Credit Card settlement

[scribega]

Was wondering if anyone had experience in this. BofA called me today and asked offered to do a credit card settlement. We have $24k on the loan with them and they offered to settle it for $6300. Has anyone had experience with this?

 

[Janet Hill]

I thought CC companies only did this if the payments are at least 3 months behind.

 

[scribega]

I am behind. My wife lost her income and I took a salary cut recently. So we have been paying every month, but less than the minimum.

 

[ilovefh]

I don't know what it does to your credit, but I believe the 17,700 that you don't have to pay back you have to claim on your taxes next year as income, or a gift. You do have to pay taxes on that amount.

 

[JoanneNC]

From what I have learned about these watching Dave Ramsey
Get the agreement in writing BEFORE you pay and do not give them access to any of your bank accounts.
Send them a certified check or money order, etc.

 

[annieb727]

Generally if you do that, you have to pay that settlement amount right away...so if you have the $6300, you can do it. However, the amount that they write off will be counted as taxable income though for taxes, so $24,000-6300 is $17,700 that will be added to your income for tax purposes next year.

 

[BrettS]

I have settled credit card accounts before, so I do have some thoughts on this.

First, a settled account will look very bad on your credit report. This isn't necessarily a reason to avoid doing a settlement, because an account that has gotten to the point where they're willing to settle (especially for such a low amount) also looks very bad on your credit report. Even if you paid it off in full your credit report would be in pretty bad shape, so I wouldn't let that deter you, but do be aware that it doesn't look good and will stay on there for 7 years.

Second, and more importantly, when you settle a $24K account for $6.3K realize that they are essentially giving you $17.7K... that's money that you spent that you haven't paid back. They will report this to the IRS and you will owe taxes on that 17.7K. If you're in a 25% tax braket, this will mean that you will owe an additional $4,425 in taxes next year. None of this money will be withheld, so you need to be prepared for that and start saving some money to cover it now.

Assuming you can get past the moral issues (you spent the money and now you're not paying it back), I think it probably is a good idea to settle. The settlement will keep them from sueing you (and for $24K they almost certainly will sue you for it) and it will keep them from garnishing your wages or taking money from your checking or savings accounts.

Good luck,
Brett

 

[a1tinkfans]

As a BofA user, I am HORRIFIED that they are doing this!

Personally, I think one should have to claim bankruptcy and take the penalty, if they charged 24,000.00 worth of items/services and then could not pay for what they purchased. SORRY, but so many people are Draining our country dry with living above their means and then walking away from their financial obligations.

For your families sake, I hope you ARE able to get out of the awful financial situation that you seem to be in
And
that you are one of the lucky ones that will learn from this so as not to again make these AWFUL mistakes, that got you in the HOLE in the first place!

I guess I figure if you Posted, you were willing to Hear, even if you don't understand the frustration of those that DO live within their means and take their financial responsibilities very seriously!

Again, I DO wish you the best of luck to get in better financial shape!

 

[secretpantssam]

Personally, I think one should have to claim bankruptcy and take the penalty, if they charged 24,000.00 worth of items/services and then could not pay for what they purchased. SORRY, but so many people are Draining our country dry with living above their means and then walking away from their financial obligations.

Yeah this bothers me too.

 

[Mom of three]

As a PP stated, get everything in writing prior to settleing.

Reason being, is that they can still come after you for the remaining balance, selling the account to another company and in turn that company will come after you.

So do not for one second think that you will be able to just pay the $6300 and be done with BOA. Even if they don't get the entire balance upfront, they will still find a way of getting it.

You can even draft up your own letter and insist they acknowledge it before you agree to it.

 

[mhsjax]

As a BofA user, I am HORRIFIED that they are doing this!

Personally, I think one should have to claim bankruptcy and take the penalty, if they charged 24,000.00 worth of items/services and then could not pay for what they purchased. SORRY, but so many people are Draining our country dry with living above their means and then walking away from their financial obligations.

For your families sake, I hope you ARE able to get out of the awful financial situation that you seem to be in
And
that you are one of the lucky ones that will learn from this so as not to again make these AWFUL mistakes, that got you in the HOLE in the first place!

I guess I figure if you Posted, you were willing to Hear, even if you don't understand the frustration of those that DO live within their means and take their financial responsibilities very seriously!

Again, I DO wish you the best of luck to get in better financial shape!

Um, excuse me, but he said that his wife got laid off and he had a salary cut,kind of rude of you to assume that they don't take their financial obligations seriously, I guess you haven't read the paper lately, its happening all over even big companies, OH MY, why not go insult some of them. sometimes things happen that we have no control over. How nasty can you be?

 

[Shmily1]

Um, excuse me, but he said that his wife got laid off and he had a salary cut,kind of rude of you to assume that they don't take their financial obligations seriously, I guess you haven't read the paper lately, its happening all over even big companies, OH MY, why not go insult some of them. sometimes things happen that we have no control over. How nasty can you be?

I agree!! These days, people aren't getting laid off or fired for not doing a good job, the companies just can't have as many employees or are going under all together. It doesn't sound to me like OP was neglecting the responsibilities by spending all they make on going shopping and out to dinner... the income's not there!!! Just how do you think that's his fault??? It sounds to me like he's trying all he can!! I'm sure when he charged on the card he wasn't thinking "hmmm... let me charge this up so the rest of the US citizens can pay it off for me"!!

 

[Mom of three]

Um, excuse me, but he said that his wife got laid off and he had a salary cut,kind of rude of you to assume that they don't take their financial obligations seriously, I guess you haven't read the paper lately, its happening all over even big companies, OH MY, why not go insult some of them. sometimes things happen that we have no control over. How nasty can you be?

Couldnt have said it better myself. Its not fair for us to pass judgement on someone when we do not know the entire circumstance surrounding the issue.

For all we know there could be another reason the OP got behind in addition to losing an income. Serious illness? (heaven forbid).

Point is, we don't know. It's our job to help and offer an unbiased opinion. Not to critique someones financial well being and assume they are dead-beats because they got behind.

 

[terrier72]

Yeah this bothers me too.

I agree and to those who have thought differently he has been to disney three times in the past three years. I would love to do that, but my financial obligations do not permit this!

 

[aka-mad4themouse]

Let's focus on answering the OP's question instead of fighting among ourselves. It really isn't productive. We're all a little anxious about the economy. Please don't turn that anxiety and frustration on each other.

 

[camreesmom]

I think the fact that the OP is making an effort to at least pay something every month shows that they are trying to do the right thing. I think everyone needs to show a little compassion.....you really never know when it could be you.

But for the grace of God, go I.

 

[mhsjax]

I agree and to those who have thought differently he has been to disney three times in the past three years. I would love to do that, but my financial obligations do not permit this!

Yes, but maybe at the time his financial obligations did allow him to go to Disney.

 

[SondraC]

Yes you do have to claim the written off amount on your taxes, (you will get a 1099-c cancellation of debt) BUT, you can claim insolvent on that amount if you debt is greater than your assets.

 

[poohfriend]

the op asked for feedback on settling this debt. It is a reasonable question. I for one respect that he/she was willing to ask for advice.

Let's be careful about flaming the op and in general "treat others the way you would want to be treated."

B of A obviously thinks they are more likely to get 6300 now than if they "wait" to get paid back at 18-24% interest for 20+ years. They have indicators that reflect this client is falling further and further behind. These indicators prob. show that eventually the individual declares goes bankrupt -- and B of A just becoms one of many creditors.

Please remember that this person may not have actually charged 20k in debt...they may have charged much, much less and over the years at the big interest it just keeps growing.

I have never been in the OP position. However, most of the time this is the place to come for great advice. Please offer advice and not criticism. OP has to be clear on the fact that he/she is in a bad spot and made poor choices in the past.

OP good luck.

 

[mamalle]

always nice to thow stones huh? makes you feel better behing your computer screen? I hate this very reason when it comes to message boards .. we have no idea what happened in their life and I hope it never happens to you as you sit upon your pedestal..


anyhow- if BOA is serious and you can financial do this- I would do it personally. I hope things turn around for you guys... these are things that I fear are becoming more and more common with the way are economy is going... very sad...