Is it better to pay a charged off account in full at a reduced price?

mshayna -

Welcome to the site!

I am not a credit expert, but I do know that when I have settled bills in the past with the help of debt settlement online companies, it showed up on my credit report as "settled for less than amount owed", rather than "paid in full" or "paid as agreed".

I don't know how that reflects on your report in terms of your credit score, but I'm sure others here will post their take on your situation. You'll have much more information by tomorrow evening if you keep watching this thread. :-)

you have the ball in your court right now, call your creditor or the collection agency and try to negotiate payment for deletion. First I would negotiate a reduced "paid in full" amount minus all their bogus fees, then explain to them that you agree to pay this amount as soon as you get a letter from them agreeing to remove it totally from your credit report. A chargeoff is one of the worst things to have on your credit report. These people want their money, it doesn't matter to them what is on your report. With a little negotiation, and the promise of a payment from you they are usually more than willing to do this. But whatever you do do not pay them until you get this agreement in writing. Once you do all this you must follow up with the Credit Bureaus to ensure this has been removed.

I'm not here to tell anyone not to pay their bills or anything like that but another thing to take into consideration is how long it been charged off.If it is a recent charged off account then its probabaly gonna be on your report for about another 6 1/2 yrs.If it is due to be off your report soon and the SOL has run out then personally i would just leave it alone.Also when you go for debt settlement solutions and pay less than what you owe, sometimes the collector/creditors will send you a 1099 and you have to claim the reduced amount as income on your taxes.Just like candice said if you have themoney to settle and they are willing to do so,make sure that you have it all in writing before sending any money.And keep the letter and all documentation incase you need it later.Sometimes ,maybe even years later another collector will come along and try to get the additional amount,and then you'll have the proof that it was settled.

I had no idea you could get a 1099 for unpaid bills. I'm with ya taksmom476. If all you have to do is wait it out, do so. Use your money to pay on newer items on CR, or pay on current bills so they dont end up on CR. Certainly dont risk court by not paying, but weigh the benefits of paying against the benefits of putting the money away.

Not paying your bill, when its about to fall off in a year is still risky. You still risk the chance of having to pay the full price the collection agency is attempting to collect, plus any interest or court fees that have been attached if it gets taken to court.

Remember though, if it does get taken to court, and the judge finds in favor of them, you'll only get 25% of each check garnished. Failure to pay could result in jail time.

After you have asked for validation, and received it, you can start working with your creditor. If you had a $500 credit limit credit card, and they're attempting to collect $1200 on it because of late fees, offer $700. If not, then send a cease & desist letter, and wait for their offer.

You can either ignore it, and RISK that chance in court, or accept their offer.

There's really no...."which is better". It's your credit that's going to be affected when you seek credit card debt settlement help; so make your decisions wisely.

Regards
Mike

I was in no way telling them not to pay his bill. Especially if there is a year or more until the sol runs out.I'm talking if they only have a month or 2 until it runs out.If they are already past the sol and its due to be off their report soon then all I was saying pay the ones that are still well within the sol and that are going to be on their report for a good bit longer.

For example: You have 5 charged off cc on your report...2 are much older and past the sol, and due to be off you report in 6 months...3 are farely new,still well within the sol,and not due to be removed for another 6 years.
I would pay the newer ones,because there is amuch better chance of being sued over those ones.And those will also be on your report much longer and in the long run will look better if you pay those.

By making a payment on the ones past the sol.it will bring them back within the statutes.Bringing up the possibility of lawsuits on those as well..So if they would for some reason stop paying on those again there is now the possibility of 5 lawsuits instead of 3.

Then for moral reasons or whatever they can then pay the ones that were past the sol.

I am sorry sorry if it was construed that way.

[quote=taksmom476]I was in no way telling them not to pay his bill.[/quote]

I wasn't trying to imply that you were giving negative information. I was only trying to make sure they understand that every avenue might have a stump in the road.

If something is about to fall off your credit report, making a payment would renew the SOL.

I just didn't want people to think I'm her as an advocate to not paying your bills thats all.I know you didnt mean anything by it.Believe me I know the good feeling a person can have when they can and do pay all their bills on time.

And as you said every avenue can have a stump in the road.Thats why I try to weigh out all my options first.

can I negotiate a debt settlement after I have been through court?

As long as you've been through court for unsecured bills, you may be able to work out a debt settlement with your creditors.

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Hey, it was Good, Nelly!!

But do you think all the Debt consultant will provide this timely guidance and help us in the tough financial situation?

Can debt settlement solutions help me get rid of unsecured bills?

Is it legal to settle and reduce the balance on my cards? What law says that is it legal in ilinois? How the reduce affect my credit score? and how I ll see it on my score in

I have alot of questions i owe actually 18850.00 on a credit card with late fees it has come to 22316.81. They have turned this over to a law office. My husband was laid off but the card was in my name. I am trying to get this company to let me pay 40% of the 18850.00 but they are not hearing it. I am afraid they are going to take me to court and garnish my wages .what are my options here? Should i get legal asst. or seek help from a credit card debt settlement company?

if you pay the full settlement amout and then file bankruptcy, can the credit card company still send me a 1099c?

if i am up to date and currently making payments on my CC debt..is my CC company likey to settle?

Hi birdMama,

The credit card company can send you a 1099-C form if they settle the debt for less than what is owed and forgive the difference. However, you can exclude this forgiven debt from your income, if it has been discharged through bankruptcy. Then, you can claim exemption from paying taxes on this cancelled debt amount.

Hi diangelo,

If you???ve been making payments on time on your credit card debts, the CC company will generally not be eager to settle the debt. They would want you to continue making payments the way you???ve been doing it at present. The companies settle debts only when they find that the debtor is not quite financially capable of repaying the CC debts in full.

However, if you???ve been finding it difficult to make payments on the credit card debts, It???s worth a try to negotiate with the CC company to have the debts settled for less than what is owed. You can also contact a credit card debt settlement company to assist you in settling the debts.

If a debt settlement rates good with the TASC but an "F" with the Better Business Bureau who do you believe?

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Also I'm seeing that even though you use debt settlement company and everything goes well you still get a 1099 form from the creditors to pay reduced amount. It sounds like you are just back to square one. If you are paying the settlement amount and then at income tax time you have to the reduced amount. And then you ruin you credit for years. Where is the benefit?

John Black

This is tossed around a lot and can be a bit confusing for people. Here is what happens in general. It doesn't matter if you settle on your own or if you hire a company to do it.

Creditors are generally required to provide a Form 1099-C in the event that they forgive a debt to a consumer that exceeds $600.00. Please understand that if you receive a Form 1099-C showing income in the form of canceled debt, this does not necessarily mean that you owe taxes on the forgiven portion of the debt.

In most cases many people can legally and ethically exclude forgiven debt from their income through the "insolvency exclusion" provided by the IRS code. This exclusion applies when your liabilities exceed the fair market value of your assets, or in other words, you "owe" more than you "own".

I recommend that anyone concerned about potential tax consequences to consult a tax adviser regarding their particular circumstance. They will also be able to assist you on filling out Form 982 that excludes you from the particular debt.

If memory serves, it was during the last big recession of the late 80's ???and there were a number of people defaulting on their loans, walking away from their houses and filing for bankruptcy. The IRS, I believe, in order to recover lost revenue (the banks took a write off; less profits and taxable revenue - the consumer received a benefit from the large sums they borrowed but only paid a fraction back) created ???this rule about the 1099c. After implementation, the banks were issuing 1099c(???s) to consumers, even if that consumer filed for bankruptcy. Congress stepped in and cried foul. Bankruptcy was enacted as a fresh start for a person. The person is not solvent and should not be taxed. When the provision was added, it did not clarify that a person had to be bankrupt but had to be insolvent in order for the forgiveness not to trigger a tax liability.

Anyone seeking to negotiate with their creditors should really be in a hardship situation and not able to realistically pay off their obligations. Debt settlement isn't for someone that just woke up one morning and said, "hey I don't feel???like paying my debts anymore". Most people looking at debt settlement are usually qualified to file for BK but do not want to or want to at least pay the creditors something and avoid it.

Even if you did own more than you owe and you had to pay tax on the debt, it would usually work out that you would still come out ahead. But as a worst case, Let's say that after you paid the the settlement amount to the creditor, the tax that was owed and if you hired a ???company paid their fees you ended up paying back 100% equal to the original balance. You are still completely debt free and you did it in 2 to 3 years, not 40 or 50.

If there were any CPA???s out there that want to weigh in, it would be helpful.
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Nole,

Thanks for the clarification. It all just seem to be confusing for an average person such as myself that has no clue in matters such as these. Have you ever heard of Prestige Financial Solutions? I found them to be very helpful in explaining all of the steps in getting my settlement done. They've answer every question that I have asked and I notice that they are not bugging me to go ahead with the process which I think is a good thing. Or is it? They have a A- from the BBB and I think has been in business since 2005. Had only 1 complaint and was able to resolve it. I don't know if you can help me with a decision but what do you think? Does everything sound good to you?

John Black

i am being sued by a credit card company and my roomate got served today for me because i wasnt home. he received the papers and its of my understanding that the next step for them is to mail me the papers at the same address. i am going to start a new job soon and i was already considering going to the debt settlement process but now i am afraid because i got sued. what can i do? can i still settle without having to go to court? is there really anything i can do?

[QUOTE=;][/QUOTE]
There are several variables you have to consider:
1. How old is the debt - is it past the statute of limitations?
2. Who is suing - a debt buyer or the original creditor?
3. How much is owed to the creditor?
4. Do you live in a State that allows for wage garnishments?
5. Do you have any asset base?
6. What other types of debts do you owe?
7. If you were to "settle" or work something out with the creditor - do you have money available to do it? Can you make monthly payments, etc.

Creditors, the vast majority of the time, just want their money. Normally, if you have not kept an open line of communication with them and they have run the normal course of collections without any contact with you, then they usually will file a law suit to kind of "get your attention".

Has anyone ever dealt with Kirkland green? The BBB rating wasn't good, but they don't have much info about them

when is it to late to contact or get into a debt settlement?

when is it to late to contact or get into a debt settlement program?

[QUOTE=;][/QUOTE]
It's never really "too late". However, if someone has already obtained a judgment against you or is currently garnishing your wages or has placed a lien against your property or placed a receiver in your place of business or has looked at trying to levy your bank accounts, etc, it's much more difficult to negotiate. Once they have a judgment, it can be renewed and can sit out there until you have assets if you don't currently or if your state prohibits wage garnishments, etc.

It's a common scenario in the debt-collection world:you find yourself saddled with credit card debts or medical bills you can't get out from under. When a debt-collection agency comes calling, it will pull out all the scare tactics needed to put you on the defensive - and make you to pay up, no matter what your hardship. The truth, however, is that while bill collectors are full of bluster, they lack real legal muscle.

What does this mean for you? Options. Whether you negotiate for yourself or opt to hire a professional debt negotiator, there are more options than you might think for surviving this experience without sacrificing your financial future. Even if you owe a lot, a creditor will almost always settle for something over nothing when it comes to payment of outstanding debt. So take your time, recognize that you do have some power, and use it wisely. (Learn how to use debt wisely in Define Your Personal Debt Redline to help avoid getting in over your head.)

Negotiating With Collectors
Negotiating your own debt settlement is a viable option for many people. Here are some tips to consider for dealing with creditors. (Read Seven Tips For The Do-It-Yourself Debt Manager for more information.)

Prioritize your bills. No matter what a debt collector insists, that unpaid credit card bill is probably not your No.1 priority this month. Always consider the fundamentals - rent or mortgage, feeding yourself and your kids - before you start handing money over. There's no point trying to appease one creditor if it means putting yourself in the bad graces of others, or jeopardizing your ability to keep earning more. (Learn how to get a grip on credit card debt in A Lifeline For Those Drowning In Debt and Expert Tips For Cutting Credit Card Debt.)

Keep records of each interaction. Note the date and the details of every phone call (and in general, avoid the phone in favor of written communication). Copy and save any letters you receive or send out and, when you've come to a payment agreement, be sure to outline it on paper, sign it and save copies, just like a contract or formal agreement. Never send money until you have a written agreement in hand.

Drive a hard bargain.Estimate how much you can actually afford to pay, and offer less (a relatively common baseline is 25% of your actual debt, though this does vary). Don't be surprised to get angry or outright rude phone calls and threatening letters. No matter what a debt collector says, keep cool and stay focused on the negotiation. The more in control you appear, the more likely you are to achieve your desired outcome.

Hiring a Debt Negotiator
If confronting your lender isn't your style, you might want to hire a debt negotiator; just know going in what each side can expect from the partnership. (A credit counselor can also help you manage your debt. Read How To Find A Credit Counselor for more information.)

Make your selection carefully. Be cautious, especially of those telephone calls or emails that arrive out of the blue from debt negotiators offering their services. Reputable credit and debt professionals usually rely on past clients for referrals, so they don't need to solicit your business through television, telemarketing or spam emails. Interview several agencies before making a choice, and don't be afraid to ask around for recommendations. Also, ask for a clear presentation - in writing - of the fees you will be charged and what they're based on. As a rule of thumb, debt negotiators are paid on commission - if they save you 40% on an overdue bill, they may charge anywhere from 10- 20% of your total debt. Monthly fees vary according to state law, which the agency should be able to explain. Ask yourself this question: When you add up the fees, does an agency make sense for you, or will it merely add to existing debts?

Protect yourself. For real protection against potentially unscrupulous debt negotiators, contact your state attorney general's website or your local Better Business Bureau. Each can provide useful data on debt negotiators, especially if there are any consumer complaints against such firms. Also, check with your attorney general's office to determine whether your debt negotiator is required to have a professional license to operate in your state. While state laws on debt negotiators vary, most have statutes against debt negotiation firms that stick you with high fees but don't follow through, that fudge the terms of a debt settlement plan, that don't explain certain costs or that tell you that you've signed over your home or car as collateral for one of your debts.

Enforce Your Rights
Overall, the key is toknow your rights - the more informed you are, the better you and your money will be protected. Contact the Federal Trade Commission, the National Consumer Law Center and/or your state's attorney general for free information on what both debt collectors and debt negotiators, if you choose to use one, can (and can't) do in your area and situation.

Also, don't be rushed. Never act too eager to settle, never accept a first or second settlement offer and, most importantly, never let the debt collection agency think that it has the upper hand. It will push for instant payments, but don't send anything until you have an agreement in writing.

Here's one last-minute tip - negotiate at the end of the month. Because debt collectors' commissions are based on their totals at the end of each month, you may be able to talk them into a good deal when it's close to deadline time.

Conclusion
Whatever you do, take action! The long-term ramifications of unpaid debt are staggering. According to the National Bankruptcy Research Center, 1 in every 59 U.S. households filed for bankruptcy in 2007. Thankfully, with a little planning and a lot of education, your financial future should be significantly brighter.

Debt consolidation can help many find their way out of consumer debt. Read Digging Out Of Personal Debt and Debt Consolidation Made Easy to find out more.

by Brian O'Connell,

I just want to know what is the cost of settling ~50K in credit card debt?

It is always advisable to pay the accounts in full , even if it is a charged off account then also I would advise you to take care of the full payment because in the end it will show on your credit report that you had paid in full . Your credit also depends on a number of other factors like your payments on the other accounts , and that needs to be taken care of properly if you think of your credit scores as a whole .