How low can I bid a settement of my debt to a collection agency and expect that they can honor it?
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Tom
They will usually accept 3/4 of the original debt, but they don’t have to accept any offer.
Stacey
If you call them, they’ll know your looking into a mortgage or to obtain some kind of credit.
You should wait till they contact you. They will call eventually. When they do, they will offer 1/2 to pay off debt. You tell them, that you are willing to come up with 1/3 by the end of day.
However, the bad part is…It will stay on your credit as a paid collection for 7-10 yrs from date paid off. If you leave it, since it’s been 3 yrs already, it will come off in 4-7 years.
It goes by the date of last activity. Sucks, I know. Good Luck!
Jeff
All you can do is make them an offer and hope they accept it. They do not have to accept anything, but usually do. However, bad credit marks will stay on your history for quite a few years.
Jeanne
The offer in compromise only works if your debt has been turned over to a collection agency. As to the original debt holder there is no reason to conpromise you debt as they stand in the position of owning your contract. But at times banks turn over a debt to a collector as they believe they will not get paid what is owed. Collection companies buy the debt from the original holder. Or they take it on assignment for a percentage to be paid to the original holder. So as long as your bid to them will pay what they paid for the debt + a profit, they are interested, or they think they will look good to the original holder and get more things turned over to them. You merely write in your offer, I offer to pay $300 on the $3,000 debt you are trying to collect from me. Please understand you need to have this money right now so if they accept your offer, a new contract has come into existence that is binding on both parties. Sometimes they will accept an offer over time, like I offer to pay $900 on my $3,000 debt, but I will pay this at $300 a month for 3 months. If they accept it, there is a new contract as well. Pay it off, and you are free. Keep in mind that contracts can be sued on in court. Most states allow for six years from date of making to be the time period a suit must be brought. So you say it has been only three years since you acquired this contracted debt. You are still open to suit for 3 more years. Suit results in a judgement which can be collected by attachment of assets, garnishment of bank accounts (so make your payments by money order to avoid telling anyone where you currently have your funds on deposit) or garnishment of wages (25% of your net paycheck until the debt is paid.) If you are regularly employeed and they can find your paycheck, why would they take less money than full payment. Getting a judgement allows them to get paid in full, it is just a hassle.
Bryan
Agency will have no right to waive your credit card liability or
agree for a settlement. It has to be done by the issuing bank.
For instance. if a Visa or a Master card issued by, say , HDFC Bank or ABN Amro , you have to approach the bank directly – Negotiate with them for a settlement. Pay off then and there and get rid of your botheration. The bank may not renew your card.
I will not suggest that you could go to some other agency
and to obtain a new card (after your settling the previous ones).
You will be furnishing them false information which is
unethical.
Brian
I actually work for a debt settlement company and if you do your research youll find that most companies get your debt settled for about half. Most settlement companies require a minimum amount to even work for you though.
But if you chose to go it alone, dont offer to settle until you have the funds available. Collectors only make their offer good for 24 hours. Once you do just let them know that you want to pay off the account but you only have (fill in blank) to do so. If they accept your offer have them email or fax you a letter that theyll accept that amount as payment in full, then pay them. Dont give them a dime until you get it in writing.
If you want to take it to the next level you can get them to agree not to respond to your credit dispute afterwards and itll come off your credit report.
Bernard
If you have a question about the fees, this is the first thing you need to check on. You need to send in a Debt Validation letter by Certified Mail. In the letter you must request that they provide you with a detailed statement on where all of the fees came from. They can not just say you owe ??? dollars with no explanation. This is because there are certain fees that are not legal to collect, but some agencies try to add them anyways. If they can not come up with validation, this may be enough to get the amount reduced on it’s own.
Now, the quicker you can pay it off the more they will “settle” for. For example if you can pay the entire amount right away they may settle for 40% of the original. However, if you need a few payments to pay it off you may only get them down to 75%. The other factor is how old is the debt, the older the debt the more you can get them to settle for. This is because after a certain amount of time creditors can no longer legally come after you. This varies by state and is between 2-6 years from the date of delinquency. So if your debt is 3 years old, you may be outside of this period. After the SOL expires the only thing they can do is post it on your Credit Report, however that must fall off after 7 years(and can not be re-aged).
When you want to do the offer, NEVER talk to them by phone. All communications need to be through certified mail. In your offer state the amount you are willing to pay, the date(s) of the payments, and the total amount due. You also need to include that they must delete the collection account from your credit report once paid. Only when you get an agreement in writting from them do you give them a payment.
As to the above poster who says they only make offers available for 24 hours. That is because they want you to feel the presure in order to get a payment from you. But if they offered it to you once they will offer it to you again, so do not fall for this tactict. This is another reason why you never talk to them over the phone.
Viola
Remember that the debt will fall off your credit report naturally in seven years anyway….If you are close to that point I wouldn’t bother. Paying off old debt will not magically fix your credit rating….I wouldn’t bother doing this unless you can explicitly get a “pay for delete” WRITTEN agreement with the collection agencies that they’ll delete the negative notations upon receipt of the money……This can be VERY tricky when dealing with collection agencies…many of which are ethically challenged….
They could pull some dirty tricks on you in this effort….Like having a hapless collection agent sign the pay for delete agreement then fire him the next day…Then once they got your money they’d say the agreement is null and void because it wasn’t signed by an employee…..YES, they would do something like this….I would only attempt such an agreement with a collection agency if you can give a confirmed signature from a real high-level supervisor with a confirmed real name and not a pseudonym.
Lastly, forgiven/settled debt is treated just like earned income by the IRS….If you manage to get 2/3rds of this debt forgiven in a settlement…the collection agency could send 1099C forms to the IRS and you’d have to add this amount to your next year’s income and pay additional taxes.
Debra
To begin… you should check your local state’s statute of limitations on collection of debt. Why? This is an important tool in leverage against the debt collection agency. For instance, if you live in Texas, we have a 4 year time limit on collection of debts (from date of continued delinquency). Once that time frame passes, the creditor/debt collector loses the LEGAL right to collect on the debt. Of course, collection agencies will call and threaten all day long on what they can or will do to you (after debt has expired).
Now, you have to be careful in approaching the topic of settlement. You can call a debt collector on the phone, and approach like the following:
If an offer in settlement was made of XX% on debt, would the company be willing to call the debt even. If the collector agrees, then advise the collector to draft a settlement letter which advises it will be in force once payment is received in the amount of $XXXX.XX (XX% of original debt).
You have to be careful in admitting liability to debt or the debt collection clock can start over again…
As some have stated, most collectors will take 50% without a problem.
However, here is the order which debt collectors work when trying to get a debt paid:
1 – Paid in full
2 – Two to four large payments
3 – Settlement
4 – Large downpayment + monthly payments
5 – Small monthly payments
6 – Refer out for civil suit/send back to original creditor
I hope this helps.. Understand, that most collectors will want to take a settlement because they make money off your account if they can collect money and get it off their desk.
Hope that helps..
In addition, request validation of the debt as someone else advised.. They cannot just give you a printout. You must specify all the account history for which you are seeking. In some cases, creditors have been known to settle out with you.. Why? Because they pay a collection agency a % or a flat $$ fee..
Finally, you must stipulate to the collection agency, that no payment or offer can be made unless a “deletion” of record is put in writing on the offer in settlement acceptance request..
Richard
You can offer any amount. There is no minimum or maximum etched in stone.
I have helped customers negotiate settlements for various debts over the years. Depending on the type of debt, the collectability from the customer and other things enter in to the amount I recommend be offered.
For a customer that receives income that cannot be attached such as social security, I recommend a lesser amount. They could not garnish and collect.
Typically I’d start at about 35 to 40% of the net balance. That would be the balance without any costs added like interest.
Negotation can be done with the credit card lending bank, or the collection company if it is placed with one.
And, yes the offer is generally if it is paid by the end of that month.
Do get confirmation of their acceptance and do get confirmation that it will be removed from your credit report prior to paying.
If $600 or more is “forgiven” in a debt settlement, you well might get a 1099 showing the forgiven amount as income, and you would be responsible to pay taxes on that amount when you fill out your tax return.
In the case of a credit card settlement that was not turned over to a collection agency, the trade line (reporting line) in the credit bureau will read “settled for a lesser amount” rather than being removed from the credit file.
Depending on how much you would save by settling, consider this when making the decision to pay in full or to settle. If you save only a couple of hundred dollars, it might benefit you to catch the account up, then resume payments to improve the rating.
Good luck.