Discover close to charge off - what happens then?

What happens is they will sue you, and you would then have to decide whether to roll over or move to compel arbitration with JAMS.

It goes from charge off to being sued? I won't have a chance to settle with a collection agency? Mine charges off at the end of March.

Every account is different....Discover tends to be quite agressive.

jennilopez77 wrote:
"A charge off on your credit report is just as bad as a bankruptcy."

And what exactly are you basing this statement on?

jennilopez77 wrote:
"Another thing you should make sure of is that the creditor is not going to 1099 you for the deficiency of the account."

How exactly do you suggest that they "make sure" of that? The creditor is entitled to deduct the unpaid portion of the principal, and to do that, the creditor's tax deduction becomes the debtor's tax liability. If the debtors would have qualified for bankruptcy (even if they didn't file one) they could certainly try to make a case of insolvency, which would exempt them from this tax liability even if they didn't file for BK.

In my opinion, JenniLopez was only here for solicitation purposes....the MODS deleted the links to a bankruptcy site. Plus the information she was sharing was not accurate.

I agree...a charge off is not as bad as a bankruptcy.

Hi Rinth,

How is it going with Discover? Any update?

Discover may go as low as 40% prior to charge off. They do tend to look for lump sum funding of the settlement currently, as opposed to other national issuers who are willing to settle prior to charge off and offer the balance reduction and as much as 94 day terms to pay it off (94 days is OCC guidance). Discover generally assigns accounts out for collection, and as Soap suggests, they are aggressive.

Once placed with an assignee the deals range between 35% an no % reduction. Depending on where the account is placed, you can settle the account for less than the 70% they have you tagged at and sometimes with 6 and 12 month terms.

Options responded with: "What happens is they will sue you, and you would then have to decide whether to roll over or move to compel arbitration with JAMS".

Options is right in the fact that you are at risk of being sued. But, there is no certainty of that. The account may be placed with an assignee collector first with settlement options available that Discover will not put on the table for you now.

The whole Jams arbitration concept requires a great deal of explanation and then action on your part. Most people just want to resolve their delinquent accounts when they have the capacity to, but Options JAMS comment would be something for you to research if you are later sued by Discover.

As for jennilopez comments, there is too much wrong with them to rebut all at once. One area I will address is the credit reporting and scoring topic.

Chapter 7 bankruptcy stays on the report for 10 years. This fact does not mean you are in credit purgatory for the entire time. In fact, chapter 7 could mean more rapid access to credit products than when enrolled in a debt management plan or when engaged in a debt settlement strategy.
In this economy, and when considering someone is in a financial bind to the point that bankruptcy makes sense, there are a few considerations for future credit needs and a chapter 7:
Unsecured credit at favorable interest rates is typically not available for a year or two. You will likely get offers for low limit unsecured credit card products in the first several months of discharge (some may even offer favorable introductory interest rates).
Student loans - your own or those you would cosign for a child (plus loans etc.) are typically off the table post chapter 7 discharge for a couple years. This may change in the future.
Auto loans are available at higher interest within the first year of discharge. Interest rates will come down incrementally after that.
Home ownership - FHA type underwriting will place home purchases out of reach for typically 2 years. This may change in the future.

Chapter 7 will make a ton of sense for people to get relief from debt when placed beside an individuals near and mid term credit goals.

Chapter 13 stays on the credit report for 7 years. It is pretty much credit purgatory for the life of the repayment plan. Repayment plans or either 3 or 5 years in length. The majority are 5 year plans. Most forms of new credit products a person in chapter 13 would seek would require approval from the trustee. The trustee can tell you no.

Charge offs on credit reports create a varying type of damage to the credit report and score. The damage can be ongoing depending on whether the account remains unresolved; purchasers and assignee reporting; multiples of accounts charged off; problematic double jeopardy reporting that victimizes consumers who are not aware of it, and do not take the initiative to fix it, and more.

Accounts charged off that are resolved early on, and where steps taken to improve credit are followed and adhered to, will over all cause less of an impact to mid and long term access to credit products than a debt management plan or chapter 13 bankruptcy plan.

While there are a host of nuanced and specific to the individual credit impacts (and time needed to recover) with debt settlement, my experience reflects that chapter 7 and short time frame debt settlement strategies track the closest to each other when considering credit impacts against earliest access to legitimate credit products at a fair price.

Discover update:
This was my last card to settle, I was out of money and they wouldn't go below 65%. I called them the last day before it was going to the attorney and they were no longer willing to settle, not even for 65%. I was given only one option (besides it going to the attorney) and I was pretty happy with it considering my lack of funds. They set up a hardship program with 75% of balance owed and payments over 60 months at 0.99%. Sure, it will take me 5 years to pay it off, but at least the interest isn't piling up like before.

One other note, I was told by them early on in this process that they wouldn't likely settle with me because my account was only about 2 years old.

Rinth,

Glad to hear you were able to put something together that works for you.
Congratulations on your success resolving your accounts!