I am in the process of settling with a collection agency for the remainder on a mortgage. my home went into foreclosure over a year ago and was eventually auctioned off for less than what i owed on my mortgage. Q#1: I am hoping to settle for 15%. Is this reasonable? Q#2: I had asked the collection agency that upon settlement of the loan that it be stated on my account that the account was "Settled, Paid in Full." My collection agency says they cannot do that and that it is illegal to do so. Is that true???? They say that my credit report will state that the account was "Legally settled for less than the full amount." Although that will technically be true, it will hurt my credit for several years to come. WHAT SHOULD I DO???????? I don't know what to say to bargain with them and I feel cornered.
Anyone who reports information to a credit bureau is obligated under the FCRA to report information that is 100% accurate. Unfortunately, in your position, 100% accurate may not be particularly flattering. So, with that in mind what can you do? Well, 1) be grateful that you're getting out from under your mortgage and only having to pay 15% of the balance, but before you go kissing anyone's feet, do you live in a state where they can come after you for the difference? It might be that you could avoid paying even 15%. If they're going to ruin your credit anyway, why give them any more money? 2) The law says that everything they report must be 100% accurate but it does not say that they have to report 100% of their accounts. I don't think it say they have to submit ANY information to a CRA so as part of your settlement agreement, perhaps you could get them to agree to a non-disclosure clause that says you won't tell anyone you got out without paying your full debt (just imagine what would happen to the banks if everyone found out they could do that!) and THEY won't tell anyone either (e.g. a CRA). It'll just be your little, private secret. 3) live on cash and forget about your credit report. The banks would have you believe that your life and livelihood revolves around your credit score. The fact is, THEIR life and livelihood might but yours doesn't have to. Just say screw 'em and live on cash. It'll probably be the best financial decision you ever made. Good luck!
God bless you ccbob. I will look into what you said in point #2. Unfortunately, Georgia allows the bank to go after us for the remaining amount on the mortgage. My CC cards have already been banished to the sock drawer. I will never use a CC again if I cannot pay off the full balance every month. My main concern about my credit is that I would like to open my own business in a couple of years (after I save up a bit) and I will probably need a business loan to get things started.
Unfortunately, the foreclosure is going to hurt you a lot more than a "settled for less than balance." And the foreclosure will be there forever on a full factual report. So I don't know that I'd be THAT upset over the settlement. Also, be prepared to pay taxes on the other 85%. I'm sure you'll get a 1099 for the amount and you have to declare the foregiven part of the debt as income.
