Safely settling debt

[rogue22]

We have reached a settlement agreement with a lawyer office representing a credit card. My question is, what is the safe way of closing the deal as far as what I should send them or they should send me. Obviously, I will be using a money order and not a personal check. It will be a one time lump sum payment. Is there anything that I should be aware about? Anything in particular I should be looking for in writing.

They are suppose to be faxing me a document tonight to sign.

[justbroke]

I'm not the best for this, but I'm sure someone will chime in. You need to know that a 1099-C will be issued by that creditor. You need to know that the debt or the balance of the debt (after the short payoff) will not be sold, assigned, or transferred to another creditor or collection agency. You need to know that this is a "final" settlement agreement. You need to know that your credit report would be updated to reflect it as "Paid".

For you, I hope that you understand the tax consequences from that 1099-C.

[frogger]

I'm not the best for this, but I'm sure someone will chime in. You need to know that a 1099-C will be issued by that creditor. You need to know that the debt or the balance of the debt (after the short payoff) will not be sold, assigned, or transferred to another creditor or collection agency. You need to know that this is a "final" settlement agreement. You need to know that your credit report would be updated to reflect it as "Paid".

For you, I hope that you understand the tax consequences from that 1099-C.

JB is right on track. You MUST get the deal in writing. You may also have options about how the debt is reported, either settled in full or paid in full. It's nothing more than a matter of which box is checked for credit reporting.

If you don't get it in writing, the remaining balance of the debt WILL be back to visit you again.

[GoingDown]

Yes, what Just Broke said should be in this letter from them, and it should bear their letterhead and their signature to be valid.

Generally speaking, they will usually only report it as "settled in full" which will still look negative on your credit report for 7 more years.

Hang on to this settlement letter from them. Scan it into your computer and then send it to yourself as an email attachment, so that you will always have it in case they sell it to a new junk debt buyer and they try to sue you later on.

[treehugger1]

There is a lot of "it depends" in such cases. Is your settlement with the original creditor? If not, and the debt was sold for pennies on the dollar, you may not receive a 1099 for forgiven debt. This is all very complicated. As others have indicated, don't assume such a settlement will result in an increase of your credit score. The default with the original creditor will most likely be on your report for years to come; settlement or not.

[rogue22]

Thanks for everyone's responses.

They will be faxing over the offer letter shortly and we were instructed to sign/ fax back. I will definitely be on the look out to see if it says "final settlement agreement" and that the remaining balance cant be sold/transferred.

I am assuming that this is from a junk buyer since the we were instructed (by their lawyer) to make the money order out to a different company name than the original CC. Whether we get a 1099C or not doesn't really matter to me.

When googling this subject, a couple articles suggested creating a cover letter (when mailing the money order) stating that "Cashing this check constitutes payment in full." It also suggested writing this same statement in the money orders "payment for" section. Obviously have it mailed certified with return receipt.

So I guess the main things to look for in the agreement prior to sending the money to them is:
1. Final settlement agreement with the amount paid in full
2. Balance will not be sold/transferred.
3. Debt collector will report it paid to the credit bureaus.

As noted before, this is supposedly being faxed to me. Is it ok that its a fax and not an original letter?

[justbroke]

I hope that you first made them PROVE that they actually own the debt... since you're writing the check out to a third party!

[rogue22]

They already have a judgment

[justbroke]

They already have a judgment

I missed that part! You should be good so long as the settlement agreement has the right points. I'm not sure that the "payment in full" works in Florida. It certainly works in some States, including California.

The problem is, what if the judgment creditor decides to not cash the check and rescinds the settlement offer? Things to think about. It may be nothing, but I personally try to be careful. The language of what's in the settlement agreement is what controls.

[spidge]

Maybe I read past it but did you require them to provide proof of their right to collect on this debt? Proof of claim should include the original application for credit.
I used all of the above tactics and kept all correspondence just in case, but they did try to collect more by sending me a bill requesting payment on the remaining balance. They showed my settlement payment as just that, a payment. I sent them a file via email with all the settlement info and informed them that they were violating collection rules. I gave them 2 days to respond before I would seek sanctions and they conceded that they would stop attempting to collect. Haven't heard a peep and even in my 13 that I filed less than 2 years later they made no claim.

[justbroke]

spidge, I thought so too, but it appears to be already through judgment.

[frogger]

"Who" actually has the judgment against you? The company that is pursuing you or another entity?

[rogue22]

Judgment has been finalized.

I got some clarification on the debt: We were sued by a lawyer thats representing BOA. However, the payment is being made to a different name other than BOA. I suppose a junk debt buyer or maybe its BOA owned company??

Just got the faxed letter and it pretty much contained nothing that would protect me... Just says that they "agree to settle the debt for the referenced amount". I'll make them change it to include the 3 points I mentioned previously before signing it.

[justbroke]

I got some clarification on the debt: We were sued by a lawyer thats representing BOA. However, the payment is being made to a different name other than BOA. I suppose a junk debt buyer or maybe its BOA owned company??

The name of the entity that you are paying, should be the same as the entity a.) offering and authorizing the settlement, and b.) should be named on any "money order" or other certified funds. The settlement offer should also state that the person signing is "authorized" by the judgment creditor to enter into an agreement!!!

My "stipulation and settlement agreement" had this in it!

The individuals signing below represent and warrant that they have the authority to execute this Agreement on behalf of their respective clients.

[treehugger1]

In the lawsuit, who was listed as the plaintiff? It is possible that BOA received a judgment and then "sold" that judgment to another party.