Debt settlement balance?

[jp2861]

If someone settles, for let's say, 50%, how does the debtor know that the balance won't be sold by some dirtbag CA? Is there some type of follow up or something that should/can be done to make sure the debt balance doesn't get passed on?

Someone asked me this question and I didn't have a clue. It seems like a risk to settle if there isn't any way to ensure the debt fully disappears. It would suck to settle up and then start getting hounded a year later by another CA for the balance. Does anyone have any knowledge concerning a settlement siuation?

[HHM]

Yeah, you need to get the release from liability, but you are correct, a junk debt buyer could conceivably repackage and resell the remaining balance (I have seen it happen), but usually you will have enough documentation to prevent any meaningful collection activity.

[keepmine]

Yep, if it's not in writing, it never happened.

[jp2861]

You would ask for a settlement statement or agreement stating the current account balance is $xxxx.xx and that the account is to be settled for $xxxx.xx and nothing further is owed and (your name) is hereby released of any further obligation to pay this debt and the remaining balance is forgiven upon receipt of payment.

You get this agreement BEFORE you pay anything. Always get the agreement first. Don't forget then next January you get a 1099-M for the balance you didn't pay.

I haven't researched it much but I was told if you're insolvent ( liabilities more than assets) that you won't be taxed on the forgiven part of the debt. There may be some way to prove insolvency and do an add/deduct when filing taxes. I'm not sure on the details but if it's true it would be a good thing to research for those with little assets.

Might be good information for a sticky if someone wants to do the research.

[keepmine]

IRS form 982 handles both debts discharged in bk and insolvency.