Hello, I have a question I'm hoping someone can answer...This is a really long post because I want to really explain our whole situation - but the actual question is at the end so if you want to skip the story and get to the meat of it scroll down... Here's the background...my husband and I run a nonprofit group home for children in foster care. We have done this for 5 and a half years. It was our passion and our heart to help children...but a few years ago some major changes in the foster care system caused us to lose most of our funding. We made overhauled our program in order to make it work again, but in the process of doing that we had to loan a very large amount of money to the program. The big problem was that it was money we didn't have, and the bigger problem was that the program did not get back on its feet as quickly as we thought it would so we didn't get paid back right away like we thought we would. It's a long long story how it all really happened but that's it in a nutshell. I guess I should have known better...before all this happened I had gotten myself out of major debt created by men in my life twice...but anyway...we wanted to make this program work so we did what we had to do. The major loan was about two years ago. We ended up with a lot of credit card debt, and we did our best to keep up with it, but after about a year we were just unable to do so. Our cards went delinquent. We sent letters to all the companies trying to explain our situation and work something out with them, and of course they started calling us. Citibank was great and worked out a very doable arrangement with us. Another company was a bit tougher but after a year of working with them they have finally settled with us so they are paid off. A third company - Bank of America was unwilling to work out any sort of plan that we could actually afford. We tried several times and eventually gave up. Then they started sending us settlement offers, but they were still more than we could do. Finally I got on the phone with them a couple of days before the "absolute deadline" for it to be charged off as bad debt and after going round and round with them for a long time they transferred me to their recovery department. I talked to a guy and we worked out a plan. We have two accounts with them and I'm sending them $145/month for one account and $55 for the other. We were supposed to do this for 6 months and then re-evaluate. I set it up so the payments would automatically come out. He made it clear that if I didn't make a payment, it would get charged off. That was six months ago. We are now stepping down as directors of the group home. It is time for us to move on, we now have two small children of our own, and also this is really the only way for us to get some of our money back. We sold the building to another company but they are taking over the group home so the program we poured our hearts and souls and all our money into will continue. The money from the sale belongs to the nonprofit, but we were able to pay ourselves back some of our loan...not all...at least it gives us some money to move on with. We also live in an apartment attached to the group home, so now we are going to rent a house. I pulled up our credit report as we were applying for a rental, and found out that the company DID charge off the debt. I was sure it was a mistake, so I called them up, but they insisted it was not a mistake. Even though I was paying them, both accounts WERE charged off six months ago. The account manager said they "had to be" because I was not paying the $332 for the one account as per the original agreement (I think that's what she was saying? I'm not sure...) I explained to the account manager repeatedly that this was NOT what I was told, but there was nothing she could do about it. Apparently, the only thing that I accomplished during that phone call six months ago and with the subsequent payments, was that the debt was not transferred or sold to an outside agency. However, it's still charged off. And yet I'm paying it. To Bank of America. She says that it's to my benefit to continue to pay it because once it's paid off, it will go to positive on my credit report and I'll be considered creditworthy. She says this is BETTER for my credit than settling. However, until it's paid off it's going to stay as charged off. If I keep paying at the rate I'm paying, by my calculations it will take 7-8 years to be paid off. I don't really want this sitting on my credit report for that long. Hopefully I can pay it off faster but I don't know for sure right now what our financial future holds. We worked out a very similar arrangement with Citibank and it shows all positive on my credit report. I told her that but she didn't seem to believe me. Is there anything I can do or anything I should do? Thanks so much for taking the time to read this.
A charged-off debt doesn't mean the debt goes away. Whether or not the debt stays with the OC or is transferred/sold to a CA, you would still be responsible for paying it (if it's a legitimate debt). Now, you are generally better off dealing with the OC because they are often easier to work with than a CA and you also don't end up with 2 negatives on your credit report- a charge off and a collection. That just complicates the situation even more. Once the charge off is completely paid, it will be updated to a "Paid Charge Off" on your credit reports. That's not a positive mark though. It's still negative and will basically hurt your credit scores just as much as an "unpaid charge off" until it eventually falls off your credit reports. So, the account manager really wasn't telling you the truth. You're in a tough spot because you've agreed to the payment plan and the damage to your credit reports has already been done. BOA is notoriously difficult to deal with, and I think the chances of you convincing them to remove the charge off from your reports are slim. How much debt are we talking about here? I assume you're not in any financial position to settle?
Thank you so much, I really appreciate you taking the time to read and respond. I would like to settle and I suggested it to the account manager but she said that would look worse on my credit report. She said it would be better to just pay it off and then I would be considered "creditworthy." That is what doesn't make sense to me - wouldn't it be better to settle NOW and then the clock can start ticking for it to go off my credit report, rather than keep paying month after month, possibly for years, and it will stay front and center on my credit report? There are actually 2 accounts and the total is about 18000. We had another company (Barclay) that we owed about the same amount and we paid 5600 over about 90 days and settled the account. We could do something similar with Bank of America. We have this lump sum of money right now which is the payback for the loan we made to the nonprofit, so now would be the time to do it.
As I mentioned in my previous post, the account manager wasn't telling you the truth. You will not be considered "creditworthy" just because you pay it off and your reports are updated to show a paid charge off. It's still an inherently negative mark on your credit reports, just like a settlement is, and it will continue to hurt your credit scores. That said, a "paid" charge off does look better to a potential lender than an "unpaid" one. If you have a lump sum of money to settle, the ideal situation would be to negotiate complete removal of the account in return for payment. That's not easy to do with an OC, but it's always worth shooting for. If you can't negotiate a deletion, go for a "Paid in Full" status.
