Settling Collection Debts- I need some advice please

[nowellsl]

Not in every state. Only a few can restart the clock.

This is from about.com (search for statute of limitations)

"The statute of limitations starts on the last date of activity on the account. (Keep in mind this can be different from the date the account went past due.) Your credit report will include the account's last date of activity".

and

"Be careful not to restart the statute of limitations. Anytime you take an action with an account, the statute of limitations is restarted. Making a payment, making a promise of payment, entering a payment agreement, or making a charge using the account can restart the statute of limitations on an account. When the clock restarts, it restarts at zero, no matter how much time had elapsed before the activity."

I'm pretty sure this applies in all states. The Statute of Limitations length varies from state to state but I believe they all can restart on the "last date of activity.

 

[mommy22pumpkins]

I would be leary of any company that offers to settle debt as it is not a binding agreement and they could always opt to sue for the remainder of the money. If you are in so much debt that you will not be able to pay back realistically- bankruptcy may be an option. This is the only way to ensure the debt is paid off or *settled* legally.

 

[Planogirl]

This is from about.com (search for statute of limitations)

"The statute of limitations starts on the last date of activity on the account. (Keep in mind this can be different from the date the account went past due.) Your credit report will include the account's last date of activity".

and

"Be careful not to restart the statute of limitations. Anytime you take an action with an account, the statute of limitations is restarted. Making a payment, making a promise of payment, entering a payment agreement, or making a charge using the account can restart the statute of limitations on an account. When the clock restarts, it restarts at zero, no matter how much time had elapsed before the activity."

I'm pretty sure this applies in all states. The Statute of Limitations length varies from state to state but I believe they all can restart on the "last date of activity.

I work for one of the bureaus and the statute of limitations to report the account will not change with them. That is not to say that collection activity won't restart of course.

From the FCRA:

§ 605. Requirements relating to information contained in consumer reports [15 U.S.C. §1681c]
(a) Information excluded from consumer reports. Except as authorized under subsection
(b) of this section, no consumer reporting agency may make any consumer report
containing any of the following items of information:
(1) Cases under title 11 [United States Code] or under the Bankruptcy Act that, from
the date of entry of the order for relief or the date of adjudication, as the case may
be, antedate the report by more than 10 years.
(2) Civil suits, civil judgments, and records of arrest that from date of entry, antedate
the report by more than seven years or until the governing statute of limitations
has expired, whichever is the longer period.
(3) Paid tax liens which, from date of payment, antedate the report by more than
seven years.
(4) Accounts placed for collection or charged to profit and loss which antedate the
report by more than seven years.
(5) Any other adverse item of information, other than records of convictions of crimes which antedates the report by more than seven years.

And...

(c) Running of Reporting Period
(1) In general. The 7-year period referred to in paragraphs (4) and (6) 3 of subsection
(a) shall begin, with respect to any delinquent account that is placed for collection
(internally or by referral to a third party, whichever is earlier), charged to profit and
loss, or subjected to any similar action, upon the expiration of the 180-day period
beginning on the date of the commencement of the delinquency which immediately
preceded the collection activity, charge to profit and loss, or similar action.
(2) Effective date. Paragraph (1) shall apply only to items of information added to the
file of a consumer on or after the date that is 455 days after the date of enactment of the Consumer Credit Reporting Reform Act of 1996.

The 7 year period for delinquent accounts is somewhere in all of that.

 

[nowellsl]

That is not to say that collection activity won't restart of course.

That's what I'm referring to.

 

[moongirl]

So I went to the myfico.com website that a PP mentioned... I had really no idea what I was getting myself into.. That things can/wont be taken off credit reports... Now I feel even more lost then I already was... Whats a 1099? I googled it and came up with more then 4 types of 1099's... I'm going to look and see if theres a debt for dummies type book...

I know this is overwhelming but with some time spent educating yourself, you can figure it out!

1. First get copies of your credit report from annualcreditreport.com.
2. Read this thread from myfico.com: http://ficoforums.myfico.com/fico/board/message?board.id=rebuildingcredit&thread.id=28996
3. And this thread that has the abbreviations: http://ficoforums.myfico.com/fico/board/message?board.id=rebuildingcredit&thread.id=584&jump=true
4. After you have looked at your credit report and then through some of these threads and read posts in the "rebuilding your credit forum" at myfico.com, you will be able to ask the right questions there to get help.
5. It is best to get advice on the sites suggested to you with the financial expertise.

A book is a good idea as well but may only suggest the most straight and narrow approach. It may be a place to learn the basics about your situation. The people at myfico.com can then steer you on what to do about it and their personal experiences.
Good luck!

 

[NYCDiane]

1. These debts are already on your credit report and will remain there, even if you pay them in full. There is no such thing as a "pay for delete". The only way that would come off your credit report is if the original creditor who reported it goes to the 3 major credit bureaus and tells them they reported it in error (and that WON'T happen)

2. You can probably settle these for between 30-50% of the current balance. When you get the money, call the debt collector and tell them you'd like to settle this for 30% and see what they say. They'll counter with a different figure and from there on, it's a matter of negotiating.

3. If the debt collector agrees to settle, be sure to get it IN WRITING before giving them a penny!!!!

4. Remember that the amount you didn't pay is considered income and you may get a "1099 form" at the end of ths year and have to report it on your tax returns. For example, say your debt is 10K and you settle for 6K... that other 4K is considered income. A "1099" is a form reporting income that you received and haven't paid taxes on through the person/place you received the income from.

5. As far as your credit report ---- once you settle, it will be reported as SETTLED IN FULL as oppposed to PAID IN FULL. Right now, your credit is already screwed up so I don't know how much of a ding that would put in your credit report but just remember, it will stay there for the next 7 years at minimum.

 

[moongirl]

1. These debts are already on your credit report and will remain there, even if you pay them in full. There is no such thing as a "pay for delete". The only way that would come off your credit report is if the original creditor who reported it goes to the 3 major credit bureaus and tells them they reported it in error (and that WON'T happen)

Well, it is possible, it does happen, and it will be the only remedy that can help one's credit report. This issue is far too complicated to hash out on a message board. Just wanted to let the OP know that settling is really bad for the credit score and it is possible to get something for his offer of payment. The OP will have to take everyone's suggestions into consideration, do some investigating, and figure out what is the best option for him/her. Whatever course of action he takes, it will be a lot of work and will take time and effort. He has gotten a good variety of suggestions and will have to do some homework to decide how to proceed.

 

[Planogirl]

That's what I'm referring to.

That's what I thought but I wasn't sure. So many people do believe that the time on the credit report starts over too.

Well, it is possible, it does happen, and it will be the only remedy that can help one's credit report. This issue is far too complicated to hash out on a message board. Just wanted to let the OP know that settling is really bad for the credit score and it is possible to get something for his offer of payment. The OP will have to take everyone's suggestions into consideration, do some investigating, and figure out what is the best option for him/her. Whatever course of action he takes, it will be a lot of work and will take time and effort. He has gotten a good variety of suggestions and will have to do some homework to decide how to proceed.

I've seen letters from creditors stating that they requested that an account be removed per agreement but it's not a regular thing. It likely depends on the company's own policies and even local laws.

 

[bettymae1121]

I've found this site to be more helpful than credit boards. They use the same type of boards the DIS uses so it will be a lot easier for you to navigate. I also found the posters much more willing to help newbies.

http://www.debt-consolidation-credit-repair-service.com/forums/index.php

 

[nowellsl]

That's what I thought but I wasn't sure. So many people do believe that the time on the credit report starts over too.

Yeah, I think some of us are talking about two different things How it affects your credit report and the OP's legal responsibility towards the debt!

 

[Tinkerbelle32]

Ok, I'm surely gonna get flamed for this but, why wouldn't you want to pay all of the debt you owe? Maybe I'm not understanding this correctly. I know so many people who run up charge cards, etc. buying things on credit, but when it comes time to pay it off they don't want to pay it. That makes no sense to me. If someone owes $8,000 for a trip to Disney and they end up in collections over it. Why shouldn't they still have to pay for their vacation like the rest of us? Isn''t is our responsiblility to pay the debt we charged?

 

[CherylA]

Ok, I'm surely gonna get flamed for this but, why wouldn't you want to pay all of the debt you owe? Maybe I'm not understanding this correctly. I know so many people who run up charge cards, etc. buying things on credit, but when it comes time to pay it off they don't want to pay it. That makes no sense to me. If someone owes $8,000 for a trip to Disney and they end up in collections over it. Why shouldn't they still have to pay for their vacation like the rest of us? Isn''t is our responsiblility to pay the debt we charged?

Just so you have a slightly better idea of how this would have actually worked... Someone takes an $8,000 trip to Disney that they put on a credit card. For whatever reason they can not make the required payments on that card after a while. So lets say the min payment has been set at $250/mo. They can't pay that, maybe they pay $100/month instead. What happens is that the $8,000 original amount starts to multiply. They pay some ridiculous interest rate like 20% plus at least a $39 (actually probably much higher) late fee every month so that even though they may be paying on that card, the balance will actually go up not down. In 2 years they may have paid $2400 to the credit card company but their balance will be more like $8500.00, more than the original amount charged. Also realize that many people dealing with debt did not charge $8,000 Disney trips. Many of them charged, gas, food or medical bills.

You ask
" If someone owes $8,000 for a trip to Disney and they end up in collections over it. Why shouldn't they still have to pay for their vacation like the rest of us? "

but see they really aren't paying $8,000. Unfortunaltly many people don't see that this can happen. It's a really good reason to stay away from credit cards. The problem is for people whose expenses are more than their income credit cards are one of the only ways to meet their expenses, if only temporarily, and most people assume their luck will turn around and they will be able to pay off their debt at that time.

I only recently took a look at this perspective. Up until very recently I had more of the attitude towards credit card debt that you do. I've been helping a family member crawl out from under some debt recently. This is not a person who is taking any vacations but instead just struggling to make ends meet. There certainly are those that have used their credit cards for frivolous things and then don't want to pay them but I think thats the minority not the majority. Just something to think about...

 

[NYCDiane]

#2. Start out low, like 15-20% and work your way up. Most places, especially collection agencies (which purchased your debt from the original owner for pennies on the dollar) will clear the debt at or below 50% owed So for your $900 debt, you want to look at settling for $350-$450.

You're wrong about this. Not all debt is purchased by collection agencies. Most of the time, the original creditor attempts to collect the bad debt for 6 months. If they can't collect it, they outsource it to a collection agency who gets a commission on what they collect.

#3. Remember that the original debt owner has ALREADY written off your debt AND been paid by the collection agency for the debt. Thus both a tax writeoff and payment. The collection agency is then making money on whatever you pay them. Again, they usually purchase these debts for $0.01-$0.05 per $1 owed. So a $1200 debt is usually purchased for $100 or less by the collection agency (depending on the collection agency). Sometimes, the debt is not sold and if that is the case, then you should negotiate with the original debt holder and NOT the collection agency.

You're a bit confused on this point. Yes, the debt gets "charged off". However, the moment the original creditor gets any payment on it ---whether from the debtor or a collection agency, that is considered income so the original creditor is not double-dipping as you're implying.

As far as debt being purchased for .01 - .05 on the $1.... that is typically debt that is so old and deemed "uncollectable". Any "fresh" debt (such as the OP) would not be sold for "pennies on the dollar".

As far as dealing with the original creditor rather than the collection agency? You're wrong again. Once a company puts the debt into collections, they're pretty much washed their hands of it and don't want to deal with you anymore. Sure, you can send a payment to the original creditor but that will only prolong your delinquent status because until your payment clears and the collection agency is notified/given their commission (yes they still get commission if you pay the original creditor), you are still considered to be in collections.

 

[bettymae1121]

You're wrong about this. Not all debt is purchased by collection agencies. Most of the time, the original creditor attempts to collect the bad debt for 6 months. If they can't collect it, they outsource it to a collection agency who gets a commission on what they collect.




You're a bit confused on this point. Yes, the debt gets "charged off". However, the moment the original creditor gets any payment on it ---whether from the debtor or a collection agency, that is considered income so the original creditor is not double-dipping as you're implying.

As far as debt being purchased for .01 - .05 on the $1.... that is typically debt that is so old and deemed "uncollectable". Any "fresh" debt (such as the OP) would not be sold for "pennies on the dollar".

As far as dealing with the original creditor rather than the collection agency? You're wrong again. Once a company puts the debt into collections, they're pretty much washed their hands of it and don't want to deal with you anymore. Sure, you can send a payment to the original creditor but that will only prolong your delinquent status because until your payment clears and the collection agency is notified/given their commission (yes they still get commission if you pay the original creditor), you are still considered to be in collections.

But that's the thing, there are a lot of different senarios the OP (or any deliquent debtor) could be looking at. It could be the orginal creditor still ownes the debt and you're dealing with in house collections. It could be the original creditor outsourced it to an outside debt collector. It could be that the original creditor sold the debt for less than owed to a debt buyer (at a slight discount or pennies on the dollar, or anywhere in between), and it could be that it's been bought and sold serveral times by various debt buyers. And sometimes debt buyers turn around and hire outside collection agencies! Every situation is unique, and any debtor should do as much research as possible to figure out who they are dealing with. Once you know what the score is, you can make better choices on how to handle it. What works with an original creditor may not work with a collection agency, and what works with a collection agency may not work with a debt buyer.

And some original creditors will pull an account from a collection agency. They may or may not, they certainly don't have to. But if a person comes across as willing to work with them (either a payment plan or an offer to settle in a lump sum) it has been known to happen. You don't know until you ask, the worst they can say is "no" after all.

Pay-for-deletes (meaning you pay the debt and the creditor agrees to either take the whole thing off your credt report, or they report it as a positive account) aren't that common, but again they have been known to happen. Usually you have to offer to pay in full with little or no negotiating the amount down at all. If a person can afford to settle in full, it's worth a shot to ask, again the worst thing they can do is say "no".

And yes, if you negotiate for a lower amount, the creditor will probably issue you a 1099 and you'll have to claim the forgiven amount on your taxes as income. But it's still less expensive than paying the debt in full.

Now, while paying what you owe is always a good thing as far as karma is concerned (plus it helps you to avoid lawsuits), it probably won't help the OP's credit report much, because unfortunatly a paid collection is almost as bad as an unpaid one. The good news is that as that negative mark on your report ages, it counts less and less towards your score, and will eventually (after about 7 years) fall off your report. It won't haunt you forever!

 

[Planogirl]

Yeah, I think some of us are talking about two different things How it affects your credit report and the OP's legal responsibility towards the debt!

Oh well, if anyone here is confused about the impact on the report then they can read through the gibberish I posted.

 

[Tinkerbelle32]

Cheryl- I do not have any attitude towards credit cards. I use them and pay them off. I only used the disney vacation as an example since I'm on the dis budget boards. As far as for folks using them to get by on for such items as food, gas, etc, that's perfectly acceptable, but on a whole people know how credit cards work. Do I think 15, 20% interest is fair? Heck no, but when you use that card for whatever reason it become your debt, no matter what is was used for. I'm not refering to op at all, just people in general.

 

[Planogirl]

Cheryl- I do not have any attitude towards credit cards. I use them and pay them off. I only used the disney vacation as an example since I'm on the dis budget boards. As far as for folks using them to get by on for such items as food, gas, etc, that's perfectly acceptable, but on a whole people know how credit cards work. Do I think 15, 20% interest is fair? Heck no, but when you use that card for whatever reason it become your debt, no matter what is was used for. I'm not refering to op at all, just people in general.

It is your debt but the debt can skyrocket because of fees and interest. You can end up paying the debt many times over in some circumstances. The banks can negotiate a lower amount and still make way more than the original debt.