Negotiating settlements question our lawyers chime in to!!

Lets say a credit card, some one owes 5000 if they agree to pay it off lump sum can a settlement be reached for may be 4000?? I guess it could apply to many other debts or services too. any opinons, exsperience? THANKS

I had a client whose husband died, and it turned out he had about 6 secret credit cards, total balances of about 30 grand. Without threatening bankruptcy or even pleading poverty, I was able to get all but one to settle for 75% to 85%.

But that was several years ago, and I think one can do even better now. Especially if you have cash. Even without cash, they will usually negotiate on the interest rate and payment amounts, just to get them "performing" again- but usually no reduction in balance unless its a cash payoff.

I've got two on my desk done this year. Wells Fargo at 35% of the balance. GE Money Bank sold to a collection attorney that settled for 40%. That's a cash settlement.

Once a company decides to write you off, the going rate for sale of your debt to debt collectors is a quarter to a third of the balance. The older it is the less it is worth. Some old stuff sells for pennies on the dollar. A collection company buys it from a credit card company. They try to collect for a while and get what they can. Then they turn around and sell it to another collection company who tries for a while.

Shoot them a low ball figure of 20%, 25%, or 33% conditioned on them also reporting to all three credit bureaus for you, your spouse, and any other name on the account that your account, both principal and interest, is fully, completely, and satisfactorily paid off due to a mutually acceptable lump sum settlement and the account is in good standing. A check will be sent to them once you have an approved settlement agreement in writing. All names on the account should be included. Sometimes they have a spouse on your account without your knowledge. Suggest that is all you can borrow to pay them off(not that you actually have it on hand). If it isn't good enough, you may have to file Chap 7 bankruptcy and use any available cash to make your house payments. Mention any other hardships such as medical problems and layoffs. This would have to be in writing with something in writing back from them that they accept the offer or else they come back with a counter offer. Mention also that your offer is better than what they can do by selling your account on the open market.

Do not give them a dime over the phone either as a down payment or an expression of good faith. You will end up losing it. Pay nothing without an ironclad "written" agreement by both parties. You may discuss it over the phone but it has to be reduced to writing before any money changes hands. Since they often forget to do it, you will probably have to send to all three credit bureaus a photocopy of your written and signed agreement along with a copy of your cashier's check that you sent. Run all three of your credit reports before and after just to make sure where you are at. The company on your card may not be the present owner. Once a year you can get free credit reports from all three agencies at annualcreditreport.com. Ignore the requests to pay for debt scores and regular reporting. Don't use freecreditreport.com as it is not really free. You should never have to enter a credit card number to get your free reports.

I have tried work outs with multiple credit card companies adding another condition that all your other creditors must accept your lump sum settlement offers before you are obligated to pay any one. Usually some will bite on a deal but there is always one or more creditors that don't so the people end up in bankruptcy anyway. With one company you might make it work. I've seen people scrimp and save thousands to make one credit card settlement just to learn that they still can't make it so they end up losing their settlement when they file bankruptcy.

You need some professional help to take a realistic look at your present and future financial situation. If you can't quit using your credit cards and then pay off your credit cards in four years then you are spinning your wheels. If you can't quit using them then you will just run your balances up again digging the hole deeper.

Of course it'll ruin your credit rating for years if you care about that

What ever happened to responsibility for your own actions.

Buying piles of crap at department stores and using a credit card to do it all and playing stupid when the bill comes in is wrong.

BC thank you that was helpfull

Mike thank you that was helpfull also.

bc's advice is right bang on, GET IT IN WRITING!
Do not exchange a cent until you do. Pay with a check or money order so you have a paper trail.

DO NOT GIVE THEM ANY ACCOUNT NUMBERS OR ANYTHING ELSE THEY CAN USE TO ELECTRONICALLY ACCESS YOUR ACCOUNTS.

bc's advice follows Dave Ramsey's advice on his radio show almost to the letter. Dave says that credit card collectors and bill collection agencies are the worst type of people, and don't trust them an inch. EVERYTHING IN WRITING, and DON'T let them THREATEN you into anything.

Negotiating should be done before the purchase, not after receiving a bill. Nothing is free. Defaulting on all or part of a debt increases the cost of doing business which raises prices for everyone else. Just like taxing businesses like oil companies, for example. They just add the tax to their cost and pass it on in higher prices.

My brother in law died of cancer a couple years ago without insurance.The bills were over 100 grand,they settles for 30 thousand.

Did you know....

If you negotiate a deal with a creditor or debt collection agency where you pay back at least $600 less than the original balance.....

You will receive a 1099-C "Cancellation of Debt" form that the creditor is required by law to file.

The amount you were forgiven has to be reported on line 21 of Form 1040 as "other income" and you will be required to pay the tax due on it...

I know this doesn't make sense. If you can't pay your credit card bill, where are you going to get the money to pay the tax on the forgiven amount...

Tim

Often times they will take a cash settlement less than the balance. What ever you do never ever send them the amount some one told you on the phone unless they send you a statment in write'n say'n that $X will pay the debt free and clear. When deal'n with these folks if it ain't in write'n it was never said. When you get it in write'n save it along with a copy of the cancled check forever.

I locked horns with a credit card company and several collection agencies after my divorce. Deal'n with them was almost as bad as the exwife I was get'n rid of.

Dave

Some do send the 1099. Some send them whether you settled or not. They do it when they write you off. However there are exceptions to it being included in income on your tax return. Bankruptcy and insolvency. Insolvency means you can't pay your bills with your income which is why you didn't pay them to start with. Just need to show that when doing your taxes. I forget where it goes on the tax forms.