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How to Settle Debt

My husband and I have many accounts showing as "charge offs". How do we go about settling this debt?

Due to personal situations I (and my husband) have bad credit. We have some charge offs showing up on us...I have not made any payments on these accounts for approx 2 - 3 years...a couple of these will send me a letter and a call occasionally, but otherwise no contact. I want to take action on these and start clering up our credit reports. I want to offer a settlement on these accounts...so here are my questions: do I do this in writing or over the phone? Since these are old, charged off, some are sold to collection agencies, (and I believe interest is still adding up on some of them) I want to make an offer for far less then the balance so - what do I need to ask for, what do I need to be aware of, how should it appear on our credit reports (paid, settled) can I ask them to have it taken off the report. If we do have contact with them and can't settle on an amount can they start harassing us again? How do we protect ourselves? We want to do the settlements ourselves (and are prepared to take the heat) but we just want to be prepared as much as possible. We live in Ohio and found out the legal time is 15 years. Any help is greatly appreciated.

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Bill's Answer
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Bills.com | Find Learn Save

I will try to answer all of your questions one by one. But before I get into that, you might benefit from the services of a debt resolution company. Get a no-cost, no obligation analysis of your debt options from a pre-screened debt consolidation partner.

I hope you have your latest credit reports with you, if not please visit AnnualCreditReport.com to obtain a free copy of your report. Now, to your questions.

Question: Do I do this in writing or over the phone?

Answer: When dealing with collection agencies and such, it is always best to keep everything in writing. You might have to speak to them occasionally, but if you reach an understanding over the phone always insist that they follow it up in writing as well.

Question: Since these are old, charged off, some are sold to collection agencies, (and I believe interest is still adding up on some of them) I want to make an offer for far less then the balance so - what do I need to ask for, what do I need to be aware of, how should it appear on our credit reports (paid, settled) can I ask them to have it taken off the report?

Answer: There are many ways you look at this. Depending on how old the debt is, you can make an offer anywhere from 15% to 50% of the current balance. How much a realistic offer should be, really depends on the original principal amount of the debt. This would be a good piece of information to ask for. If you do reach an agreement, the account should appear either "paid in full" or "settled in full". If the information about an account is incorrect, then you can file a dispute with the Credit Reporting Agencies.

Question: If we do have contact with them and can't settle on an amount can they start harassing us again? How do we protect ourselves?

Answer: There are definite rules and regulations regarding the handling of collection accounts by creditors and by the collection agencies themselves. The Federal Fair Debt Collection Practices Act guarantees you specific rights as a consumer when a personal debt has been turned over to a debt collector. These include:

  • The right to stop them from contacting you except to notify you of specific actions being taken by writing them a letter requesting this.
  • The right to receive a full written notice explaining the amount you owe, to whom you owe it, and what action you should take if you believe you do not owe the money.
  • The right to sue in state or federal court if you believe that the debt collector has violated the law in its handling of your account (within one year from the date that you believe the violation occurred).

If you have had an ongoing problem with a collection agency, you should probably contact the agency one more time to request a specific, written statement of their proof that you still owe on the debt. Insist that they also include instructions for disputing their statement if you do not believe you still owe the money, as the law requires.

You might also consider reporting the collection agency to your state Attorney General's office and the Federal Trade Commission (FTC). Many states have their own debt collection laws in addition to the Fair Debt Collection Practices Act, and your Attorney General's office can help you understand your specific rights. For more information, read the Bills.com Fair Debt Collection Practices Act page.

I hope the information provided helps you Find Learn. Save.

Best,

Bill

Bills.com/blog

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3 Comments

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  • 35x35
    May, 2008
    brad
    There are a number of methods to determine if any financial services provider is legitimate: 1. how long have they been around (do they have good people, processes and systems that have sustained over several years) 2. are they members of the Better Business Bureau (BBB.org) 3. how big are they? 4. do you feel that they are honest and ethical in dealing with you. Frankly, debt settlement might not be the best choice for you... it is usually for people who have larger debt balances (because you have to trade off the savings and low monthly contribution to your program against the negative credit impact -- and in your case the savings will only be around $1,000, but the negative credit impact will be just as bad). You might want to look for a consolidation loan or borrow some money for your bills. Good luck.
    0 Votes

  • 35x35
    May, 2008
    wilma
    Bill how do you REALLY know if a debt settlement company is legitimqte? I have about $3,000 worh of debt...stems from having to put mother in nursing home,and having unexpected expenses. I am 100% leary...how can I be sure the company is not a fraud? Thank you
    0 Votes

  • 35x35
    May, 2008
    Willy
    Well my comment is beware of your creditors, they don't always report to the credit agencies that your charge offs are paid. I ran into this problem myself I fell onto hard times allowed a loan to be charged off, then after a couple of months paid it off in full. But now one year later my credit was pulled and what do you know it was still a charge off not showing paid or settled, and all the bank had to say was "OOPS we forgot to report it, we will do it ASAP." They will do everything in their power to get their money and don't care who it offends how they do it. So just beware and stay on top of it all.
    0 Votes

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