Anyone have experience with credit card settlement offers?

[SMC22307]

Quickie background: Friend laid off in 2012, and one card got way out of control -- around $9K. She finally landed work in 2014, and is still rebuilding. She's been bombarded by collection letters and phone calls, but the most recent agency said they'd accept about $1,300 to settle, by July 25th or 26th. I don't remember what she said about status -- delinquent or derogatory?

I know next to nil about how all of this works, I'll admit it. If she pays the $1,300, is the slate wiped clean for that card? No more hounding? How will it affect her credit score?

Thanks.

[elleng]

1. Have her check quickly with a lawyer.

Could save her money, and aggravation, at little cost. Ask local Bar Association for referrals.

[SMC22307]

4. Yeah, that's one option.

This offer sounds to good to be true, so I imagine it is.

Thx.

[Avalon Sparks]

24. It's likely true

The junk debt collector probably paid 100 dollars for it, they'll make a profit at 1300, the original loaner wrote it off as discharged long ago...

I can guarenrte almost 99% that is not a collector that will sue based on the low amount they will settle for. They'll eventually sell it. Point is none can sue for it after 3 years...

[SMC22307]

33. I just texted her again...

at least four different agencies have been after her: MRS, Client Services, Nationwide, United Reovery, and they appear to be looping around, if that makes sense.

Alright... finally, bed! Thanks for all your input. Will revisit this later in the day.

[Avalon Sparks]

36. It only

Matters which one owns the debt now...the one that is offering the settlement.

These junk debt collectors just keep trying to collect, then selling the debt to another company when they don't succeed. If it's been passed through all those firms, it's likely the current collector dosent have the paperwork to prove she even owns the debt... Thus the low settlement offer.

Goodnight. Sorry to keep you up.

[Avalon Sparks]

2. I know a lot about this

Can you tell me the state? First thing is to check statute of limitations.

[SMC22307]

5. She's in North Carolina.

Thx.

[SMC22307]

10. North Carolina... 3 years?!

https://www.nerdwallet.com/blog/credit-card-data/credit-card-debt-statute-limitations-guide-50-states/

[SMC22307]

16. She just texted the last payment: 8/22/13.

Poor thing tried to keep up for about a year after being laid off, then gave up.

[Avalon Sparks]

21. Ok

If they don't sue by that date she can walk away Scott free from ever paying it back. It may not be ethical but it is legal.

Settling by paying a portion or agreeing to pay the full amount over years will not help her credit score. I can't think of one reason to pay back a dime if it's past the SOL.

[SMC22307]

25. Oi.

It's way too late in the day (night) for me to sift through this (source for the 3 years claim above)...

http://www.ncleg.net/EnactedLegislation/Statutes/HTML/ByChapter/Chapter_1.html

...saving it for later.

Thanks for your input.

[Avalon Sparks]

28. I wouldn't read trough that legalise

If there is no payment activity on the debt in three years in North Carolina a collector cannot sue her to collect it. In some states the time period is much longer.

[Avalon Sparks]

22. Google the debt collection agency name and

The word sued and see if people are mentioning they were sued by them. Two companies that do occasionally sue are Midland and Portfolio ....

Even then, it's a lo shot they would

I'd stall them around and not pay or promise to until 8/22, then ignore them.

If they do try to sue she can tell them she's past the sol at that time

[SMC22307]

27. She texted that it's Client Services, Inc. in MO.

Gotta get to bed now but will do some digging tomorrow (er, later today). Thanks!

[Wounded Bear]

3. She can do it, but...

remember she will have to declare the amount they 'forgive' as income at the end of the tax year.

[SMC22307]

6. Huh. I had no idea.

How is the exact amount conveyed to the card carrier -- some sort of form from the collection agency? Or is the amount reported to the IRS based on simple math and honesty?

Thx.

[Avalon Sparks]

18. I'm not a lawyer

But I have researched this topic throughly.

If she has not made a payment to the original lender, or any of the junk debt collectors in the last 3 years there is no legal way for the collectors to sue her for it. It seems Nc has a short statute of limitations for credit card debt. The sol is the window they can sue in. Past that, there's no legal way to collect the debt

If she made a payment that resets the sol clock

I wouldn't pay in that case. If she settles, the debt collector will report the difference to the irs and she will pay taxes on the amount that was 'forgiven'. She'll likely get a letter from the debtor around the time you get all your tax stuff in early 2017. The taxes would be around 25-25% depending on her tax bracket.

That's not why I reccomend not settling though, it's likely she may have to pay taxes on it at some point, but as the debt is passed from junk debt buyer to junk debt buyer, someone will be trying to collect on it for a long time....in that case it could be years if ever before its reported, when it is, she will likely get a letter.

But also settling won't do anything to help her credit score......and the credit collectors can't sue after the sol, if they try they would lose anyway....

Basically her choice is to settle, debt is done, gone that's it, she'll pay taxes as income on the difference.

Or just do nothing but ignore every attempt to collect, keep a record of her credit report that proves she made no payments for three years, and then wait and see if any collection reports it as dismissed.....


If u want to discuss by phone, pm your number and I'll try to explain better.

[SMC22307]

29. Very informative!

I gotta get to bed now... work tomorrow. But I'll revisit it later in the day. Thanks!

[Avalon Sparks]

23. If she settles

The collection agency will report the difference to the irs. It won't include any interest of fees added after she originally quite paying....

The collection firm by law is supposed to send her the tax form about it....

[PoliticAverse]

37. It's suppose to be reported on a 1099-C form. You may find this article of interest...

http://www.creditcards.com/credit-card-news/forgiven-debt-1099C-income-tax-3513.php

IRS webpage on 1099-C...
https://www.irs.gov/uac/about-form-1099c

[The_Casual_Observer]

7. At this point the interest has stopped

So even if they pay the full amount over time they are way ahead.

[SMC22307]

8. Yes, the interest has stopped, but I doubt there's a way...

she'll be able to pay off the full amount over time. I don't know how much she makes now, but she has shared that it's substantially less than before the recession. She's a mid-50s worker and homeowner with a mortgage.

[The_Casual_Observer]

11. As long as she pays something each month they

Cant do much. This can go on for years.

But what kills you is the interest, before long it will be over.

[JaneyVee]

9. Slate will be wiped clean, credit score will be trashed.

I know someone who had a similar situation. Clean slate, but credit score trashed for at least 5 years.

[SMC22307]

12. I think it's pretty trashed now.

She hasn't shared the exact score, but has mentioned that it needs a lot of work. The car is paid off, but she struggled to make mortgage payments and health insurance premiums.

[JaneyVee]

19. Then I would definitely recommend her doing it...

That's a pretty good deal. They cut my friends by only half. Make sure she gets a letter from them stating she is now paid off. In about 3 years her credit can start recovering. 3 years after my friend settled she actually started getting credit card offerings again.

[Avalon Sparks]

26. You'll get offers either way...

They'll be crappy offers, but take a few and rebuild, you can't fix past info or screw ups unless it's incorrect.

[SMC22307]

30. She's already getting letters about rebuilding... how wacky is that?

IIR, it's Capitol One that's being the most persistent. Others are starting to roll in.

[footinmouth]

40. After 7 years -

After 7 years this debt will no longer appear on her credit report. My son had a similar issue. He had several debts that were out of statute. He finally checked his credit report and sure enough, after 7 years, those debts were no longer showing on his report. All is well now, he is employed in a good paying job and owns a car and a house now. I advise not dealing with the junk debt buyer at all.

[DesertFlower]

13. i have a relative who had a lot

of credit card debt. several of them offered her deals like that. it does happen. they probably write off the loss.

i don't know what it did to her credit.

[SMC22307]

14. Did she take advantage of the offers? (n/t)

[DesertFlower]

41. yes. nt

[gopiscrap]

15. many years ago my son ran up an 1100.00 cell phone bill

after about 8 years I got a letter from a collection agency saying they would settle for 50,00 I said I would if they would send me a paid in full invoice. They did and it di the trick.

[SMC22307]

17. Sounds like a bargain.

$1300 rather than $9000 does, too, but there are so many variables.

[gopiscrap]

20. yup

I also told the collection agency a few years before that if they go after me, I will file bankruptcy in heart beat. I had cancer and other debts so my credit was shot anyway. BTW we had a talk with our son about responsible cell phone use and got him a go phone.

[cosmicone]

31. If she has not use the card for >4 years

the statute of limitations to collect has run out.

[forgotmylogin]

32. I have worked with consolidation, and am working with settlement.

I had two credit cards each with about 20k on them and a couple other with a few thousand each. Yes i know, poor planning.

I tried debt consolidation which is the "good" way to pay it, in that the company negotiates to lower the interest rates (in my case each was at about 25% down to 6% and 9%) and I was paying one payment of about $550 a month. The goal was to pay it off within four years. I did it for three years then just couldn't do it any more. I had paid off 75% of the debt, but got into dire straits with no car and some new financial burdens. I had to go another year by cancelling the settlement, but the payments on all my cards were down to about $100 each.

Finally in all the random calls I got for some reason I picked one up and it was a debt settlement company. Settlement is the scary way to pay off debt where you stop paying the creditors, and instead stash the money into a joint savings account with the company which they use to then pay off each debt at a much lower settlement cost then the actual net owed.

I was leery at first, but everything checked out. I'm paying about $300/month and all my cards are settled except one. I believe the company actually fronts the money to pay a settlement they are offered before I have enough accumulated, but I'm expected to complete the entire term of the payment, even when the cards are settled. With the full amount I'm paying, it will be around half of what my total debt was, plus they are taking a $20 monthly payment, and they explained they make money when they settle *lower* cumulatively than the amount I'm paying (I'm paying about half of the entire debt, they settle usually for anywhere from 35-45% of the debt and keep the difference.)

So far it's worked, I have about a year to go. The hard part is ignoring all the debt collection calls and emails - the settlement company *wants* them to go to collections, because they have an easier time negotiating with debt collectors than the original credit card companies.

I'm told one can negotiate their own settlements with credit companies, but it can be very stressful, and I appreciated having experienced people to talk to and do all the "dirty work" getting me through this.

[SMC22307]

35. Very informative, thanks.

And good luck to you. Sounds like it's been stressful, but you're nearly there!

[SMC22307]

34. Thanks to everyone for your input... lots to think about.

Gotta get to bed and will revisit this later in the day.

[winstars]

39. Don't do it. They are making this offer because the SOL in NC is 3 years. THEIR time is about up.

Send Demand of Verification (DV) letter to the collection agency CMRR. (Certified Mail Return Receipt Requested) They may not even have the paper trail of the debt.

If she settles, all the lates (20/60/90/120 days overdue) that are on her credit report from the original creditor stay for the full 7 years from the last payment. It probably says account closed, sent to collection agency...which is really bad...

Now, there is a separate collection agency "baddie" on her credit report from whoever is contacting her. If she pays now, it will be there for 7 years.

The sites below have a lot of info on credit repair, there are ways to do this. Paying the junk debt collector right before the rather short SOL in NC (its 15 years in OH for a written contract, which I believe a cc is) runs out is totally NOT what to do. Its still gonna be on her credit report for 7 years. As someone else said, by paying you can "re-age" the debt, that is restart all the clocks.

One last thing, NEVER EVER TALK ON THE PHONE TO A COLLECTION AGENCY. Ever! In the first letter you send them, you state that all future communication be by mail in writing...


The sites below have all the info one needs for credit repair, which this person needs to do anyway. She can start with this scum junk debt collection agency.

Read up:

https://creditboards.com/forums/index.php?s=8e3d1882713e4b1ca6cf66485edf1c46&showforum=2

http://whychat.5u.com/index.html