A charge-off is a serious negative on your credit report. Essentially, a charge-off is an accounting technique in which a creditor moves bad or unpaid debt from the accounts receivable side of the ledger to the expense side. A creditor will usually do this after six months of non-payment. If a creditor charges off your account, it will often sell your debt to a third-party debt collector. You are still the legal owner of this debt and are liable for repayment. If you want to settle your debt at this point, you must usually go through the secondary collection agency.
Validate the debt. One of the fair-play principles of the Federal Trade Commission's Fair Debt Collections Practices Act is that you as a debtor have a right to ask your creditor to prove that you owe a debt. While most creditors will have this information on file, it is possible that a second- or third-hand collection agency does not have any proof of your original debt. According to the FTC, no agency can collect on a debt that has not been validated. If your agency cannot validate your debt, you may not have the need to request a settlement letter.
Call the collection agency. Once your charged-off debt is in the hands of a collection agency, you will usually receive frequent communications regarding your debt by both phone and mail. The collection agency is required to provide you with contact information. Call and explain that you would like to pay your debt but that you cannot afford to make full payment. Ask if they will offer a settlement letter.
Wait. If you can't make your payments, and the agency balked at your initial request, wait a few months. If a collector is under the impression that you really cannot afford to make full payment, it may initiate a settlement letter of its own accord.
Negotiate after receiving a summons. Eventually, a creditor may decide that the best course of action is to sue you for repayment. If you receive a summons, you should contact the creditor filing the suit and attempt a negotiation. Since it costs a company money to take you to court, win a judgment and enforce garnishment of your wages, it may be amenable to a settlement letter.