DIY Debt Settlement - Received first response

There are alot of people on this board that are in the same boat as you are and they will be along to offer to advice. Good luck and keep your chin up.

Wells Fargo is terrible to deal with. I would call back and ask for the loss mitigation dept. You might have better luck in that department.

How far delinquent are you on your accounts? If they haven't been charged off yet, they may be easier to deal with as the charge off date gets nearer.

I have heard from a lot of people that if you don't like what you are hearing from one person, politely excuse yourself, hang up, and call back 8 hours later. You'll likely get a different person AND a different supervisor, and start fresh with a brand new clean slate with a new person. Stay nice, stay calm, and be persistent.

Good luck!

Dobuble Post

Great job playing hardball. I wouldn't answer any of the other questions because you were perfectly clear to begin with. I do think it will take a number of calls on your part to bring them to 30%. Worst case scenario is they eventually file a complaint and you settle at the 50%.

I am almost a year delinquent on all of my accounts. What is a charge off? I am dealing with a collection agency and not Wells Fargo. Is that a charge off? I found a website on the internet that showed how much debt reductions various Companies have accepted. I noticed that Wells Fargo did range anywhere from 50 to 81% reduction, so I didnt think that asking for 70% reduction was to far fetched. Does anyone know when it is best to bargain?

Accounts are charged off at 180 days delinquent with the original creditor, so your accounts have already been charged off. What that means is that the creditor wrote it off as a bad debt on their books. It doesn't mean that they will not still attempt to collect the debt. If you are dealing with a collection agency, the account may still be owned by Wells Fargo, and they may just have a collection agency collecting for them. Or the account may have been sold by Wells Fargo to the collection agency. If the account has been sold by Wells Fargo, then Wells Fargo now has no say on the settlement amount, and it is solely up to the CA.

can you give a brief idea of the tax problems? I had never heard of tax problems in the past?

smo - I believe he is talking about the 1099C you may get if your settlement benefit is more than $600. Per the IRS you may be taxed on the difference of the amount owed less the amount you pay.

Yes, if your "forgiven" debt is over $600, then the total "forgiven" amount has to be reported to you by the creditor on a 1099c form. Unless you were insolvent at the time the debt was forgiven, then you owe taxes on the "forgiven" amount. Obviously, the taxes would probably be less than the amount of the debt, if you were to pay the debt in full. You can read more about it at the IRS website:

http://www.irs.gov/publications/p4681/ch01.html

The IRS , however ,has a form ( Form 982 ) available for certain hardship situations that may exempt you from this tax.

Could someone please explain to me how the credit card delinquency steps work? when do they sue you? who sues you?


thank you all

Watchkeeper - you might want to start your question under a new post, that way it won't get lost in this thread that has nothing to do with your issue.

Just use the "New Topic" button at the top of this page.

You just pay your current tax rate on the forgiven debt. It would go on your current tax forms in the income section. Most peoples effective rate is in the 15% range which means you would be taxed at 15% on the forgiven portion. I always suggest that this is taken into account when you settle because the debt is usually grossly inflated by the time a person settles it. For example, if you have a credit card that you received 5k benefit from and then default on it for a year then that balance might grow to 8k from penalties, fees and interest. If you settle it at 4k then the CC will file as a 4k loss to get to the 8k which means you will pay another 15% on 4k in taxes or $600. The bottom line is you would have paid $4,600 on a 5k debt which really isn't that good of a deal. Now the credit card company would get a tax break of roughly 25% of 4k on that debt which is 1k. This means they got exactly what was owed plus they probably made money from previous usage unless you opened the card, took the money and defaulted immediately. Also, the IRS makes $600 so they are happy. I always suggest settling at 50% or better of the limit of the card assuming you maxed the card. This means you would settle for $2,500 instead of 4k which is obviously a better deal even though you pay a bit more taxes to the IRS. In that case you would pay 15% of $5500 which is $825. Your total out of pocket would be 2,500 plus 825 or $3,325 which is a 66% settlement. Also keep in mind the more debt you settle the higher your income will go which might start bumping your tax bracket. Anything of 32k is taxed at 25% I believe on an individual so if for some reason you settled 32k in debt plus you made 32k salary for the year then you would pay 25% of any debt settled to the IRS in taxes.

I would speak with an accountant to see if the the IRS Form 982 would benefit you in your hardship situation. Hopefully they can exempt you from that tax.

they are only offering 50% for me.. i have an account that has charged off and another that has not yet. I have a total balance of around $18k. they are both business visa cards. just wondering - thanks!