Question on Settlement
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Question on Settlement
| Sun, 01-08-2006 - 9:30pm |
My husband and I are trying to pay off our credit card debt. We are down to 4 cards - yes we had many. The companies seem very anxious for us to "settle" our accounts for a lower amount that is owed. My questions is = it seems tempting and I know that our credit has been ruined but would it do us any good to "settle" the balance or just to continue to make payments.

If you already have a bunch of charge-offs on your credit and they are recent, then having a settlement isn't going to be too much worse.
I agree that it depends on your total debt situation as to how bad a settlement will look. But the truth is, that a settlement always looks worse than a "paid in full," no matter how delinquent the account got before you managed to pay it in full. So if you can keep paying, that's what I recommend. Just reassure the companies that you are going to continue to send monthly amounts and that you are not wanting to settle at this time. You may want to send them a letter stating your repayment plans, and they may stop pestering you.
Another thing you need to know, in case you do decide to settle, is that you will be responsible for paying taxes on the difference between what you owe and what you pay to settle the accounts. The IRS considers this forgiven debt to be income, and will tax it as such. So be sure you can afford the taxes!
Also, make sure ANY agreement you make with the credit companies is made in writing. It is not uncommon for a company to ask for a settlement, and then, after receiving your payment, to continue to try to collect on the rest of the original debt. Sneaky, and illegal, but they can get away with it if you don't have the agreement in writing. They may try to get away with it even if you *do* have it in writing, but your chances of successfully contesting their collection attempts are greater if you have that written document from them. Don't send them *any* settlement money until you have that written document (it's not good enough for them to say the document is in the mail!).
Good luck with whatever you decide. Blessings,
Heather