we are in the process of settling about 5 bad debts. we are settling all for 50% of what we owed? Questions: 1. How long "settled in full" is going to stay in our credits? 2. Is it true that the other 50% that we don't pay to the collection agencies needs to be reported as income on our tax returns? 3. Can they "collection agencies" ever come back to try and collect the other 50%? any other advise, comment, past experience will be greatly appreciated. thank you.
Do you have anything in writing from the CA's? Reporting any account is voluntary, it is not required that accounts must be reported to Credit Reporting Agencies. They want the money and it's to your advantage to have them agree to deletion of the account in return for payment. All that would be necessary is something like: Dear Sir or Madam: This will confirm that ABC Collections has agreed to accept payment of $XXXX.00 as settlement of the above referenced account. [Put the account number on the letter] Payment will be made on or before XX/XX/XX. In consideration of the settlement amount being paid, ABC Collections has agreed to remove any derogatory reporting of this account from any Credit Reporting Agency. ------------------------ Then hold them to it. Once settled, you have met your obligation but be sure to retain the letter and receipts exchanged with the CA on each account. Consider payment via certified check, retain a copy of the front and back of the check, put your account number on it, then get the digitial image copy of the check when it has cleared. That way you've got a record of your accounts settled and when payment was accepted. Talk to your CPA regarding the possible tax issues or an attorney well-versed in these issues. After all, United and other companies settle their obligations often at $0.10 or $0.20 on the dollar, they regroup and move on.
Yes, any amount not paid is then considered income for tax purposes. Be sure and check out the tax consequences before settling for a lesser amount. besides, you should be paying in full... you ran up the debt.
message for ALWAYS!!! I was told on the telephone that if I pay 50%of what I owe it would say settled in full not paid in full on the credit reports. so... you think they could instead of reporting settled in full they could delete it from the credit report all together? For example on the TransUnion credit report it says: PAY STATUS: collection account and the other one says: charge off as bad debt. you are trying to tell me that they can delete that all together from my report after I settle in full. thanks for your time and opinion/advise, etc. on this matter.
What I am saying is that *nothing* must be reported. Accounts can be deleted and it's done all the time. It *could* be reported as "settled", "paid", or "paid collections" and variations of the above. At the very least, aim for just the word "paid" to be part of the reporting. Remember that your leverage is your money and they want to be paid. If they make a verbal agreement over the telephone, tape it because once a CA or a company tells you "this call may be monitored for quality control purposes" -- you can tape, even if you're not in a one-party state. Then send a confirmation letter, CMRR that they agreed to whatever terms you came to in the conversation. If possible, consider negotiating at the *end* of the month when CA's are more motivated to work with you. Don't just settle for less, make the reporting terms part of your mission, too. A paid collection account will stay on your report for seven years, you want it deleted and you want them to agree to delete "any derogatory reporting at any Credit Reporting Agency."
