Post: #1

I'm considering trying to negotiate paying off a couple credit cards by offering a lump sum at around 50% of what I owe. So far it looks like companies are open to settling rather than getting nothing at all. I was wondering if any forum members have gone this route.

What I've learned so far:

Get your deal in writing, including how it will affect your credit.

Don't accept the first offer.

And your chances of getting this done without a credit ding is best done before it goes to collections, however of it does go to collections you can pay a much lower lump sum.

Post: #2

I'm a pro at this Fisto whatever you want to know ask me. I've seen settlements at 10%. I did mine at 20 I think but it's considered income at tax time.

Post: #3

It's income from discharge of indebtedness.

So if they forgave $10,000, you owe taxes on that $10,000 as if you had earned it.

But it still ends up being a deal.

Say you owe $20,000. You pay $10,000 and they forgive $10,000.

You'll owe around 15-25% (whatever your tax rate ends up being) of that $10,000.

So all in, you're $12,500 on a $20,000 debt.

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There are a couple of good credit repair law firms. (Lexington Law Firm is good.)

After you've settled your debt, the banks have little incentive to keep track of your files.

The law firm will send dispute letters to the credit bureaus.

By law, the bank must confirm the negative entry in your credit report is valid within 30 days. If they don't, the entry falls off of your credit report.

A friend of mine walked away from a lot of CC debt and had a 700 credit score within a year.

Post: #4

Id like to know about this also but my rules may be different since I am in Canada.

Post: #5

Mechanic and MikeCF I'm and definitely down to do it then.

Do you guys know if I can do the same thing on a couple 2nd mortgages I have on 2 houses?

My understanding is that bankruptcy courts view 2nd mortgages as basically unsecured debt if the value of the houses are upside down so the mortgage companies get hosed in bankruptcy court. I was thinking of trying to do the same thing with them.

Post: #6

(07-31-2012 05:32 PM)Fisto Wrote:  Mechanic and MikeCF I'm and definitely down to do it then.

Do you guys know if I can do the same thing on a couple 2nd mortgages I have on 2 houses?

My understanding is that bankruptcy courts view 2nd mortgages as basically unsecured debt if the value of the houses are upside down so the mortgage companies get hosed in bankruptcy court. I was thinking of trying to do the same thing with them.

Correct. I don't know many people paying those but on mine which is 17k I offered them 1k start real low on those.

Also make sure you don't have any money in any of those banks.

Post: #7

Ok awesome. I'll pm you.

Post: #8

I'd also like to hear more about this...tips, strategies, etc

I'm in the same boat, have gotten letters from creditors saying they will settle for 50% however, I haven't taken advantage mostly because I don't want to spend the money and I have no motivation to do it.

I def want to improve me credit, so any tips from people in the know would be helpful

Post: #9

Fisto, your debts are still with the original creditor so a 50% settlement with them is a very good deal. The big ding to your credit rating does come when they charge it off and sell it to a third party. If you don't care about bill collectors tracking you down and possibly hounding your relatives to get a hold of you then wait them out for a 10% - 20% settlement but that might take a couple years.

The most imortant thing to get when you settle any debt is a letter from the creditor specifically stating the debt is either Paid In Full or Settled in Full. Keep this letter in your records because collection agencies recycle debt, if it ever comes up again you fax them a letter showing it's paid.

Don't be afraid to negotiate. Bill collectors are desperate for cash, a western union payment on the last day of the month can save you a lot. You can play a bill collector like a fiddle for as long as you want if they think you might pay.

I'm an ex bill collector so I know how a credit report looks and how debts get closed out.

Post: #10

(08-02-2012 08:21 PM)painter Wrote:  Fisto, your debts are still with the original creditor so a 50% settlement with them is a very good deal. The big ding to your credit rating does come when they charge it off and sell it to a third party. If you don't care about bill collectors tracking you down and possibly hounding your relatives to get a hold of you then wait them out for a 10% - 20% settlement but that might take a couple years.

The most imortant thing to get when you settle any debt is a letter from the creditor specifically stating the debt is either Paid In Full or Settled in Full. Keep this letter in your records because collection agencies recycle debt, if it ever comes up again you fax them a letter showing it's paid.

Don't be afraid to negotiate. Bill collectors are desperate for cash, a western union payment on the last day of the month can save you a lot. You can play a bill collector like a fiddle for as long as you want if they think you might pay.

I'm an ex bill collector so I know how a credit report looks and how debts get closed out.

wouldnt your credit get whacked pretty bad if you had a credit card that you didnt pay for 5 months in order to get them to settle?

Post: #11

Brian, your credit would get dinged after the first month without a payment. I definitely would not advise anyone to put off paying a bill to get a low settlement but that's the situation a lot of people are in. The real whack to your credit is when you go nine months without a payment, it becomes a red flag on your credit report, a bill that is not being paid and will remain on their for @ seven years depending on what state you live in.

Having unpaid bills on your credit report doesn't mean you won't get credit anywhere, you will but at a higher (sometimes much higher) percentage rate. An example would be going to buy a car, you won't qualify for the primo 0% rate, it would be probably be more like 10% or more.

I once saw a credit report with 43 charge offs (no payments for nine months and counting). This chick had credit everywhere and continued to get more and burn everyone but her rates were through the roof and her credit limits had to be miniscule.

The main thing I would advise anyone with credit problems is get a copy of your credit report and start working through what's unpaid. Find out the statute of limitations in your state and see what's coming off your report and when. The only thing is even if you never pay a bill and it's out of statute you still owe the money and bill collectors can hound you, they just can't take any legal action against you.

Be very careful with debt settlement agencies, they can ruin your credit by not paying any of your bills while you build up money to pay your debts.

Post: #12

Don't know how it works Stateside but I owed 30,000 Pounds on credit cards and bank loans here in the UK about five years back. There was no way I could pa it back. I decided to change my surname to my mother's maiden name and changed address and I never heard from them again. In fact I opened a new account in the same bank I owed thousands to ( different branch obviously ) a couple weeks later with my new name and address and was offered new credit cards and overdraft immediately. I'm not saying my way is what you should do but if you're struggling with big debts and the pressure of paying them back then it's an option. I don't regret it.

Post: #13

(08-03-2012 08:17 AM)Vorkuta Wrote:  Don't know how it works Stateside but I owed 30,000 Pounds on credit cards and bank loans here in the UK about five years back. There was no way I could pa it back. I decided to change my surname to my mother's maiden name and changed address and I never heard from them again. In fact I opened a new account in the same bank I owed thousands to ( different branch obviously ) a couple weeks later with my new name and address and was offered new credit cards and overdraft immediately. I'm not saying my way is what you should do but if you're struggling with big debts and the pressure of paying them back then it's an option. I don't regret it.

What? Don't you have social security numbers in the UK? No police? No gaol?

Post: #14

(08-03-2012 11:49 AM)ElJefe Wrote:  What? Don't you have social security numbers in the UK? No police? No gaol?

Of course we do but loans and not paying them back is not a criminal offense,you can't go to prison for being a bad manager of your finances. Hence big loans are secured against property etc because the banks know they can't do fuck all if you refuse to pay them back.

Post: #15

(08-02-2012 08:21 PM)painter Wrote:  Fisto, your debts are still with the original creditor so a 50% settlement with them is a very good deal. The big ding to your credit rating does come when they charge it off and sell it to a third party. If you don't care about bill collectors tracking you down and possibly hounding your relatives to get a hold of you then wait them out for a 10% - 20% settlement but that might take a couple years.

The most imortant thing to get when you settle any debt is a letter from the creditor specifically stating the debt is either Paid In Full or Settled in Full. Keep this letter in your records because collection agencies recycle debt, if it ever comes up again you fax them a letter showing it's paid.

Don't be afraid to negotiate. Bill collectors are desperate for cash, a western union payment on the last day of the month can save you a lot. You can play a bill collector like a fiddle for as long as you want if they think you might pay.

I'm an ex bill collector so I know how a credit report looks and how debts get closed out.

I'm going to save up a little money from my new job and then hit them with the lump sum payoff at the end of the month

Post: #16

End of the month is the way to go, the last collection day is August 31, I would call on the the 30th and lowball them around 25% - 30% and see what they say. Tell them you are in a hardship situation but a relative is willing to lend you the cash. Hopefully you can get them down to 40% or better but like I said before, with the original creditor 50% is a good offer.

They will either want you to do a post dated check where you give them your account info (routing and account number from the bottom of your check) or certified funds through Western Union or Moneygram (located at Walmart). The quickest way to get your settlement letter is sending certified funds, as soon as they get the payment they can fax you a copy so have a fax number for them. If you do a post dated check you have to wait up to 30 days for the check to clear and it can be a hassle going back and forth with them.

If the fax machine is not a hassle for you have them fax the terms of the offer so you have it in writing before you make the payment.

Good luck, if you get them under 50% it's a great deal!

Post: #17

(07-31-2012 04:12 PM)kosko Wrote:  Id like to know about this also but my rules may be different since I am in Canada.

Hey, it's basically the same thing.

From a corporate tax perspective - if you own a business - debt forgiveness will be included into income in the year the loan becomes forgivable. However, the forgivable portion is first applied to any non-capital losses you have, then active business income, etc. (I forget the exact order but a google search will do)

So it doesn't go directly into income first because it eliminates some of the losses you could have carried forward.

From a personal tax perspective, it will be included in your income, assuming the loans are under your personal name (i.e. credit card under your name). Of course your credit will be affected and you should find out by how much. I never really pay attention to this though because once you get enough assets or have a high monthly income, then most banks are willing to give you a loan anyway.

Post: #18

(08-05-2012 07:40 AM)painter Wrote:  End of the month is the way to go, the last collection day is August 31, I would call on the the 30th and lowball them around 25% - 30% and see what they say. Tell them you are in a hardship situation but a relative is willing to lend you the cash. Hopefully you can get them down to 40% or better but like I said before, with the original creditor 50% is a good offer.

They will either want you to do a post dated check where you give them your account info (routing and account number from the bottom of your check) or certified funds through Western Union or Moneygram (located at Walmart). The quickest way to get your settlement letter is sending certified funds, as soon as they get the payment they can fax you a copy so have a fax number for them. If you do a post dated check you have to wait up to 30 days for the check to clear and it can be a hassle going back and forth with them.

If the fax machine is not a hassle for you have them fax the terms of the offer so you have it in writing before you make the payment.

Good luck, if you get them under 50% it's a great deal!

Is there a certain department I should ask for when I call in?

Post: #19

Once they have your account number or your name and social they should automatically transfer you to whoever is handling the account. If the first person you talk to doesn't come down enough ask for a supervisor and keep low balling until their position is clear. A regular collector is only allowed to go so low but the supervisor can approve or get approval for a lower settlement. Keep negotiating until you're sure they're at their lowest price. On the last day of the month I've seen all standards get thrown out the window, esecially in a slow month like August.

Post: #20

Was searching for something else but I found an old thread by Pusscrook on this topic:
/thread-8185.html

Post: #21

As of right now I'm current on all my payments. It's been tough but I've made them. So there's no one "handling" my account. Should I miss a payment first to start the settlement process?U

Post: #22

(08-06-2012 03:43 PM)Fisto Wrote:  As of right now I'm current on all my payments. It's been tough but I've made them. So there's no one "handling" my account. Should I miss a payment first to start the settlement process?U

You have to miss months of payments before they are ready to settle.
A customer said "When the mean people stop calling and the nice people start that's when"

They're going to break your balls on the phone I just loaded iblacklist on my iphone to weed out bs calls if you have one

Post: #23

you can also demand that all communication be in writing

Post: #24

(08-06-2012 03:43 PM)Fisto Wrote:  As of right now I'm current on all my payments. It's been tough but I've made them. So there's no one "handling" my account. Should I miss a payment first to start the settlement process?U

If your current on your bills then your credit rating is in good shape. If you want to save money by settling you have to stop making payments and that will hurt your credit rating. I wouldn't advise doing that if you can afford the minimum payments. If you can't afford it, pick one or two and quit paying, let 'em go to collections, and wait out the best deal. That will ding your credit report and lower your credit score so consider the statute of limitations in your state and how long that stays on your credit report.

Post: #25

(08-06-2012 05:00 PM)reaper23 Wrote:  you can also demand that all communication be in writing

Definitely, if a collection agency is on you and you're sick of the calls you need to get their mailing address and send a cease and desist letter and request all communication be in writing. A verbal cease and desist is good for 7 days. If they violate that and you can prove it you can sue them and they will most likely settle. Your bill goes away and you get paid, haha!

The only thing is you have to repeat the process with each new collection agency.