Discover charge-off — take a ~50% settlement or lower monthly payment plan?
I have a charged-off Discover account with a balance of around $12k. I recently received an Attorney Referral Pending notice and contacted Discover directly.
They gave me two main options:
Option 1: Pay around $120/month for 3 years at 0% interest with no late fees. At the end of the three years, I would still owe around $7k–$8k. The rep said I could call at that point to see what settlement options are available, but there's no guarantee what percentage they would offer.
Option 2: Settle the account now for about 50% of the balance, or roughly $6k, spread over 2 years. The monthly payment would be around $240–$250. Upon completion of the agreement, the debt would be resolved.
Discover confirmed that either arrangement would stop the legal referral/action as long as I comply with the payment arrangement.
I asked whether they could extend the 50% settlement over a longer period to lower the monthly payment, but they wouldn't extend it beyond 2 years.
My dilemma is mostly cash flow. I have some significant household expenses coming up and my utilities increase quite a bit during the winter. The ~$120 payment would obviously give me more breathing room, but I hate the idea of paying for three years and still having a substantial balance.
My budget is currently pretty tight and I don’t have much left over between paychecks, so the higher settlement payment would require some budgeting changes and possibly weekend gig work.
My credit is already in the 600s, so I'm also wondering how much difference there really is between continuing payments on an already charged-off account versus settling it for less.
For anyone who has dealt with Discover specifically: Would you take the ~50% settlement and be done in 2 years, or take the ~$120/month plan for the breathing room and revisit settlement later?
I'd especially appreciate experiences from people who settled a Discover charge-off and later rebuilt their credit.
TL;DR: Discover offered me ~$120/month for 3 years with a balance remaining, or ~50% settlement over 2 years and I’m done. Which would you choose?