How to settlement offers work?

**AnW819** · 10-29-2010, 11:56 PM

We owe an old bank like $700 bucks, from crazy over draft fees from like idk, 2 years ago? We got a letter in the mail today saying they are giving us a settlement offer of $170! Which is really awesome.

Now 1, I don't know how this kinda stuff works. And 2, I feel kinda crappy about it =/ Are settlement offers good to take? Does this show on my credit and make my credit worse? Or will this help?

Any advice would be great

**Michelle68** · 10-30-2010, 12:05 AM

If I remember correctly, I think that if you take a settlement offer, the remainder of the amount that is "forgiven" can be reported to the IRS by the company as earned income for the year. In other words, you could end up owing money on you taxes for the amount forgiven. That is the extent I know of settlements. Hopefully someone else who knows more can chime in with more info. Good luck!

**Palooka** · 10-30-2010, 12:37 AM

In your case, yes, I would take the settlement and pay. Make sure you get it all in writing.

I wouldn't worry about this on your credit,(good or bad) because I know it's already bad.

I just wouldn't want to owe a bank fee's.

What Michelle said. I know with loans/credit cards it's considered income what you don't pay back and will be taxed on that amount, but not sure if the same applies to over draft fee's. Don't see why not.

**AnW819** · 10-30-2010, 12:57 AM

How do I get this all in writing though? They just want me to mail them a check or pay with a CC...

**Palooka** · 10-30-2010, 01:08 AM

Originally Posted by AnW819

How do I get this all in writing though? They just want me to mail them a check or pay with a CC...

Um heck no. Is this an actual letter from the bank or from another place? I would take the letter and go straight up to the bank and get it settled and have them put it in writing that they offered you this settlement and that you paid this x amount.

**Kitten20** · 10-30-2010, 01:14 AM

Definitely do not pay them over the phone. I was working with a debt collector that wanted to settle and they kept trying to get me to pay over the phone with a card.

I declined and told them that, as soon as I got a letter stating that they were accepting $xx.xx as FULL payment for the total owed and would then consider the account paid in full and closed once the settlement amount was paid, that I would send a check (return reciept requested).

Once I recieved their letter in writing, along with a copy of my debt, I mailed a check (return reciept).

I also suggest that once they take the money from your account, go online and print out or get a copy of the cashed check from your bank.

A different debt company tried to come after me for the SAME debt a year later! Luckily, I had all of the information and was able to clear it all up.

**AnW819** · 10-30-2010, 02:17 AM

Originally Posted by Palooka

Um heck no. Is this an actual letter from the bank or from another place? I would take the letter and go straight up to the bank and get it settled and have them put it in writing that they offered you this settlement and that you paid this x amount.

Its from a creditor. If I bring it to the bank I am sure they will tell me I have to call them correct? They can't do anything about it now being its sent off to collection agency.

**HappyMama** · 10-30-2010, 10:47 AM

Debt Settlements:
The term settlement or settle means: "to compromise"! Put another way, it's a an agreement to substitute, for an existing debt or obligation, some alternative form of discharging that debt. The term, " satisfaction" is the actual discharge of the debt by the substituted means. Compromise is an agreement to perform some action, while satisfaction is the actual performance. Satisfied means the fulfillment of an obligation or claim, such as the full payment of a debt. Using these definitions, we can clearly see that settling debts means that the original debt is not paid in full and that some lessor amount is accepted as a means of satisfying (or discharging) the debt.

BEFORE offering to settle ANY debt, ALWAYS check to see if the Statute of Limitations (SoL) to enforce the debt has expired. Not because you don't want to not pay or do your moral obligation it is because you don't want it reported as a new debt on your credit when you pay it. Which some unethical companies do that. You will then have it on there for seven more year!!!

If the debt is more than seven years old then it can no longer be added to your credit reports however, collectors who buy old debts, often report these old debts to the credit reporting agencies (CRA) as new debt. Reporting inaccurate information violates the Fair Credit Reporting Act Section 623. Getting collection agencies to remove the inaccurate information from your reports is difficult at best. You can and should demand they comply with the FCRA. Make sure you are educated of your rights under the FCRA, especially when dealing with a collection agency and not the original creditor. It is always best to try to settle and deal with the original creditor!

If you do take their settlement as everyone said get it in writing. If they accept your offer, put it in writing BEFORE paying! Debt settlement letter samples are on the net, check out the FCRA for your rights and a copy of sample letters. Knowledge is power, then you are always in control of your money and making the right choices that work for your family, budget and taking care of your obligations. Remember every time your debt is sold to a collection agency it loses value especially once it is past the SOL, not meaning you still don't owe but it is why they pay pennies on the dollar to buy it and you don't want to pay then have it restart the seven yr period, be on your credit forever or worse some who didn't get it in writing and paid a settlement had it then sold to another, who said the original was not satisfied and was a whole set of other problems.

Debt buyers will issue a 1099c.There is an IRS requirement for a 1099-C to be issued on unpaid amounts over $600.

Good luck to you. It does sound like a good offer to get it out from under you and take care of your responsibility. Just want to give you information so you can follow up, research and do it right so it doesn't haunt you later. I am not an expert in this field but again knowledge is power, put yourself in the drivers seat .

You can find more information, and sample letters to give them a settlement at:CreditBoards.com - Credit Help, Credit Repair Tips, News, Forums

Good luck to you, and good job for dealing with these things to give you a fresh start.

source: FCRA information and fair debt collection.com

**Nishu** · 10-30-2010, 10:49 AM

If the debt has been sold, the bank isn't going to work with you at all. In fact, since they don't have a right to that money any more I doubt it's even legal for them to work with you.

If they sent a letter that says they'd accept 170, then I say that qualifies as getting it in writing. Call up the phone number that's listed on the letter and tell them that you'll mail them a money order. Buy a money order, mail it to them but keep the receipt and the stub and staple it to the letter that you recieved, then file it all away. Don't lose it.

I don't know exactly what it will say on your credit report, but it can't possibly be worse than having a 700 outstanding debt.

So yeah, I'd take the offer and run.

**AnW819** · 10-30-2010, 04:31 PM

Thanks all for the awesome info!!

Originally Posted by Nishu

If the debt has been sold, the bank isn't going to work with you at all. In fact, since they don't have a right to that money any more I doubt it's even legal for them to work with you.

If they sent a letter that says they'd accept 170, then I say that qualifies as getting it in writing. Call up the phone number that's listed on the letter and tell them that you'll mail them a money order. Buy a money order, mail it to them but keep the receipt and the stub and staple it to the letter that you recieved, then file it all away. Don't lose it.

I don't know exactly what it will say on your credit report, but it can't possibly be worse than having a 700 outstanding debt.

So yeah, I'd take the offer and run.

thats what I thought, the letter---saying they will take $170 is in writing. What else could I get? I thought thats enough proof. And good idea with a money order. Or I could just do a check and print out from the computer my bank showing the check and that it has been paid if they do not take money order?

**NikoSan999** · 10-30-2010, 04:53 PM

Originally Posted by AnW819

thats what I thought, the letter---saying they will take $170 is in writing. What else could I get? I thought thats enough proof. And good idea with a money order. Or I could just do a check and print out from the computer my bank showing the check and that it has been paid if they do not take money order?

What else can you get...a wire transfer from your bank which would cost probably less than 24...your bank has a receipt, ask for a print out then you have a receipt...they have no access to your bank account..dosen't get lost in the mail and is IMMEDIATE.

What else can you get...from experience...ask that a letter be faxed ( to the bank if necessary if they will allow for another buck ) a letter of release stating that payment has been received and the COMPLETE debt has been released and considered to be paid in full

If they will take a check being mailed they will also take a cashiers check from the bank. Your bank has a record also of: who made out to, for how much, when, etc...mail return receipt requested which shows WHO signed for it...confirmation receipt so you can track it along the way online at the post office etc.

Last DO NOT CALL FROM HOME OR THEY WILL START CALLING YOUR HOUSE...THEY CAN'T DO THAT RIGHT NOW CAUSE IT'S IN YOUR DADS NAME...ONCE THEY HAVE it ( sorry about the caps...forgot they were still on ) once they have it they won't stop and if the crap hits the fan they will sell it to another collection agency.

Wire transfer is best in my opinion..

**Nishu** · 10-30-2010, 05:20 PM

Yes, the point of the money order was that if you give them a check or a credit card number then they could possibly use that information to try to collect the rest of the balance. I don't know how often it happens. I've heard of it happening before though.

**NikoSan999** · 10-30-2010, 05:40 PM

On a wire transfer the bank keeps a record for themselves...which is a tremendous backup...they will print you a receipt.

If they have a problem with a wire transfer then there is a problem.
Such as they don't want to give THEIR account number...

Don't forget to get the AFTER paid " NOW RELEASED" and all the above.