| |
Dealing With Debt: Settlements |
|
| |
More Advice Team |
|
| |
| |
Home values in the town where I live are going up and I'm considering buying a house. My credit is not very good and I'm trying to re-pay some collection accounts. Can I “settle” the accounts for less than the amount owed? -Kim |
|
| |
|
Dear Kim,
If the collection agency does not agree to have the account shown as "paid in full" on your credit bureau file, you may face problems securing a mortgage loan. Check with your mortgage company to see how they will look at a settlement notation on your credit bureau file. Many mortgage companies will require you to pay the entire balance in full before they will consider you for a mortgage loan.
The Advice Team |
|
| |
| |
I have gotten in trouble with two credit cards. They have been charged off and turned over to a collection agency. I received a letter saying they would take a reduced payment if I paid this in full within 10 days. I don't have that much. Will they offer this again or reduce it again? I am trying to figure out how I can pay this off and get a good night's sleep. -Cathy |
|
| |
|
Cathy,
The collector is offering you a settlement. A settlement means that they will take a portion of the debt and write off the rest. There are two main downsides to this. First, the settlement can further damage your credit report. Second, the amount that they write off might have to be reported as income for tax purposes.
Since you don’t have the money for the settlement anyway, I recommend you call and try to make arrangements you can live with. If you come to an agreement, get the details in writing.
The Advice Team
|
|
| |
| |
I was out of work for several months and got behind on my credit card payments. The collection agency is calling daily. I recently started a good job and I want to get this account taken care of. Can I offer them less than I owe? If I do this, will the negative marks be removed from my credit report? -Jess |
|
| |
|
Jess,
Settling with a collection agency will not remove the negative notations already appearing on your credit bureau file. Generally, when you settle a debt, the collection agency will note on your credit bureau file that the debt as been "settled in full." However, there will still be a balance showing on the account. On the plus side, you should not be contacted again to repay this balance because the account settled.
The Advice Team |
|
| |
| |
I’ve heard a lot about debt negotiation lately. Paying less than I owe sounds great, but I am skeptical. Are there any downsides? -Erik |
|
| |
|
Erik,
Debt negotiation is the same as debt settlement. How much the collection agency will settle for depends on your negotiating skills. But you must be aware, if they accept your settlement offer, you must send in the settlement balance immediately. The collection agency will not accept payments on a settlement offer.
Another factor you have to take into consideration on a settlement offer is how it will affect your credit report. When you settle with a creditor, the creditor typically reports that you still have a balance remaining but the account has been "settled in full." If the creditor does not agree to have the account shown as "paid in full" on your credit bureau file, the derogatory "settled in full" notation will remain on your credit bureau file for seven years.
There may also be tax implications to a settlement, so please check with an accountant about this issue.
If you'd like to consider debt management as an alternative, don't hesitate to call a counselor at 800-762-2271.
Good luck with your decision,
The Advice Team
|
|
