Settlement offer - how to stop further collection activities

Who or what company sent you the settlement letter?

What happens next depends on this answer. You may receive settlement letters from reputable companies and from not so reputable companies.

I think the statement ???all collection activity on the account # will stop??? is descriptive and will give you legal right if anyone else tries to collect it in future. Try to mention the amount in the agreement paper also.

To stop further collection activities on a settled account, filling out 1099C form is a good policy. You can also think of it. Hope VLD will put some more points here.

I got the offer from Midland. I was thinking of sending them a letter and getting the offer in a more legal manner. Stating that the account will be listed as "paid in full", and not just "Paid". I will not do anything till I have this in writting.

The Guest's earlier post was right. It depends on who sent you the letter. If it was from the actual creditor, then you're fine. If it was from an assignee of the debt from the original creditor with written notice of the assignment to you, then you're fine. If it was from a collection agency, then it just means that THEY can't do anything about it any more. If the creditor delegates collection to a different collection agency, then I'd say you've got an arguable claim if you want to wait and see if they sue you, since the collection agency that sent you the letter was acting as the agent of the creditor who is bound by the acts of its agent. But the creditor will say, "Nah, that's just an independent contractor, we're not responsible for the beans they throw out at people."

Would you suggest that i get in wrtiing that the debt be reported as paid in full, and no futher collection activity will be done in regard to this account by there company or any other company? The offer was from Midland Collection, in regards to a Fingerhut account.

Have you been paying midland on this debt already, or has the collection proceedure just started? I was wondering if you've been paying and they decided to up and offer you an settlement or did Midland just start contacting you about this account. I'm only asking because I have been paying Midland through another collection agency on a fingerhut account. In my case, a collection agency is collecting for a collection agency.

Shirley,
The original debt was Fingerhut, then it went to SIMMS Associates, I went on a debt management plan in January and now Midland has purchased the account from SIMMS associates. I am just worried that they will sell the amount that they do not collect to soemone else, I need to know how to avoid that.

Have you informed the debt management company about the situation? You can get them involved in it.

And VLD, what is your opinion about 1099C form submission as per debt settlement issue is concerned.

stanley,
yes i have informed them they are the ones that informed me to make sure that they were not going to sell what they do not collect in the settlement to another company. I just need to know how I go about protecting my self if i take this offer.

I often tell people that if I could do arithmetic, then I wouldn't have had to have become an attorney. If you talk about taxes, my eyes glaze over. I got a "D" in taxation in law school, my only "bad" grade.

But I think I know about the 1099C question: you only have to report income if you actually have income. If someone reduces the interest you have to pay, because they're not entitled to collect that much anyway, then that's not income. If an actual debt is forgiven or partially forgiven, that's income. I have no idea what the reporting requirements are. I work with a CPA to deal with stuff like that.

At the least write the creditor with a copy to the collection agent, attaching a copy of the debt collector's offer letter as an exhibit, and telling the creditor that you accept their offer made through their agent. That makes it clear that you're creating a contract to settle the claim with the creditor, not the debt collector. Always behave in a way that is consistent with your own position, don't buy into the opposition's position by behaving in a way that's consistent with their position. Doing so is, in legal terms, "estoppel by deed" - you can be prohibited from making a claim in court that is inconsistent with your behavior.

And, if you're supposed to pay money as part of the settlement agreement, use a cashier's check drawn on a bank made out to the creditor (even if you send it to the collection agent) and have the bank put the notation "paid in full" on the memo line. Make sure you send it to the "other correspondence" address, not the address where ordinary payments go.

You know, its really great having you here Virginia Legal!! I really appreciate you and find your information very useful and informative. thanks for being here with us and helping out!!

Thank you, and the others who have been so complimentary, for saying so; glad I could help.

I have a quick question for you Virginia---is there any way to know if an original creditor has 'sold' your account to a collection agency. I read somewhere where they have to tell you but I've never heard anything. I have written several letters asking if the account has been sold but have never gotten an answer.
In my case, original creditor is on credit report but collection agency is not. collection agnecy now has come up and offered a settlement. they are a collection agency collecting for a collection agency. They said their collection agency 'authorized' it, but nothing was said about the original creditor. I don't know if they are still involved or not. If I take the settlement offer, how can I get a 'paid charge off' or 'settlement' when collection agency isn't on report?? only original creditor is. If OC leaves things as is, as a charge off, but I paid it off to a collection agency, thats not going to help me out at all, since collection agency isn't on report. this is so crazy to me. once I pay collection agency, does original creditor have to update since they're the only ones on report. It surely would suck if they sold the account and ca isn't on report. then it won't help my report one bit at all. thanks.

Your analysis of the situation is entirely correct, although what you read about the creditor being required to inform you is not generally true (it may be in some states, I don't know).

One thing to keep in mind is that there's two kinds of credit information on the credit report: historical and current. Historical information may say something like, "on March 7, 1999, subject was late making a payment on his mortgage." Current information, on the other hand is more like "Subject is in default on his mortgage."

If it's clear that the creditor's entry in your credit report is purely historical, then there's no legal obligation to update the information. If it reflects current information, then the creditor has an obligation to update the information, even if only to say that you don't owe them the money anymore because they sold the debt to someone else.

One of my pet peeves is that creditors almost never inform their debtors of a sale of the debt. They're looking to get the most pennies on the dollar that they can, and they don't want the added expense and bother of informing the debtors. And, since they have no real obligation to provide that information, they don't. However, the debtor is in the position of having to pay someone they're not sure they really owe any money to. And, as a legal matter, if the debtor pays the wrong person, that's his problem, and he still owes the rightful creditor; if A sues C because of a real debt, it's no defense for C to say, "But A sold the debt to B and I paid B; B told me so!" Oops.

I think that all payments made on any debt should be made to the original creditor only unless and until either the original creditor provides instructions to the debtor or the assignee provides documentation showing that they rightfully own the debt (i.e., by a document from the original creditor, with the creditor's endorsement in the form of a signature of a corporate officer) that specifically identifies the debt sold (usually they're sold in bulk with no identification of any particular debt). Even then you ought to check with the original creditor because sometimes collection agencies send out bogus letters in the name of the original creditor and pose as the original creditor.

You can't ever go wrong by paying the original creditor if they haven't provided you with written instructions to pay someone else that you have independently verified.

At the least, only pay by check, and make the check out to the original creditor as the payee, even if you send it to a collection agency.

Btw, here's one more important point. The biggest risk is fraud on the debtor (and, while a court will sympathize, that won't get you out of the original debt, either). You can do everything right and still be the screwee (to use the technical legal term) because the original creditor can come into court and say, "we never got that check - it was made out to us, but we never got it, and it was processed by a bank that we've never had an account with. This defendant has clearly paid someone but it wasn't us." Ooops.

Here's the point: Look and see if the person you propose to send money to is real.

It's easy to pose as "J. Blow and Associates, LLC", to get a post office address, get a telephone, create a website, and print letterhead, without there actually being a "J.Blow" or actually creating the LLC. Some of the scam artists use Mailbox Etc. as mail drops so they appear to have a legitimate street address.

Every corporate entity must be created by a state. Therefore, there's a record of the entity with some state agency. The databases for most states are available through the internet. So it's like a five minute task using a search engine to locate and search the records of the secretary of state or the state corporation commission or whatever they call it in the state you're searching on. You should, at the least, be able to find the proposed new payee at a particular street address in such a database if it's a legitimate entity.

Secondly, lots of fraud occurs because of the use of bogus entity names. For example, there's never been an entity named, "AT&T Wireless". That is not the true and correct corporate name of any entity ever registered anywhere in the U.S. (I've checked.) You'll find it registered as a trademark (The U.S.Patent and Trademark Office database is available free, online), and you'll find it as the registered fictitious name of about a million different companies. But there's never actually been any company named "AT&T Wireless". Here's one clue: any legitimate corporate entity will have a name that includes one or more of the following terms: inc., incorporated, co., company, ltd., limited, l.l.c., l.c., limited liability company, or some equivalent, depending on state law. If the name of the entity doesn't have one of those terms, it's not real. There may be a real company using the fake name, having legitimately registered the fake name, but there's got to be a record of that, too, in the state database. "Hormel", for example, is a legitimately registered fictitious name.

Another thing to do is to call the municipality where the proposed payee is located and ask them whether that payee has a business license, or whether there's a licensed entity at the address given to you. If the information you get back doesn't match what the payee sent you, the payee is bogus or at least lying.

If you use the "reverse lookup" feature on most telephone listings websites, like those from Verizon, PeopleSearch, InfoSpace, etc., and you can't locate a business with the correct name using the address they gave you, then they're not real. If you get an 800 (including 866, 867, 888, etc.) number, then call that number and ask them what their local (non-toll-free) phone number is, and look that up.

Document your research so that you'll be able to explain to a court later that (1) the people who are suing you don't exist as a legal "person" and therefore the case should be dismissed; and (2) you didn't pay them because you determined that they did not exist. (I can, for about fifty bucks or less, file suit against you in the name of Macaroni and Associates, P.C., where you live, get a judgment against you, and garnish your bank account, all without having to prove to anyone that there is such an entity as Macaroni.)

The moral of the story is this: Don't ever pay anyone you're not sure is the person you really owe the money to. You can write to the credit bureau and require them to put a notation in your file to correct any misinformation they've been distributing. They'll be required to investigate your dispute of the correctness of the information and publish your comment along with the disputed information if they do disseminate the disputed information.

Sent a validation letter to Reliable Adjustment collecting for Citizens Bank which was Charter One Auto.

They send original contract and letter telling me to make payment arrangements with Reliable. This debt was for an auto that is past SOL and off my credit reports. Originally was 12K, Reliable added fees on saying it is 18K, but they have approval from Citizens to "settle in full" for 7K.

Yes, out of SOL, and off credit report, but going through security checks for govt and must be settled or paid. It is a legit offer since Citizens sent me the original paperwork and said to deal with Reliable? Then if so, and I pay, will it go back on my credit report for another 7 years? Any help appreciated.

The government's interest in your debts are, at least according to them, that no one will be able to hold anything over you, to gain leverage over you, or to subject you to civil legal process that could require you to divulge confidential information. This doesn't have anything to do with any of that. If the SOL has gone by, you don't owe the money, as a legal matter.

First thing I'd try is to hire a lawyer to look at all the documentation, conduct whatever investigation he feels is necessary, and write up an affidavit which he will sign, which states that he is an attorney, that he has conducted a thorough investigation of the facts, and that you do not, as a matter of law, owe any money on that debt. Get two originals, one for the govt. and one for you. Send a photocopy to the collection agency. That'd probably shut them up.

If you do pay anything at all, it will probably constitute a waiver of the SOL defense, and you'll get back on a debt treadmill. If you don't legally have to pay, my advice would be, absolutely do not pay.

I realize that this is probably more than you want to have to mess with, but your best option might be to file suit for declaratory judgment to the effect that the SOL has expired and that you are therefore not indebted. That will result in a final order of judgment that you can present to the govt. types to show that there is no debt. It will almost certainly be cheaper to hire a lawyer to do that for you than to pay off the debt, even at the fifty cents on the dollar they're looking for.

I'm thinking your break even point is probably going to be around $2500 - if they'll settle for less than that, then it's probably not worth it to file suit. Best thing to do is to send them a counteroffer, but caution, a counteroffer is a rejection of the original offer. If you want to lowball them, that's fine; but be sure to let them know that you know perfectly well that this debt is outside the SOL and your only consideration is, which is cheaper, hiring a lawyer to do a declaratory judgment action, or paying them off just so that you don't have to think about them anymore.

BTW: settlement agreements written by creditors shouldn't be signed without striking through a lot of the stuff they put in. If there's an arbitration clause, a liquidated damages clause, etc., get rid of that stuff. Don't settle unless it's really and truly in your interests to do so - in the case we're talking about here, the only thing you should be giving up is money, not rights and future claims. It would be best to have a lawyer look over the proposed settlement agreement (and, btw, if a lawyer tells you it's a standard preprinted agreement without any analysis of whether the individual clauses are in your interests or not, tell him you want your money back - you knew it was a standard form when you came in, you didn't need a lawyer for that little gem - and if he won't give you your money back, file a complaint with the state lawyer ethics people).

Find a lawyer who understands what I've said here, and can do that kind of work, and get them to tell you what their ballpark figure would be, on a fixed-fee basis, to get you a declaratory judgment on the assumption that the facts as you've stated them are true.

Quote:

well, yes, but...

if you change any of the terms, e.g., by deleting some, then you've basically rejected the offer and proposed a counteroffer, which they do not have to accept.

If, on the other hand, you have a deal already, you don't have to sign anything else. If you get a letter containing a settlement offer, and it doesn't say anything about separate terms and conditions, and you write "I accept" on it, with your signature, and send it back, that's a contract. Again, there's likely to be nuances and details that I can't advise you on here, because we don't know yet what they will be.