Settlement Questions

[FU2MI]

Hey Everyone,

I'm looking at settling with credit card debt I have vs filing bankruptcy (being self employed it would be too much of a hassle).


I'm looking for some informaiton on those who have settled their debts.

1)How long after not paying does the credit company wait until offering a settlement?

2)Is it better(cheaper figure per dollar) to deal with the credit card company (if they offer a settlement) or a collection company who bought the debt from the credit card company?

3) What are the CONS of settling the debt?

4) What kind of writing should I require from them to make sure settling completely settles the entire amount of the debt?




thanks

[StartingOver08]

If you are working with the OC or CA, make sure you get something in writing that they will not sell the 'rest' of the debt to another CA to collect. If you say settle for 40% w/ xyz CA, make sure they own the debt, and that the 60% will not be sold to someone else to collect (that is the number one rule). Have the entire agreement in writing.

One of the biggest dissadvantages to settling is the 1099-C that is issued for the forgiven portion of the debt. Make sure you take that into account with your figures.

[Flamingo]

Answer to your #3. StartingOver08 indicates it in the above posting. You will receive a 1099 for the amount of forgiven debt for the tax year in which the debt was forgiven. You need to include that on your tax return filings for that year and you will be taxed on that amount accordingly. There is one way around that and that is to claim insolvency with the IRS but to do that I would suggest seeking the advice of an experienced Tax CPA/expert inasmuch as when that is done, your chances of being audited skyrocket.

[magyar123]

These days you might have better luck settling with collection agencies and not original creditors/banks who are still begging Monica Lewinsky style for bailout money.

[BigJohn]

I stopped paying an account owned by GE Money Bank back in March. In October they wanted $2200.00 on a $6400.00 debt, a savings of $4200.00. I did not take the offer.

I don't talk to my creditors. I do not phone or write back to them. So as you can see, they were willing to settle for about 1/3 of the amount and this was the first offer.

[FU2MI]

Thanks guys....