How to Recover
From Debt
This page is about collections and charge-offs. Recovery starts after the last account is satisfied.
Recovery Is a Time Problem
This article covers accounts already in collection or charged off. It does not cover cards that are only late. Lenders generally will not look at you favorably until every collection and charge-off is satisfied, and then they usually want to see no new negative payment history for 12–24 months after that.
An account becomes satisfied by paying it in full, settling it, or discharging it in bankruptcy. A payment plan on a charge-off does not satisfy it until the last payment is made. That is why a long payoff can delay recovery more than a settlement you can finish now. Full satisfaction is not achieved until every delinquent account is fully resolved.
A common myth on the Internet is that paying or settling a collection or charge-off restarts the 7-year credit-reporting clock. It does not. See this FTC opinion letter for confirmation.
Rough Recovery Times
Recovery can be achieved either by paying the accounts in full, settling them, or including them in a bankruptcy.
- Chapter 13 bankruptcy, 3–5 year plan: the plan itself runs 3–5 years. New credit can start sooner, but many lenders wait until the plan is done. See the Chapter 13 comparison.
- Debt settlement over 2–4 years: the accounts stay unpaid the whole time, and lawsuit risk stays open. New credit is often realistic within two years after the last account is resolved, so the total can be 4–6 years, if you actually finish it. Not recommended.
- Debt settlement over 1–2 years: the clock starts when the last account is resolved. New unsecured credit is often realistic within two years after that, so the total can be 3–4 years. Only recommended when combined with a payment plan approach. Learn about our payment plan service.
- Chapter 7 bankruptcy: discharges in about four months. New unsecured credit is often realistic within about two years of discharge. See credit recovery after Chapter 7.
- Simultaneous settlement: takes about 6 months. Some finish sooner. Some take longer. New unsecured credit is often realistic within two years after the last payment. Learn about The Strauss Method.
These are planning numbers, not promises. Some people get new unsecured credit in 6–18 months. Assume two years to be safe.
Common Questions
When will I get new credit again?
Generally, within two years of resolving all of the delinquent accounts. An account is satisfied by paying it in full, settling it, or discharging it in bankruptcy. A payment plan does not satisfy a charge-off until the last payment.
Does paying a charge-off restart the 7-year reporting clock?
No. Paying or settling does not restart the 7-year credit-reporting period. The FTC said so in its advisory opinion to Amason. A payment often does restart the statute of limitations, which is the time a creditor has to sue.
Is it better to wait for old charge-offs to fall off?
Sometimes. If they will fall off in about two years or less, waiting can match the recovery time of paying them, unless a mortgage lender requires them resolved or the balances are small.
Want a clearer recovery timeline?
Read the free series first, or have Jared look at the accounts with you.