Paying off debt with income tax refund
Date: Wed, 12/26/2007 - 20:10
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January to April is a debt collectors Christmas because it is income tax season. It's also a clients expectations of an excellent liquidation rate period.
Should you choose to settle some of your old debts for less than the full balance here are a few tips.
NEVER let a debt collector know you have money, don't let that words I get a tax refund pass your lips. If they ask, tell them no or that you pay taxes and do not get anything back.
This tatic will help you to negotiate a much lower settlement than you would have gotten for this time of year.
Debts that are less than two years old I can honestly say that you likely not get less than 70 cents on the dollar. Debts that are 2-3 years 60 - 50 and 3+ years will depend all on the amount being owed. I've seen an account settled (70k debt) for 10% before, but it was also 8 years old.
Negotiating is key. If you aren't good at it then find someone who is whether it be a friend or a settlement company. Be aware that you must give the agency permission to speak to anyone else other than you. Some states it does require that you also give permission for a spouce to discuss your account.
Should you negotiate a settlement be prepared to follow through with the agreement. Have a fax handy, Kinko's, Relatives, Grocery store, so that you can recieve your written offer more quickly.
Remember a collection agency does not have to settle any account that you have in their office. If you get a jerk, request to speak with someone else or call back. Over all I think you will not find too many of those during this time but you never know.
A first time settlement, meaning you have never done one ever before, WILL lower your credit score by up to 150 points. If it isn't your first it won't matter as much.
Ask the agency if they report PAID instead of settled to the CBR agencies. It does make a difference especially if it is your first settlement.
If you do settle an account or even if you are paying one off ask when you can get your zero balance letter. It is usually within 30 days of paying the bill. This is one of the most important pieces of papers you can recieve from a collection agency. Because it states that you did honor your contract. Do not forget to get this paper and don't let any collector tell you that it's mailed out automatically because 8 times out of 10 it isn't. You must call back and request it.
FYI- thanks for the info - I also want to add, you can get some
FYI- thanks for the info - I also want to add, you can get some offers for less than 70% in the first year, one company offered me 20% after 7 months and per 2 different rep's Chase can go as low as 35% but again it all depends on your balances how much you owe to them and other accounts, my balances were pretty high on 4 different cards but I was able to get 20% after 7 months on the one.
Again - thanks for the info, it's nice to have someone in the CA industry helping us and providing great information!
When I was collecting, we would have training seminars in early
When I was collecting, we would have training seminars in early January about collecting off tax returns. It is good way to get legimate bills paid off. However with JDB's, I would definately tell them that you owe or it is being taken for back taxes or some other federal or state debt.