To good to be true? Debt settlement?

iVillage Member
Registered: 01-06-2006
To good to be true? Debt settlement?
7
Mon, 12-28-2009 - 8:30pm
I have a quick question for you. Today I got a call from the "legal department" of the credit card company that we owe money to. They said that if we paid a certain amount within 150 days that they would consider us paid in full. This amount is 19000 less than we owe. Have any of you done this before? If we do pay them this amount will we be penalized in the end for doing it? Will this hurt our credit any worse than it already has?Thank you so much for your feedback

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iVillage Member
Registered: 07-29-2009
Mon, 12-28-2009 - 9:17pm

"They said that if we paid a certain amount within 150 days that they would consider us paid in full. This amount is 19000 less than we owe."


Wow.

iVillage Member
Registered: 10-28-2009
Mon, 12-28-2009 - 9:49pm

Hi there, I would get anything & everything in writing from this company before any verbal agreements is reached. I would think in order for an offer to be made at all, you are not current on your payments?

I would ask what effect this will have on your credit, and also ask for that in writing. If the person states they can't put this offer in writing, then I would ask for their name, and then speak to their supervisor. chances are they don't have the authority to make such offers, but may get rewarded from collecting payments on an overdue account.

Good luck and let us know how it goes!

iVillage Member
Registered: 11-02-1999
Mon, 12-28-2009 - 10:13pm

I'm not sure how it would affect your credit, but you should know that any "forgiveness" over $600 can be reported to the IRS and considered a form of income. The credit card company can submit what is called a 1099-C for the amount of the forgiven debt (in this case, $19,000), and you could then be responsible for paying income taxes on that amount (at 30%, that would be $5,700). There are loopholes that can alleviate or eliminate that responsibility (proving insolvency for one - that is, that your liabilities at the time of the forgiveness outweigh fair market value of your assets), but there are no guarantees that you will fit the requirements.

Just want to be sure you weigh all of the potential outcomes when making this decision - GOOD LUCK!










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iVillage Member
Registered: 01-06-2006
Mon, 12-28-2009 - 10:29pm
No, we owe 28,000 and the guy told me that the company was willing to settle the debt in full for 9,000 if we pay it within 150 days. So that is 19,000 that they are willing to take a cut on.

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iVillage Member
Registered: 01-06-2006
Mon, 12-28-2009 - 10:38pm
Thank you so much. I was looking everywhere online and could not find anything about this. Your post helped a lot. But I figure we would still only have to pay 14,700 out of the 28000 we owed. Before we went late we had them paid down to 19,000 but with the late fees and all they say that it is now at 28,000. I will talk them tomorrow and ask for it in writing and also bring up what you told me about. Thank you so much!!!

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iVillage Member
Registered: 07-10-2003
Mon, 12-28-2009 - 11:53pm

I know I am not the most trusting individual, so I could be way off in left field on this.

iVillage Member
Registered: 07-05-2006
Tue, 12-29-2009 - 12:15am
I have settled for less than my debt on about 4 credit cards. Never did I settle for that much less...the most I settled was a 10,000 dollar debt for 7,000. It definitely helped out a lot because basically what I ended up paying them was what I actually owed them. The 10,000 dollars they said I was supposed to pay was from all the interest and late fee charges. But be prepared to be hit big time when you pay your taxes. They will send you a 1099 and you will have to claim the forgiven money as income. It is much harder to avoid paying the tax man than it is to avoid a debt collector. Just make sure you do your research and also know that it will greatly affect your credit report. Settled debt is almost as bad as bankruptcy to a lendor. It definitely haunts me, that's for sure! Although I don't regret getting a better deal on my credit cards, I still think that I could have found a better way if I would have had more knowledge.