I received an offer from the original creditor to settle my CC debt what now?
This debt is for a credit card that I have had for 22 years. Prior to now I have always paid off my balance each month in full.
Last September I was in a terrible car accident, I was in the hospital for over one month, and have since had 4 reconstruction surgeries on my legs. I lost my job, and my husband barely makes enough to pay our mortgage and keep the utilities paid each month. We had to use the card to pay for some of my doctor visits, medicine, groceries, etc now the card had about 00.00 on it. My doctor says that I will probably never be able to work again due to the extent of my injuries, and I should file for SSR. We have been unable to make any payments on this card.
Yesterday I received a notice from the CC company wanting to settle the debt. Has anyone ever settled a debt? How should I proceed? Will the CC company want a lump sum, or will they take a minimum payment each month. Honestly I do not want our credit ruined, as we had perfect credit, but I would only be able to make a very small monthly payment, does anyone know if they will accept the payment?
Considering your circumstances, the credit card company might accept half if you can come up with a lump sum. I don’t think you will get much discount if you only make small payments. Call them and see what you can negotiate.
Basically, the credit card company sees that something drastic has happened and are willing to accept less rather than have you default completely.
If you do settle, the account will show on your credit report as charge off/settled — a negative. This would be a better negative than if you just default on the account. You will also probably get a 1099 for the forgiven portion which will have to be included in your income taxes.
February 16th, 2010 at 7:00 amFirst of all phone your creditors, i’ve been in almost the same situation as you and i’m quite sure many others have. Most creditors are flexible and a show of good faith on your part by calling and explaining your situation will go a long way!
February 16th, 2010 at 7:00 amGet them to send you a written statement with the debt settlement amount on it. Do what you can to come up with the full balance. Sell stuff, have a garage sale, get rid of a car, whatever. When you do get this letter, keep the original for your records. When you make a payment, attach a copy of the letter each time you send it in. NEVER, give them access to your account. If you owe them $10,000 and agree to a monthly payment of $100, They will go in and drain your account if they have access. They are scum and will do this as much as you think they won’t. You may be stuck with a tax bill for the difference next year as well. If you owe them $10,000 and settle for $6000, you will get a tax bill for the taxes on $4000 income. Yes, this is considered income. Sorry. When this is all paid off, keep the records for the rest of your life. Inevitably some goober will try to come after you for this 25 years from now. If you do not have the records to prove that this is a closed issue, you will have a huge hassle down the road. The credit card people are not real bright and the collection agencies they sell to are even less intelligent.
February 16th, 2010 at 7:00 amGood Luck. Sorry to hear about your injuries. I wish you all the best.
They generally want a lump sum payment to clear this from their books. They like to get 1/3 to 1/2 or even more. In your negotiations request that no 1099C be issued. If they forgive part of your debt and issue a 1099C, then you have taxable income when next you file taxes.
This is why we need national health care!
February 16th, 2010 at 7:00 am