Chase Debt Validation ( not exactly)

[BigJohn]

Paging Mr. Know it all... LOL just teasing


Unrelated to the Chase issue she is dealing with Citi on her other card. She is a little further behind on that card than expected. Nevertheless it is a good thing. I'm keeping BIG BOY updated as I promised I would since he said I cannot dictate to the CC companies what is going to happen.

I called citibank. I was automatically routed to collections. When I asked to speak to someone in collections the CSR explained that I had reached the right place. I explained that she is unemployed with 0 assets and now 0 income and because of her health will not be returning to work. I explained that she has no income or ability to pay them and their continued efforts to settle would not produce any payments. I explained that I would be willing to work out a settlement with them depending on the circumstances.

The lady said the account was eligible for a settlement of 65% of the current balance. I explained to the lady that it would not work for me. I explained that her options are to file bk or settle with her creditors on limited funding. I explained that I did not have the over 6000.00 to pay the lump sum at 65% and really needed a payment plan of some type that was not long term. I explained to her that I had read online some credit card companies are willing to settle the debt for 20 to 30 percent in some situations. I explained that if they were able to work that amount out then I would be willing to pay them that amount over 4 payments. She said that it was possible but would need special approval from a manager and the ones that could offer that had left for the day. She said she was going to see if she could get approval tomorrow and call back. I asked if there is no answer to leave a voicemail so we would know if it was able to be worked out at that amount or if she should just proceed to filing BK. The collections CSR made sure to let me know that she would rather try to get the 20 to 30 percent settlement with a 4 installment payment plan then have her file BK.

Is this a done deal the obvious answer is no. It is however a step toward a pretty fast settlement before the fees and 30% APR pile up. I will let you know what is said tomorrow. If they do not get to the magic percentage of settlement then we will just wait until they are a little more motivated.

I would say so far you have done really good for yourself. Don't be surprised they might want a higher percentage but if you 'stick to your guns', you might win.

[treehugger1]

If $6K is the 65% amount, then I assume she is holding about $9200 in debt here. At 20% settlement, there will be approximately $7300 in forgiven debt. I can almost guarantee you that Citibank will follow the law and you will receive a 1099C for the $7300. If she is not working, then no big deal. If she is working then the $7300 will do two things, possibly. Inflate her Adjusted gross income for the year and you will be paying (likely) a higher percentage of taxes on the $7300. This could still be a trivial amount and the settlement is now a good deal. For many folks who are high-wage earners, a settlement could lead to %28 tax bracket for the forgiven amount.

Let's do the math in such a case:

you pay $1846 to settle a $9230 debt. Depending upon your tax bracket, at 28%, you possibly owe an additional $2067 to the IRS. Now you have possibly paid $3913 to settle the debt. In such a scenario, when all is said and done, the true settlement amount is approximately 42% from your point of view. Hmmm, I'd be careful here. If BK is in the future, I'd definitely file. Save yourself $3900!

[BigJohn]

If $6K is the 65% amount, then I assume she is holding about $9200 in debt here. At 20% settlement, there will be approximately $7300 in forgiven debt. I can almost guarantee you that Citibank will follow the law and you will receive a 1099C for the $7300. If she is not working, then no big deal. If she is working then the $7300 will do two things, possibly. Inflate her Adjusted gross income for the year and you will be paying (likely) a higher percentage of taxes on the $7300. This could still be a trivial amount and the settlement is now a good deal. For many folks who are high-wage earners, a settlement could lead to %28 tax bracket for the forgiven amount.

Let's do the math in such a case:

you pay $1846 to settle a $9230 debt. Depending upon your tax bracket, at 28%, you possibly owe an additional $2067 to the IRS. Now you have possibly paid $3913 to settle the debt. In such a scenario, when all is said and done, the true settlement amount is approximately 42% from your point of view. Hmmm, I'd be careful here. If BK is in the future, I'd definitely file. Save yourself $3900!

If they file a joint return, and they have a lot of deductibles, he might be able to claim the amount he pays for the debt and then use that amount to nullify the 'extra income' from a 1099C.

[clo]

LOL you two love birds need your own fo---room LOL

Treehugger I must say I respectfully think that it is not a fair assessment that you have provided. Not that your intent was bad or ill willed but simply just an unfair assessment.

She has more write off's than the tax liability that would or may be created. For one to fairly calculate if a settlement is right for their situation they must consider their tax liability. However to just assume everyone is high wage earners is not a good way to look at it nor does it mean it would be a bad deal for a high wage earner.

Even taking your scenario to be true settlement cost would be 3900 or 42% broken up between now and when taxes become due the following year it is still better than paying the whole cost of the debt.

You are correct though before one considers a settlement they must decide clearly what route they are going to go. It would make no sense and could actually be more costly if one starts the settlement process and pays some creditors and in the end still files for bk protection.

Using your scenario even if correct it still makes a 42% total settlement a good deal IMO.

Yes the current balance is about 9,500.00 give or take.

To update I had not heard back from the creditor as of today. I called back this evening and was told that they have looked at the notes on the account and there still has not been a decision. The collection CSR I spoke with today suggested I call back Monday a little earlier and if there is still no answer ask to be transferred to a manager.

He did offer the following information for those who are interested. He claimed that Federal guidelines only allow a settlement of a lump sum of not more than 3 installments. I'm not sure this is accurate as I have read other payment arrangements but I'm just relaying what he said.

He asked what my proposal was as far as a settlement and I explained that especially in 3 installment plan would not be able to exceed 30% and even that would be pushing it.

He said generally they do not go below 40% but may make a special consideration we will just have to wait and see what they are able to come up with. So I'm quite confident I could have made a deal for 40% tonight if I wanted to.

He said we are just crossing into the 90 day late mark on this account.


He also said that generally the later the payment the better the settlement offer. I hate to bring up what I read someplace else but I read someone who owed like 70,000 making the same percentage settlement.

If anyone can tell me what settlement offer they got from Citi nearing the 180 day mark it would be great.

[clo]

update:

I called today and followed up with the settlement request. The lady asked how much in a dollar figure could I offer. I told her 2,850 over 3 payments or 30% of the current balance. She said the computer dictates and usually the managers will not overide the computer. She said the least they could take is a settlment of 5000.00 which is a little over 52% of the current balance. She checked with a manager and got the same response. She said 5000.00 is the best we can do "for now". I rejected that offer and asked should I expect that offer to change or what does for now mean? She responded that the later the payment the lower the settlment offer will be but also reminded that the interest and penalties continue to accrue also.

I told her we would weigh her options including filing BK and will be in touch. I will keep you posted as I will check back with themin 30 to 45 days.

[BigJohn]

Like you say, call them back in 30 to 45 days. Sounds like you are in control.

When you do call back, tell them you don't have the $2850 any more but only $2500. Ask them if they will take the $2500. I have a feeling by then they will bite.

[treehugger1]

Clo, I can only say that if you or your significant other cannot pay the debts under contract, then you are by most definitions, BANKRUPT. Why give the creditor and/or the IRS a dime? I understand the exemptions and adjusted income, don't get me wrong. This could be a really good deal! However, is this debt the only debt hanging out there? If not, you best be prepared for the wrath of the collection gods to come down upon you or your significant other. If you have the cash on hand to settle, then by all means give it s go. And, if this is the only debt, then no big deal. If there are other creditors out there in the wings, and the settlement payments are under scrutiny by a future BK trustee, then you have probably only thrown good money after bad. I don't know your entire situtation, but I'm hoping that in the end you are only dealing with one or two creditor settlement offers. If not, then you must have a bucket-load of money to work with the other creditors. Because, if there are other creditors, they will eventually come knocking at the door. Just my opinions and experience.

[clo]

update as promised.

They sent a mail out claiming the amount owed to be now 10,406.68. They offered to reduce it 70% or 7,284.68 in writing as per the mail out. This leaves a total settlement payment of 3,122.00 that can be split over 3 payments.

We called and told them I'm only able to do 800.00 a month over 3 months for a total of 2400.00. The supervisor said at 30% they are already 10% lower than what they normally will take and cannot go any lower.

Has anyone recived any offers for settlement lower than 30% as I may take this one as it is less than 300.00 more than my original settlement offer to them.

[Martha31]

update as promised.

They sent a mail out claiming the amount owed to be now 10,406.68. They offered to reduce it 70% or 7,284.68 in writing as per the mail out. This leaves a total settlement payment of 3,122.00 that can be split over 3 payments.

We called and told them I'm only able to do 800.00 a month over 3 months for a total of 2400.00. The supervisor said at 30% they are already 10% lower than what they normally will take and cannot go any lower.

Has anyone recived any offers for settlement lower than 30% as I may take this one as it is less than 300.00 more than my original settlement offer to them.

I just settled a Chase account for about the identical amount. only mine was a one time lump sum. I would take that offer.