeled with this option, but at least you avoid filing for bankruptcy.
Step 3: Plan for a reasonable offer
Now it's time to work out the magic numbers: what amount you should offer that Capital One would be willing to settle for.
Time is a key factor for what the bank will accept. One major influencer of the amount Capital One or another bank will accept as a reduced payment is the age of the debt.
If the debt is newer (say you're only a bit more than 90 days past due), Capital One will be looking to get close to the original amount.
If the debt is older (for example, 150 days or 180 days overdue), there's a better chance Capital One will accept an offer of a significantly reduced payment.
Know your state's statute of limitations. The statute of limitations is the deadline when the opportunity to collect on a bad debt through the courts expires.
Each state is different.
Some states (like South Carolina and New Hampshire) only give a creditor three years to recover a debt before it's no longer binding.
In West Virginia and Rhode Island, a creditor has 10 years to sue you for a debt before the statute of limitations runs out.
If your debt is older than your state's statute of limitations, you're no longer legally responsible for it.
It's important to know that submitting a partial payment usually restarts the statute of limitation.
It can also restart the time period for negative reporting on your credit score.
If your statute of limitations is getting close to expiry, Capital One (or another lender) might be more willing to accept a lower payment.
In situations where the statute of limitations has passed, you can cite it when you defend yourself against a lawsuit and the creditor will not get their judgment.
Be honest about how much you can pay. It's important you do what you can to come up with the funds you need, for example, if you want to propose a reduced payment.
Write down your monthly income and expenses and see where you can cut costs.
Calculate what realistic amount you can afford if you agree to pay monthly installments.
Also, figure out how much you can afford to offer as a lump-sum settlement payment.
You can decide if it's more comfortable for you to pay a lowered amount off with cash up-front, or to pay it down in monthly payments.
Consider a debt consolidation loan. If you have multiple credit card debts in addition to your Capital One balance, you could consider getting a debt consolidation loan to pay them all off at a lower interest rate.
Step 4: Contact Capital One at the earliest opportunity
If you want to avoid getting a lawyer letter from Capital One you should make contact with the bank to start negotiations as soon as your debt goes beyond 90 days overdue.
Before you negotiate, you'll have to decide whether you're going to do it yourself or hire a pro (a non-profit or for-profit credit counselor) to do it on your behalf.
Consider the pros and cons of both options. When you take it upon yourself to settle your debts with a company like Capital One, it can be faster and cheaper.
Credit counseling companies often approach these situations by negotiating for a longer-term, multi-year repayment plan.
These companies charge a 20–25% fee based on your original debt, so if you get it reduced by 50% you're still actually paying 70–75%.
There are also usually additional fees for setting up the special account and for maintaining it each month.
A $10 set-up fee and a $10 monthly account fee might seem reasonable, but these extra costs add up if the payment plan is stretched over several years.
There are also issues of potential fraud and high failure rates when you're working with these companies.
Go it alone if you can. If you're comfortable going to bat for yourself and talking to Capital One's customer service department directly, you'll probably save time and money.
Make sure you're contacting the right person.
If you already got a letter, and it's from a law office representing Capital One, it's best if you contact that law office instead of jumping through hoops by contacting their customer service department.
For debts that haven't been sent to a lawyer or the debt collector, contact Capital One's customer service department to start negotiations.
Choose snail-mail or phone. It's quicker to deal with these negotiations over the phone rather than through a formal letter.
If you choose to do it over the phone, it's crucial to write down and document the details of every conversation you have, including the customer service rep's name and position.
Step 5: Handle the negotiations like a pro
Although you're not a professional debt negotiator, there are a few pro tips you can apply to increase your chances of reducing the amount you pay.
Give them your hard-luck story. When you're negotiating, start off by explaining the difficult financial circumstances you're currently in.
Tell them about the specific hardships that contributed to the situation where you can't pay your debt.
It could be an unexpected illness and the associated medical bills, the loss of your job or an income stream, or the exhaustion of your savings due to a family emergency.
Whatever your reason is, remember, you're a human being talking to another human being, asking them kindly for their consideration.
Play on their sense of sympathy—by painting a sad picture of your plight—and you'll be off to a good start.
Remember Capital One's goal. The bank wants one thing and one thing only: to protect their financial interests.
When it sees you're between a rock and a hard place and can't pay your debt, the bank will know it's in its best interest to negotiate.
Your credit report doesn't lie. When the folks at Capital One look over your credit report (which they definitely will) it should back up your claims of financial hardship.
If it doesn't, you will come across as insincere (or a liar!) and the outcome probably won't be in your favor.
Focus on what you can pay. Rather than concentrating on the debt itself, highlight the fact you're willing and able to pay—albeit for a reduced amount.
Make them aware of how much you toiled to scrape some money together and you're hoping it can be enough to settle the delinquent account.
Expect a counter-offer. Don't offer the full amount you're able to pay right off the bat.
Offer a reduced amount, then when they come up with a counter-offer it should be in the ballpark of what you can afford.
Always cite specific dollar amounts (not percentages) when you're making an offer.
Let's take as an example a $1,500 overdue credit card debt with Capital One.
If you hoping to get it reduced to 50% of the total ($750), offer $600.
When the ball is in Capital One's court, the negotiator will probably come back somewhere around $750, and you'll have achieved your target.
Be prepared to answer questions confidently. There is a good chance the customer service agent at Capital One will put you through the wringer before you reach an agreement.
The list of questions you need to be prepared to answer includes your annual income and your basic expenses.
You'll need to prove you're struggling in the red before Capital One considers a reduced settlement.
Since the person at the other end of the phone will probably be looking at your credit report while you speak, he or she will probably have some questions about your other debts.
Step 6: Finalize your agreement
Hopefully, you'll be able to seal the deal yourself using these tips, but don't be discouraged if you don't get the answer you're looking for right away.
Negotiations take time. Be prepared for a lot of back-and-forth conversations and to speak with several people.
If you're making a reasonable offer but getting no progress with one rep, politely ask to speak to their superior, who might have more decision-making power.
Don't agree to anything you can't afford. If the agreement Capital One offers is more than what you calculated you can pay, don't accept it and state the reason why.
Once you have arrived at an agreement you can afford, get it in writing before paying a dime.
The agreement you get in writing should include the original amount owed, the agreed-upon settlement amount, and repayment schedule or deadline.
Make sure the agreement zeroes-out your debt. It's also super-important to include how the debt will be reported to the credit bureaus.
Sometimes when a debtor agrees to pay back less than the full amount of what was owed it still shows up as "unpaid" on their credit report.
You want to make sure Capital One will report a $0 balance on your debt when you follow through on the settlement terms.
When you make your payments, keep all the receipts and store them in your files.
Check in on your credit report a month after finishing payments to make sure the debt has been reported correctly.
Example Scripts to Use When Negotiating with Capital One
What you say when you pick up the phone and call Capital One's customer service department or attorney's office to negotiate will depend a lot on your particular situation.
But when we get on the phone to speak, we always tend to forget to say what we need to.
To help you gain the confidence to talk and negotiate with Capital One over the phone, we're providing you a couple of prepared scripts you can use when talking to Capital One rep over the phone.
The two scripts we've offered here are based on the two most common concessions Capital One has been known to accept: the workout plan and the lump-sum payment.
We're illustrating some realistic examples of the kind of tone you could use and the type of details you could mention to increase your chances of successfully negotiating down your debt.
Script #1: Negotiating a workout plan
"Hi, I'm getting in touch because I received a letter indicating I'm being taken to court by Capital One for my unpaid $1,500 credit card bill.
I'm willing to do whatever it takes to avoid going to court, and I'm sure you folks feel the same way.
The only problem is, I don't have $1,500 or even $500 to put towards the debt right now.
My partner was recently laid off from their job, so we lost our savings and had our income cut in half.
I could definitely manage $75 a month for 20 months.
Would that be acceptable to Capital One?"
Script #2: Negotiating a lump-sum payment
"Hi, I just received a letter stating Capital One was suing me for my $2,000 unpaid credit card bill.
I'd love to discuss my options for settling this debt and keeping the whole thing out of court.
If I talk to my family, I'm fairly certain I can get together half of the full amount I owe right now.
Would you folks be willing to accept a one-time $1,000 lump-sum payment if I could make it happen immediately?"
Capital One would probably rather talk to you than sue you
I'm not a fan of Capital One's tendency to take people to court who can't pay a $1,000 credit card debt.
But I do admire the company's willingness to negotiate out-of-court settlements with their debtors.
The key to negotiating with a bank like Capital One is to be honest about your situation and to let them know about your financial struggles.
Your credit report should be able to back you up, and the bank will realize the choice is between recovering some money or losing it all via a bankruptcy.
If you are successfully sued by Capital One, you'll have money from your bank account seized, and your wages will be garnished.
Being taken to court for a bad debt is one of the most depressing and stressful situations a person can experience.
Fortunately, you should be able to avoid going to court altogether if you follow the various tips and advice we've offered here.
And the best part is, you can do it yourself.
Don't be intimidated by the idea of negotiating your debt with a major bank.
You can do the exact same things a professional debt counselor would do, with no additional fees or extended payback periods.
I think it's great Capital One is willing to offer credit cards to people whose credit scores are less than perfect.
But when the 11th biggest bank in the U.S. is responsible for 40% of the total lawsuits for bad debt, then there lies the problem.
Most people who end up in court probably don't realize there was an opportunity to make a settlement.
Even though Capital One might seem a bit overly keen to slap its past-due customers with lawsuits, I bet it would prefer to come to a settlement almost every time.
If you're worried about getting taken to court by Capital One, follow the steps I've outlined above and there's a great chance you'll be able to avoid a lawsuit.
Have you used Capital One before?
Did you already know that the company often sues its customers?
Any stories (or nightmares!) to share with the rest of us?
Let us know in the comments below!