Settling Private Student Loan with Citi.

[flickflock]

I've been in default on this puppy for three years. It was originally only 14k IIRC and they say I owe nearly 19k now. I paid on it for about two and a half years.


They sent me an offer of 35 percent, which is around 6.5k.

Anybody have any experience with them? I'm still hurting and really don't have the cash, but.... it's close to SOL and I know they would rather settle now than go to court.

Any advice on countering for 25%? My parents have offered to lend me the money, but I hate getting so much from them.


Also, I know Citi loans were purchased by Discover. I have even got letters from Discover saying my loan is now serviced from them. Oddly, the collections attempts still say on behalf of Citi. Discover has never sent a statement, account number, bill, made any attempts whatsoever to get me to pay. Is this odd?

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Edit: I actually just called back and countered with 22 % and they accepted. I was a little cautious as they wanted the money first and then would send me the letter. Um, no.

Anyhow, they are now sending me a letter with the agreed amount and letting me know the account will be shown as paid in full. Is there anything else I should be looking out for? I've never settled anything such as this other than a credit card balance.

[bcohen]

Sounds good. As long as you have it in writing that the debt will be considered "paid in full" and that the remaining balance will be forgiven and never sold, you're good to go.

[flickflock]

Thank you! That is exactly what I thought. Much appreciated.

[HHM]

Nice result.

You will get a 1099-C in the mail at some point (probably next January). You didn't mention if you filed BK (but then why would you be at a BK Forum...), you will need to complete IRS Form 982, but because the debt is a non-dischargeable student loan, you will not be able to use the BK exception to paying tax on the unpaid portion, you will need to qualify as insolvent. You should go download the IRS insolvency worksheet and compete it now, because the insolvency issue is based on the "time the debt is settled". If you are not insolvent, then the unpaid portion will be counted as income for tax purposes (sorry).

[KeithDoxen]

This is great news. And it shows that private student loans CAN be settled for a fraction of the defaulted balance. So many people claim that this is not possible, but clearly it is. Looks like we're finally starting to see lenders of student loans come back into the real world of creditor-debtor negotiations, instead of hiding behind the claim that a student loan should somehow be a sacred form of debt that should be exempt from all consumer protections simply because it's a student loan.

[flickflock]

Nice result.

You will get a 1099-C in the mail at some point (probably next January). You didn't mention if you filed BK (but then why would you be at a BK Forum...), you will need to complete IRS Form 982, but because the debt is a non-dischargeable student loan, you will not be able to use the BK exception to paying tax on the unpaid portion, you will need to qualify as insolvent. You should go download the IRS insolvency worksheet and compete it now, because the insolvency issue is based on the "time the debt is settled". If you are not insolvent, then the unpaid portion will be counted as income for tax purposes (sorry).

Thanks for the info. I am a little familiar with the 1099, as I settled a credit card a few years ago and got one as well. I haven't even filed my bankruptcy yet. Still sitting here on my lawyers advice not to file until I get a job offer for permanent employment. Considering we are already half way through 2012, I'm thinking that unless I get a kick ass job, my total wages for the year won't be anything to put it up there too far. Last year I had un employment for four months (Didn't bother having taxes taken out) and a temp job for two months and it was the first time in a million years I actually got money back from the fed. If I happen to stumble into a good paying job, I'll be sure to stick some cash away for tax season and get a head start on my taxes in January in case I owe.