View Full Version : Debt Settlement
Sit: Credit card owing A amount of dollars. Company offered B amount for a settlement. I think it's a good deal.
www.debtworkout.com (http://www.debtworkout.com) has answered a lot of my questions but I'm still lacking on a few. Does anyone have experience in this or know the answers?
- what is actually involved in the process?
- will I get a piece of paper saying the debt is PIF?
- how long will that take to reflect on credit score?
- will other companies now offer settlements or demand more in payment?
- like some bankruptcy/reliefs, after I "settle" can they wait x amount of time and then turn around and demand more?
I'm sure there will be more questions once these are answered. Thanks for putting up with me and all that jazz.
StagLefty
09-16-2010, 10:15
Great question-my son is in that predicament-looking forward to replies.
OgenRwot
09-16-2010, 10:18
If you are settling with the credit card company and not a third party I don't see how it could be that bad. Everyone, well, pretty much everyone's credit has gone to shit over the past two years. It takes about three years of having companies report good credit to actually bring yours back up to good standing. I'm not sure if you will take a big hit if it is in fact the credit card company offering the settlement, but probably not. If it's a third party then yes you will take a hit on the credit score. But refer back to my last though, everyone's credit sucks right now.
StagLefty
09-16-2010, 10:22
I think that's where it gets interesting. My son gets 3rd party letters offering to settle the debt and I think (to me anyways) it's a scam. Am I just paranoid ?
what is actually involved in the process?
You pay the agreed amount, the debt shows on your credit report as paid as agreed, settled for a lesser amount. Collection calls stop.
will I get a piece of paper saying the debt is PIF?
No. Settling a debt does not clear it from your credit record. It shows that you settled for a lesser amount. They WILL send you a letter stating it is settled. Take this letter, make copies and store them in seperate and secure places. It's your only proof you paid.
With the rescission more people are settling and at the same time credit restrictions are tightening, and some lenders may require you to pay the full amount before they will give you a loan.
If the difference between the total debt and the settlement amount is greater that $600 you will receive a 1099c form and will have to declare it as income on next year's taxes. This is a nasty surprise for many folks who thought they were gettin' one over on the bank.
how long will that take to reflect on credit score?
30 days.
will other companies now offer settlements or demand more in payment?
That's up to them. Generally the further past due you go, the lower the settlement offer goes because the lender wants to keep the account from charging off. The main factor is what you owe and how far past due you are. They usually don't adjust their settlement amounts based on what other lenders are offering. They can however look at your credit and might ask you "Well you're finding money to settle these other debts, why won't you pay us?"
like some bankruptcy/reliefs, after I "settle" can they wait x amount of time and then turn around and demand more?
No. But like I said it may keep you from gaining new credit until it is paid in full for the original amount. And if you do get calls trying to collect a debt you settled, send them a copy of the settlement letter along with a written cease and desist. (Legalese for "I settled, bugger off)
Settlement isn't quite the beautiful shiny way out like the commercials on the radio make them out to be. It's still damaging to your credit. But depending on your situation it may be a life saver.
Settling debts, getting back on your feet and paying the rest off later is better for your credit history than bankruptcy.
what is actually involved in the process?
You pay the agreed amount, the debt shows on your credit report as paid as agreed, settled for a lesser amount.
will I get a piece of paper saying the debt is PIF?
No. Settling a debt does not clear it from your credit record. It shows that you settled for a lesser amount. They WILL send you a letter stating it is settled. ... and some lenders may require you to pay the full amount before they will give you a loan.
It's still damaging to your credit. But depending on your situation it may be a life saver.
Settling debts, getting back on your feet and paying the rest off later is better for your credit history than bankruptcy.
I guess this is where the confusion comes in for me (highlighted red)...
Even when I settle, it's not PIF?
I'm still responsible for paying back the full amount even after I settle? When can they start coming back after me for the rest then?
... hope that makes sense. Thanks for your help/answers.
I'm not worried about the damage to my credit as it's already shot to sh!t. I owe the money, I would loved to pay it back plus interest... but settling sounds like a life saver right now....
I think that's where it gets interesting. My son gets 3rd party letters offering to settle the debt and I think (to me anyways) it's a scam. Am I just paranoid ?
Nope. I think they are scams too. [Beer]
ChunkyMonkey
09-16-2010, 10:43
Sometimes I have to settle debts for my clients before they are qualified for loans.
The skinnies in simplest term...
1. Call the collection agency: "I am mr. so and so's CPA. I need payoff faxed to # asap, as we are filing chapter 7 bankruptcy(or business)"
2. Collection agency/CA calls client within the next few hours and ask for settlement. (If not, you call them!)
3. Settlement agreement can be done verbally, but make sure you receive it in writing before you send any money. Do not pay over the phone - ever! Typically settlement can be at 10%-40% of original balance (Do not include interest or fee).
4. Keep in mind, junk debt are being sold and resold at as low as 10 cent on the dollar. A 20% settlement already double CA's initial investment.
Currently I am helping a business owner with a $65000 lien from a commercial foreclosure. She will have to settle at $10k or less.
Hope this helps! Good luck!
MB888, that brings up another question. Can I do a settlement on a debt, then the company sell the "left over" debt to a different company and then I'm responsible for that too?....
ChunkyMonkey
09-16-2010, 10:49
Nope. I think they are scams too. [Beer]
Not necessarily. However, I would hire a bankruptcy lawyer to settle debts before I deal with any other 3rd party.
ChunkyMonkey
09-16-2010, 10:52
MB888, that brings up another question. Can I do a settlement on a debt, then the company sell the "left over" debt to a different company and then I'm responsible for that too?....
No. Settlement or arbitration is a debt reduction where you and the CA agreed on a reduced balance as payment in full.
A lot of CAs will try to trick you to pay part of the debt on the phone as 'debt settlement.' Do not pay over the phone based on verbal agreement. Do not sent any payment unless you see it in writing that it will be your final payment as the debt is settled.
I guess this is where the confusion comes in for me (highlighted red)...
Even when I settle, it's not PIF?
I'm still responsible for paying back the full amount even after I settle? When can they start coming back after me for the rest then?
... hope that makes sense. Thanks for your help/answers.
I'm not worried about the damage to my credit as it's already shot to sh!t. I owe the money, I would loved to pay it back plus interest... but settling sounds like a life saver right now....
if you settle, it's not paid in FULL it's paid as AGREED. You're basically making a deal. You agree to pay them some of what you owe and they agree to accept it and quit bugging you.
Lets say you owe 10k on a credit card. You are way past due and accept a 40% settlement. They're not going to take 4k and say you paid ten, your credit will show that you took a deal.
Your credit will not be "clear", but it will be a damn sight better than having a charge off or worse yet a bankruptcy. You won't have to pay more.
But down the road if you want to buy a house, the mortgage lender may require your credit to be "clear", which would mean you'd have to take care of those settlements.
EDITED TO ADD: MB888 knows what he's talking about
if you settle, it's not paid in FULL it's paid as AGREED. You're basically making a deal. You agree to pay them some of what you owe and they agree to accept it and quit bugging you.
Lets say you owe 10k on a credit card. You are way past due and accept a 40% settlement. They're not going to take 4k and say you paid ten, your credit will show that you took a deal.
Your credit will not be "clear", but it will be a damn sight better than having a charge off or worse yet a bankruptcy. You won't have to pay more.
But down the road if you want to buy a house, the mortgage lender may require your credit to be "clear", which would mean you'd have to take care of those settlements.
Understood, but what exactly does (red) mean? i.e. I paid the 40% based on the 10K, so now I need to contact the original credit card (or collection agency) company and tell them I want to pay the other 605?
No. Settlement or arbitration is a debt reduction where you and the CA agreed on a reduced balance as payment in full.
A lot of CAs will try to trick you to pay part of the debt on the phone as 'debt settlement.' Do not pay over the phone based on verbal agreement. Do not sent any payment unless you see it in writing that it will be your final payment as the debt is settled.
Rgr, I've been burned before. I always ask for things in writing on letterhead paper with ink signature (not .pdf'ed in, etc).
I deal with legal issues all the time for my employer.
I am not a lawyer, but deal with them all the time.
If you are going to settle make sure you get a settlement agreement that states that the entity owed the money settles in full for $X for all debts known and unknown, releases you from any liability and can take no further action against you. You can also add that no negative reporting will be made to any credit entity. I have a standard format, but it is at work and I only work Mon, Tues and Wed. If you still need on on Monday, I can send it via email. Just PM me.
Understood, but what exactly does (red) mean? i.e. I paid the 40% based on the 10K, so now I need to contact the original credit card (or collection agency) company and tell them I want to pay the other 605?
You'd have to pay the remaining amount (6k) so that the original, full amount is paid. (paid in FULL)
In the years I worked credit cards I never personally heard of anyone that did this, but it does happen.
ChunkyMonkey
09-16-2010, 11:02
But down the road if you want to buy a house, the mortgage lender may require your credit to be "clear", which would mean you'd have to take care of those settlements.
EDITED TO ADD: MB888 knows what he's talking about
As long as it is settled.. there is a trick to remove them completely off your credit report [Tooth]
I only know from experience dealing with creditors and being a 'creditor' myself. I think a bankruptcy lawyer is the ultimate expert on this topic.
You'd have to pay the remaining amount (6k) so that the original, full amount is paid. (paid in FULL)
Yes, understood. But to whom? The CA or the original CC?
As long as it is settled.. there is a trick to remove them completely off your credit report.
Please share, PM if deemed nessicary.
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