I've been trying to decided if I should settle with several collection agencies who have offered up to 50% settlement offer. What I'm affraid of is this looking bad on my credit report. I've heard these settlements look just as bad as a bankruptcy. I've just found out about "snowballing" to pay off your debts but I think I could snowball faster if I settled with these companies. I just don't want my credit to look bad longer than necessary. I believe a settlement lasts longer on a report than a paid after collections does but I'm not sure. I want to buy a house soon and don't want to mess anything up. Any suggestions out there as to which would be better? Just pay them off or settle. Thanks lots!
It depends if this is an OC or a JDB and SOL. No NIMO it doesn't. Tell me about snowballing??? Again we need to have specifics of who what and when. Woofer
Can't tell you how settlements affect your credit report/score - but have to caution against "settling". Any settlement $600 or over will trigger a 1099, and would have to be considered "miscellaneous" income by the IRS, therefore really increasing your tax liabilty.
snowballing "Snowballing" is when you pay off your bills by paying the minimum payment on all accounts and using all your leftover money to pay them down starting with the smallest amount. Then you add that money to the next one and so on. Thanks for the info on the 1099. I hadn't thought of that. I want to pay off my bills in the fastest way possible that would be the least stressful and do the least damage to my credit report. Know of any miracles?
If the parties agree that the debt is doubtful and disputed, no 1099-c needs to be issued and the parties can also specifically agree that one won't. The IRS is not interested in pursuing situations where 1099-c forms have been negotiated out of the picture. What they are interested in is 1099-c forms being issued where the collector has either given up (not pursued the debt for the prior 36 months) or where the debtor has acknowledged liability for the full amount but negotiated a lesser settlement. JDBs don't really know what their claims are worth (and thus what figure to base the 1099-c on) unless they have enough documentation to validate ... and that's rare. For a full discussion where the JDBs admit all that, look up the "Debt Buyers Association v. Snow" case ... it can be googled up.
http://www.brokencredit.com/wp-content/uploads/2007/08/DebtBuyersvSnow.pdf That's an interesting link. From the link: Makes it sound like they wouldn't stand up to much court scrutiny.
To pay them off fastest and to benefit your financial standing the most, don't pay off based on the balance. Pay off the highest interest rate first and then move to the next highest. This might not raise your scores the quickest, but it will keep the most money in your pocket over the course of paying off the bills. You'd be better served by paying them off before you go to get any more major credit, anyway.
I like the snowball idea but I would pay the highest utilization that wasn't at a special low rate down (with a BT from a card that offered me a special low rate if possible). If there was no special low rate available, I would pay down the balance of the highest utilization card at full rate until it reached the same utilization as the next-highest utilization card that was at full rate ... at that point I would bring those two down in lockstep as far as utilization goes, until they reached the same utilization as a third card (which would join in the payoff), and a fourth, and on down the line. At some point, BT offers start to come and you take advantage of those until you're working only on balances that are at a low rate, and then you bring those down according to which low BT rate expires first. As for making settlements (the original question) ... Have you checked the plaintiff/defendant indexes down at the county courthouse to get an idea of who sues, how often and for what threshold amounts? Give first priority to creditors who sue and who are within SOL. Do not insist on PFD from them. Give second priority to creditors who will PFD and are within SOL. Give third priority to creditors who will PFD and who are not in SOL, assuming you don't want to just let them age off your reports. Give fourth priority to creditors within SOL who will only mark your credit "settled for less than amount due" ... you don't want to raise the expectations of the others, and if you can't get a good notation you want it to be an older settlement than the others so that hopefully the records will get archived sooner and you will be able to knock the TL off your reports with a dispute a year or so down the line. Give fifth priority to creditors within SOL who will mark your account Paid as agreed, paid in full or just plain paid. Again, you can knock these off later if you need to. Give sixth priority to creditors outside SOL who will not PFD and negotiate the best notation you can. Try to settle for 30 to 50 cents on the dollar with respect to what is claimed. Citi seems stuck at 55% reportedly. Insist no 1099c forms issue for any amounts creditors claim is "forgiven" ... insist the debt is doubtful and disputed.
I had to settle with CITI and it was for just around 40 percent. They would not delete, and the TL says paid or paid as agreed. Woofer
Thank you Thank so much for all the information. I'm learning alot here. Though it takes me a while to process it. There are no fees racking up on my collection accounts. They are all a set amount and have been for a while so I don't have to worry about interest rates. Just who to pay first so I don't get sued. I will look into the county courthouse as woofer suggested. And since I've been on this forum one of my CA's just sold one of my accounts because now I have a "Northstar" calling. New name to me. Here we go all over again.
