Has anyone settled with creditors for 10%....????

[lovemybugs10]

MarieT-

I am settling with my creditors 1 by 1. I've paid 6 payments of 670 to Discover on a 10k balance, and I'm in the process of paying 870 to Citi on a 20 original (35 with all the fees and interest balance)

I'm no where near 10%. But they are settling and taking payments. I am looking at insolvency....and I'm going to have a professional file taxes for me. It seems easy to understand, but not sure how it actually works. you know?

We would be paying 100% back as well. Stinks that settling is the cheapest way to go, but sometimes it is. (yes, to my favorite people, even with paying income taxes on the amount they write off. Thank you again for making that clear for me)

[MarieT]

Still trying to figure out this settlement thing...

If I agree to settle with collection companies at 10% or 15%, can I make them agree that a condition of me settling is that they have to report it as "settled in full" and not report the forgiven amount to the IRS... is that possible?

I do not think that we will have a tax liability anyway as our debt amount is way more than our assets (insolvent) so probably do not have to worry since my understanding is that we would not owe taxes if we are insolvent but I worry about everything.

[HHM]

The collection agency CANNOT dictate how the original creditor will report the account. You can "ask" them for a clause about how they will report the account, whether they agree is another issue. Most actually report as settled anyway. As for IRS reporting, not possible. Any such agreement would be void. IRS regulations REQUIRE the reporting of forgiven debt. A contract is void that requires one or both parties to violate the law.

The big problem with settlement is that many of the underhanded companies will simply sell the unpaid portion to another collection agency creating a BIG headache.

[MarieT]

The collection agency CANNOT dictate how the original creditor will report the account. You can "ask" them for a clause about how they will report the account, whether they agree is another issue. Most actually report as settled anyway. As for IRS reporting, not possible. Any such agreement would be void. IRS regulations REQUIRE the reporting of forgiven debt. A contract is void that requires one or both parties to violate the law.

The big problem with settlement is that many of the underhanded companies will simply sell the unpaid portion to another collection agency creating a BIG headache.

Okay I understand now ...the CC's have to report the forgiven debt as income by law. I still think if they sign off saying it is satisfied (in writing) that they would not be able to sell the unpaid balance to another collection company. (especially after they issue the 1099 saying it is forgiven debt).

At any rate, I would have my attorney write the agreement and make sure I was protected that way. Thanks!

[LadyInTheRed]

I think the chance of getting all of the debt settled for 10% is small. If you pay your attorney to try, that fee will be on top of what you would pay him to file BK if you end up having to file anyway. I would use any non-exempt cash to pay down the non-dischargeable IRS debt. If you do decide to have your attorney try to negotiate the debt, make sure you have a clear understanding of how much it's going to cost. Attorney fees can eat up the cash you have to settle very quickly.

[lovemybugs10]

If they are a shady company that would sell off the portion remaining after a settlement then it wont matter what is in your agreement. They will do what they want. In my settlements it states that the amount agreed upon will settle the balance in full.

If you do settle, save copies of everything. Fronts and backs of checks, proof of shipping for overnighted check. Print out of delivery conformation and who signed for it, etc. Most importantly make sure they send you a statement or letter showing that you paid as agreed and the balance is 0. Then hold on to these papers for life.

Why is your attorney settling for you? He/she wont get any better deal than you will.

[MarieT]

If they are a shady company that would sell off the portion remaining after a settlement then it wont matter what is in your agreement. They will do what they want. In my settlements it states that the amount agreed upon will settle the balance in full.

If you do settle, save copies of everything. Fronts and backs of checks, proof of shipping for overnighted check. Print out of delivery conformation and who signed for it, etc. Most importantly make sure they send you a statement or letter showing that you paid as agreed and the balance is 0. Then hold on to these papers for life.

Why is your attorney settling for you? He/she wont get any better deal than you will.

I know he probably won't get a better deal than me but I think when the collection companies know I have retained an attorney and I can just as easily go ahead and file BK as to settle with them, it is a good negotiation tool. I also think if I have my attorney write the settlement offer letter to the collection companies it will carry a lot more weight and keep them more honest and I have already now paid the entire BK fee to the attorney anyway.

[MarieT]

I think the chance of getting all of the debt settled for 10% is small. If you pay your attorney to try, that fee will be on top of what you would pay him to file BK if you end up having to file anyway. I would use any non-exempt cash to pay down the non-dischargeable IRS debt. If you do decide to have your attorney try to negotiate the debt, make sure you have a clear understanding of how much it's going to cost. Attorney fees can eat up the cash you have to settle very quickly.

I have one that has agreed to 10% and one that I have just started negotiating with that has agreed to 30% right away so probably willl come down. The smallest one at about $6,000 has not been able to come up with anything to prove it is my account (was WAMU then Chase took it over) so wondering what will happen with that if they can't come up with anything to show it is mine. I just got a letter from them saying they want to settle.

My thinking is that I can still always do the BK ultimately if I can't get them to come down but that is not my first option. I would do most of the negotiating myself...I only need the attorney to send out the letters and look over what they send back to keep them honest.

[lovemybugs10]

That's fantastic, MarieT! Great job!