Many people today are considering settling the amount of credit card debt they possess. An industry of organizations and companies has built up around America’s overstretched wallets. Currently consumers in the U.S. are up to $915 billion in credit card debt, most likely you are a contributor. It is my personal belief that lack of discipline is what has gotten us here. As such, settling your debts is only complicating your situation, because you still aren’t willing to accept responsibility for your spending problem. See also all of my articles on Collection Agencies.
I once considered settling my debts using one of those agencies that ran commercials on t.v. and radio. You can read about my negative experience with this in a previous article Reasons not to file bankruptcy or settle your debts. However, if that article still doesn’t convince you to take the long road, here’s some advice for settling your credit card debt on your own. This article is full of useful information about the consequences of defaulting on your creditors. So take your time to review this post and feel free to add your comments at the end. Related Debt Prison articles you should read are Get Everything in Writing: Collection Agencies and Their Lies and How to Deal With Collection Agencies.
DebtPrison.net does not offer legal advice. The information found here is readily available on websites throughout the internet.
Please take a few minutes to read Tell Debt Settlement Companies to Kiss Your Ass, which is actually an email from one of my readers who describes her personal experience with two different debt settlement companies. This will give you an inside look at how these companies work and hopefully convince you not to use them. See also, Restrictions on Wage Garnishment for Debt Collection.
When to consider settling your debts
At this point you should already have a tight budget you are following. You might consider settling your debts when you can no longer meet the minimum payments. For example, for whatever reason your income is not high enough to pay all of your bills. If you are in this position it’s my belief that you should stop payment on non-critical items. Critical items are food, vehicle, rent, electricity, water, and a phone. Non-critical items would be credit card debt, student loans (these can be deferred for now), and medical bills.
Make a list of your critical and non-critical obligations. Write down the critical items on the left side of a sheet of paper and the non-critical on the right side of the paper. At the bottom of each list write the total amount of debt for both categories. This may be a sobering process for you. It should be crystal clear in your mind how much is owed to each and every creditor. I currently owe money on five different accounts for a total of $49,000. I can tell you within a hundred dollars how much I owe on each one of them. This keeps me focused on lowering my debt and controlling my spending.
In addition to a tight budget you should consider ways to lower your critical expenses. Perhaps you could move in with a friend or relative and pay little or no rent until you get your debts back on track. Also, are there tangible items that you could sell to generate additional cash? Start asking yourself these questions. Remember that the worse your credit score is, the higher interest you will pay on future loans. So let’s try to start thinking about the long term as well.
Why you shouldn’t use debt settlement companies
It is true that debt settlement companies provide a service. There are two points that should be made in regards to why debt settlement companies are unnecessary. The first point is that you can perform the exact same functions that they do. This article is about how to settle your debts on your own. Well basically you accomplish this by going through the same steps that debt organizations do. Why involve a third party in a situation like this? The credit card companies had rather deal with you directly. And although it may not be any fun - you are better off if you will deal with them directly. This means talking on the phone with them and writing letters. I know how stressful this can be, but it’s a necessary evil.
The other point is that debt settlement companies charge you for the service they render. When I contacted a debt settlement agency they charged me $50 just to sign up for their program. I would pay them $600 per month. Of this they would keep $60 for themselves and put the other $540 into an account (their company account - not a bank account with my name on it). So here I am broke, not paying my credit card debt, and paying a ridiculous $60 per month for a false sense of security. In addition, the $540 is going into their account. This is a bad idea. These companies are not banks. If you were to change your mind in a couple of months you can’t just go and make a withdrawal. There is a complicated process and you may not even get all of your money back. I’ve heard some bad stories. After reading the sign up information I simply called them back and said no thanks (I still had to sign and fax a waiver to them)!
What will happen when you stop making payments
For the first month or two you will get some phone calls from your credit card company. You can answer if you want and just let them know that you don’t have the money right now to make any payment. If you make a small payment this will only postpone the debt settlement process for you. So I wouldn’t make any payment at all. It is a good idea to write them a letter explaining why you cannot make payments at this time. It’s always a good idea to send every letter as a registered letter. This way you will know for sure that they received it. Keep the receipt from the post office. If you haven’t already made a file for each creditor - you should do so at this time.
Although you are not making payments the credit card company will continue to add late fees, over the limit fees, and minimum balance due to your account. I recommend keeping track of the fees and interest added to your account from the first month you miss your minimum payments. You may be able to talk them into waiving these fees when they get ready to settle your debt. Meanwhile back at the ranch you should be saving any money you have. But I wouldn’t keep it in a bank or any account that could be traced by an investigator. At home in a safe or a safe deposit box would suffice.
The sixth month is often the magic month. After you’ve gone 6 months without making a payment of any kind the creditor will probably be ready to settle your debt or turn it over to collections. If possible you want to avoid the bank turning your account over to an outside collection agency. Like I said earlier you don’t want to involve another party to this situation. This will complicate your ability to settle this debt and put it behind you for good. If your account goes to an outside collection agency expect the phone calls to increase as they love letting their automated computer dial your phone number. You should keep on file any letters sent to you in regards to your account.
The goal of debt settlement
The goal is to have the bank accept a partial percentage of what’s owed. For example, if you owe them $6,000, maybe they will accept $3,000 as payment in full. They would rather get $3,000 than nothing at all. Now this won’t work if you don’t have any money to offer them. So you must have cash somewhere that you can use to meet this $3,000 obligation. The purpose of debt settlement is to keep you from having to file bankruptcy. If you file bankruptcy then your creditors will most likely end up receiving nothing. You also want the creditor to send you a letter stating that this $3,000 is “payment in full.” They can verbally agree to settle your debt, but if you don’t have this in writing you could be in trouble. They might just send you a bill for the other $3,000 and act as if they don’t recall the conversation.
You want your credit score to be as high as possible. Having the bank close the account and stating “payment in full” will help keep your credit score high. If you don’t demand this your credit report will indicate that the account was closed and you failed to pay the $3,000. Remember, if you have the money to settle the debts then you are in control. You have money and the banks can get it - but let it be on your terms.
Get everything in writing
Never agree to send them payments until you receive a letter from them stating that this $3,000 will be regarded as “payment in full.” And that this payment completely 100% fulfills your obligations to this debt. If you don’t receive the letter then they don’t receive a payment. And when you pay them send a money order and send it overnight. Do not send a check as this will give them your checking account numbers. This could also come back to haunt you. If they refuse to put it in writing then they aren’t serious.
If you are dealing with an outside collection agency (the bank sold the debt to a third party) the rules are the same. But before settling with a collection agency contact the original creditor first and make sure that you can’t settle with them directly. If they say “NO” because they sold the debt then deal with the collection agency. But here’s the tricky part. There should be no grey area. What if you receive a letter from the collection agency stating that $3,000 is payment in full and you pay them, but the bank comes back later and bills you for the remaining $3,000? I’ve heard of this happening as well. So make sure that dealing with said collection agency satisfies this debt in full. Get the agreement in writing and keep every letter. Don’t forget to send all letters registered and keep the receipts.
The negative side of debt settlement
The bad thing about settling your debts is that you aren’t keeping your word. You agreed to honor a loan and you haven’t. This bothers most folks as it should. Settling your debts can affect your credit score. Your score is already affected because of the months you went without making payments. It may be further damaged by creditors reporting that your account was “settled”. This will lower your score even further. Remember, this means that on future loans you will pay higher interest. That’s why getting the “paid in full” or “paid as agreed” is so very important.
The debt settlement process is very stressful. Your phone is ringing off the hook and the conversations can be intimidating. Try to remain calm and stand your ground, you may be able to get through this without hurting your credit that much. You can check your credit report for free every 4 months at annualcredireport.com. I recommend you keep a close eye on this report, it gives you an idea of where you are financially and helps keep you focused on the consequences of debt.
Discuss this article, share ideas, and meet new people at Debt Prison Forums.
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Related Articles
* Restrictions on Wage Garnishment for Debt Collection
* The Fair Debt Collection Practices Act
* Reasons not to file Bankruptcy or Settle Your Debts
* Can you go to jail for not paying your debts?
* How to deal with collection agencies
* Sample Debt Validation Letter
* Information on Credit Card Balance Transfers
* How I Escaped Credit Card Debt
Can a collection firm, refuse an offer you make, as in say you can only offer, 1 dollar a week, and they refuse it….this is due to your on a very low income and even have a hard time living week to week…. Have an collection agency that has a judgment, against me, they say if I don’t make an volunteer payment plan, they have a warrant for my arrest on site….if I call an offer this.cause it is the only thing I can afford…and they refuse…can they still have the warrant enforce…after refusing a offer. even though I follow though to try and settle..
They may have a judgment but they don’t have a warrant for your arrest. In fact, if you had recorded that conversation you could sue them.
Many people have judgments against them that cannot be collected. If you cannot satisfy the judgment, you should contact the court and explain that to them and that the collection firm said they had a warrant for your arrest. Only the court would issue a warrant for your arrest. And the court would only arrest you if they requested for you to appear and you didn’t.
Sometimes after a collection firm gets a judgment, the debtor doesn’t try and pay it, so the collection firm asks the court for a debtors hearing where they ask you to show up so the court can ask you questions about your income and bills. But the court would inform of any such request. The collector can’t have you arrested because you cannot pay. However, the court could arrest you if they asked you to show up for a debtors hearing and you didn’t.
Would the court issue the warren to me or the collection agency, they said they have it, and will issue it, if I don’t may arrangement’s.
BB,
Can a credit card company put a lien on your house for the debt you owe them?
Hey Jerome,
The company can take you to court if you don’t pay them to seek a judgment that you owe them the money. After they get the judgment they will ask you to cooperate and pay the judgment. If you do not they may seek to put liens against any assets you own.
However, unless you’ve already been to court and had a judgment slapped on you - the possibility of a lien on your home is a long way off.
Hey Rebal84,
The court would issue the warrant to you - but why would they do this? This is not how things work - they can’t put you in jail for not paying them. However, they can request the court summons you to come to court for a debtors hearing where they will ask you about your income and assets. The bill collector does not have a warrant for your arrest. To suggets that they have such a warrant is a violation of Federal Law and really pisses me off.
- perhaps you should call the police station where you live and ask them about what the bill collector has told you.
A collection agency does not have a warrant - only the court can issue a warrant. Perhaps you should call the court where the judgment occurred and discuss this with them.
A bill collector does not have a warrant for your arrest…
You need to worry about letters that come from the court itself - not telephone threats from a collection agency.
Thanks…They sent a letter…saying if they don’t get a call from me, the court, gave them the warrant, an will issue it…if I do not respond…
Rebal84
Sounds like a debtors hearing…
This is interesting please keep me posted on what is going on.
I just received my first call from a collection agency (Zwicker & Associates). Have you heard of them? How should I deal with them? To be honest I’m very nervous.
Hey Jerome,
No I haven’t heard of them but I’m assuming they are a collection agency. First of all, relax… you’re a long way from wage garnishment here. However, I cannot give you my opinion on them unless you give me some details about the debt.
Barry
The debt is a $15K CC that is about 3 months past due. The CC company had called me, but I never picked up. I then receive a call from the collection agency today telling me to call them back (of course I didn’t). I will check the mail to see if they’ve sent me a letter. If they haven’t what steps do I make? Can I contact the actual CC company to see if they will settle or is it still too early for that? I remember you said I should wait for 6 months.
Jerome,
Six months, and maybe longer. Let’s look at this situation from the the perspective of the credit card company (since they are still in possession of this debt - they have assigned it to Zwicker). This may help you decide how to handle this matter.
The credit card company needs you to pay, however, most companies will SELL the debt to a collection agency usually after six months of no payments or contact. That being said, sometimes the original creditor will hire a debt collection law-firm to sue you. I have no idea what makes them sue some of the time but the majority of these debts are sold. My friend was sued by Discover Card despite being in college at the time. He was a no show at court and they got a judgment on him which
he pays a monthly amount on now…
Chances are the credit card company will write the debt off and sell it to a collection agency. Once that occurs (your debt has been sold to a collection agency) then you can begin the process of trying to settle since the CA most likely paid ten cents on the dollar for the debt. However, at first the collector will demand you pay the entire amount. Which you tell them you cannot and just keep on negotiating with them until they feel like settling… which won’t take long since anything above 10 cents on the dollar is profit. Also, if you do settle with a collection agency, make your offer near the end of the month. Collection Agencies most often have monthly quotas they are trying to hit and so they will often accept a less than desired settlement near the end of the month.
You do not have to talk with Zwicker, however, you can request validation of the debt and send registered mail. You could also simply write them a letter that due to your financial problems you are unable to make any payment at this time.
Will you get sued?
It’s always a possiblity that the original creditor or the collection agency will pursue a judgment. There are some things you can do to lessen the likelihood of being sued.
http://debtprison.net/wordpress/279/how-to-avoid-lawsuit-collection-agency/
Read over that article and see where you stand with the possibility of being sued. I know this is your main concern, because if they seek a judgment and get one, you may end up paying more than a settlement.
Hi Barry!
I’ve read a lot of your website and found it very informative!! I’m still trying to decide what to do at this point. I have 40k unsecured debt and can no longer pay minimums and still afford my mortgage, etc. I am in excellent standing with my creditors to date with interest rates around 13% at the highest (except for samll balances w/ department stores). Over 1/2 of my cc debt is with Citibank and Bank of America on 2 cards (14k each). I am an independent contractor in recruiting and with everyone on a hiring freeze I am no longer providing an extra income. We also could not sell our house last year and held 2 mortgages for 6+ mos adding to the hermorage. We have successfully rented the old house, but the damage has been done and savings is gone.
My biggest concern is with BoA. Besides the CC, I also do all of my banking with them (checking/savings) and carry a secured loan with them for a vehicle. Will this bite me if i default with them? Can they sieze my vehicle b/c I defaulted on my CC?
Also, I have a couple lines of credit right now that have a 0% interest rate (home depot, furniture). I would like to honor my agreement with these companies if possible and will look into hardship programs for the time being. BUT…will this hinder my ability to settle with my big dogs if they see on my credit report that I am current and paying with these companies?
I have lots of questions, but that is a start. My husband is speaking to a couple debt settlement companies and feels ths is the route we should persue…I have HUGE doubts!
Fran
Hey Francis,
I do not see why they would seize the car for defaulting on the credit card debt, I’ve never heard of that happening. I don’t think it will matter if you are still paying some of your debt, this is the situation some debtors are in.
In regards to debt settlement, bear in mind that this offers no protection from civil suit, you are still on your own there. The debt settlement company is not going to represent you in court. Also, the debt settlement company will have all your extra money. The DS company is not a bank and you can’t just go make a withdrawal if you change your mind. Does that sound like a good idea to you? I would carefully read over any paperwork. The DS company also offers no protection for your credit report.
Many people use these companies because they believe that the company has a ’special ability’ to accomplish something that a single person, on there own, can’t do. That’s simply not true. Also, the large amount of money you are paying the debt settlement company could be used to pay your debts. You are going to pay a company thousands of dollars for managing your sinking ship, only to find out that the only thing they are doing is sitting on your money and offering the creditor a settlement in a year or two.
http://debtprison.net/wordpress/134/tell-debt-settlement-cos-to-kiss-your-ass/
Perhaps, you would be better off seeking legal counsel for one hour before throwing money into a debt settlement program. Why don’t you at least go sit down and talk with a lawyer who specializes in civil suits or debt and pick his/her brain?
Barry
thank you Barry,
this is a very informative site. just some info for homeowners facing foreclosure. quite a few homeowners have stopped the foreclosure procedings by asking the mortgage co to “produce the original note” (discovery) the mortgage company must then respond in 30 days, if they dont respond then the homeowner can then file a motion to compel. most mortgage companies cant produce the original note because the loan has been transferred more than once. an attorney from tampa florida, Chris Hoyer has been successful following these procedures, he has a great website too, and free templates to file with the court , if i lived in florida and was facing foreclosure i would definetly give him a call. Thank you again Barry, for all the useful information.
Thank you for this very imformative site. I have been served with a summons for court from the law firm Fredrick J. Hanna & Associates for a Bank of America credit card debt.
I do not deny that I owe this money. I just completed one of Dave Ramsy’s courses and was working out plan. As a matter of fact 1 week before I received the summons I had mailed a letter to Bof A, with a $20 check and said that I knew about this debt and I wanted to pay on it, but at this time $20 was all I could afford. My plan was to use my income tax return and try to settle with B of A for a portion of the debt. A friend of mine in finance told me that a lot of credit card companies were settling on 30 cents to the dollar. Then I received the summons.
My question is should I try to make this settlement with the law firm that now represents B of A and how should I go about doing that?
Thanks,
Anne
Hey Anne,
I would first contact BOA and ask them if they will consider a settlement. You can ask to speak with a supervisor if you get an answer of “no”. If you can get a settlement before the court date then you should be good to go.
If BOA refers you to the Law Office then try and deal with them. They may or may not accept any settlement. You’ll have to make some phone calls and see what happens.
Good Luck!!
Hi Barry,
I guess, I have no way out…
Here is my situation…
- my credit score is 720, never had a late payment or anything;
- CC debt: 32K+10K+2+1+1+7, total of 53K;
- 10K upside down on my car;
- paying rent;
- I can not file bankrupcy because I am not American citizen;
- I must to leave the country by end of march because I will have my working visa canceled;
- receive 1.6K/month from unemployment, which will stop in May;
- CC minimum payments 1.1K/month;
- while employeed, I could make around 90K/yr - but I am looking for a job since Dec/08 and March is my deadline because of my visa cancelation;
- With the country’s economic crise, I am not even getting e-mails back when applying for job;
- idealy, I would stay in USA more 3 yrs, and leave USA anyway, but with no debt…
- I don’t own anything, I am single, and I ended up in this situation because of a chain of events in the last 2 yrs: car accident->lost my job-> got a job -> got sick-> lost my job again now in Dec/08
Question 1:
Should I just stop paying everything, CC, car payment, etc, and use the unemployment money to pay my food while while staying in a friend’s house, with a visitor visa, HOPING THE ECONOMY GETS BETTER AND I FIND A JOB, BEFORE MY UNEMPLOYMENT BENEFITS ENDS?
Question 2:
Should I just leave USA earlier, using the unemployment I am receiving and pay the minimum in my CCs until I am living in another country?
Question 3:
What do I do with my car I don’t need anymore, with 10K debt/upsidedown?
Any suggestion?
Hey Sorte,
Question 1. I think living off of the unemployment for a couple of months, while looking for a new job and defaulting on your current bills, is a decent idea. If you are able to find a new job then you can quickly get caught back up with your creditors.
Question 2. This is certainly a real option but is your decision.
http://debtprison.net/wordpress/247/will-debt-follow-you-abroad/
Question 3. If you don’t need the car, and can no longer afford it, you can contact the creditor and request a voluntary repo.
Hey, My name is Stef. I’m 24 yrs old. I have about $10,000 credit cards and personal loan debt. It does not includes my student loans. Since I’m a full time student and a part time worker, I earn about $400 a month. Last summer, I didn’t get a job so I failed to pay all of my bills. Now, I couldn’t pay any of my bills. My phone are ringing all the time. I have no one to help me. On top of that, I still have to pay for my own apartment that I can barely afford. I don’t even know if i will get a job in this kind of economics situation. Can you give me a suggestion? Should I file bankcruptcy or should I try to negotiate? I’m pretty sure that I already have a negative mark on my account since I fail paying my bills for almost a year now. Your help will be appreciated.
If you don’t have a home or any assets, and basically no job - you might consider speaking with a bankruptcy attorney. You could also choose to ignore their calls and if they file suit against you hire a lawyer.
You could speak with them, but if you can’t pay, I don’t see what good it would do. And often, once they have you on the phone they proceed with harassment and intimidation.
Hi BB,
Thanks for your time and all the help you give us… I know a lot of people appreciate it….
I have a debts from Washington Mutual ($2k) and Citibank ($2k). They have been in defult for about 8 month (no paymets). They assigned the debts to their collection companies. Now I have try to settle these debts for $1K each. They accepted but they do not want to sent anything in writing, they want me to pay by phone. I said NO, and I said you will not get any money from until I received something in writting.
The thing is these negotiation have been for about 2 months and still they do not want to send a settlement in full letter…
any advice???
Thanks,
If you don’t get something in writing then there is no agreement. They may still be representing the original creditor and cannot actually make such a settlement on paper. They would accept your $1,000 and then turn around and bill you for the rest. This is how it works everytime.
http://debtprison.net/wordpress/170/collection-agencies-get-everything-in-writing/
You need to follow the advice in the article I referenced. It’s the only way to settle and even then you will likely have to force them to honor their written agreement.
If they agree to your terms, next day air them a money order.
Thanks BB….
When you offera money for settlement in full it has to be in full???
If still the debt is bige can it be in payment??? let say the dbet is 5K and it has been about 8 months with no payment, can I offer to pey them 50% of the debt in 4 o 6 months??? Do you think it is ok too???
Again thanks for your time and your help
It would be best if you could pay the entire 50% at once, that’s way it handled and out of your hair. But if they accept say two or three payments, and they agree to that in writing, then that would be alright too
Let me start off my saying my wife and I have been really bad at looking at the over all picture about our debt. Over the past 3 years we have been just been getting by. But last year I had to take a pick hit in my income. To the point its about the same for me to work part time and take care of our 2 kids, as it is to work full time and pay for after school care and day care. We have about 75k in debt thats about $1750 in monthly payments. WIth 3k mortgage we cant make our bills anymore. My thought was we are so in the hole Chapt 13 was all. After spending some time really looking into it, if we have a good budget we can make it but with have to have no CC payments. I am not even a month late on my CC yet but I have stopped paying them and wont. My plan is to try to settle with them later down the line when its time. We can take a loan out on my wifes 401k for the settlement. The thing is of that debt I have a few small cards I was planning on keeping each under $1500. But everyone has been talling me to not pay any of them and settle with them all and be debt free. Otherwise later down the road Ill just be back when I am now.
Hi Barry,
Your site is packed with great information. I was wondering if you had any advice for my situation - in 2002 / 2003 I canceled a cc with a $300.00 limit and at the time I was so broke I could not make any payments. Around 2005 I received the most awful calls for a collection agency stating that my balance due was $1100.00!! I tried to work with them, but they were so unbelievably rude that I changed course and sent them a Validation of Debt letter. I never heard back from them, instead the debt was transferred to a different agency. I ignored their letters until yesterday. I received a notice that a judgment has been made against me for $1600.00. However, I never received a summons from the court or anything. Is it possible to miss a summons? Shouldn’t I have also received a notice of the judgement from the court? I think that is strange. I read you sample letter that states” Therefore, please consider this response as my legal dispute and request for you under public law 95-109, 15 USC 1692g. S 809 to obtain verification of this alleged debt or a copy of a judgment against me”. I am thinking this is my best course of action at the moment. The letter I received from their offices seemed incomplete. What would you do? This is a little scary too me; I really don’t want my wages garnished.
Thank you,
Lynne
Hey Lynne,
Well you need to contact the court and explain that you never received a summons, had no idea about the court date, and would very much like to request validation of the debt, as is your rights under federal law, and that you are requesting the judgement be thrown out until you can request validation. I would also ask them what happened to the summons? Yeah you can’t just go suing people without letting them know. Contact the court.
Let me know what they say cause I’m curious…
Barry
Hi Barry,
Thank you for the quick reply!! I called the clerk’s office and there is no record under my name. They told me to call the Law office who sent me this letter and ask them what the deal is, what court this would have gone to. It does not mention which court in the letter I received, and a few people I spoke to at the clerk’s office seemed to think that was very strange. I wanted to run this past you first since you advise never to call these people. Should I send the letter I mentioned above? Thank you, thank you, thank you.
Lynne
Hey Lynne,
well does the ‘judgment’ you received actually look like something that came from a court? It sounds like this may simply be an ‘intent’ to pursue a suit against you and not an actual judgment. If it’s from the court itself, which it should be, then the return address would be from the court. If it’s just from the lawyer then it will have their address of law office.
If that’s the case then you should request validation of the debt.
So the real question is… was there court and a judgment issued by a judge? Or is this a simple lawyer writing a document to look like a judgment that is really stating an intent to file suit?
Barry
Hi Barry,
I have received nothing from any court of law; this includes a summons or a letter after the fact (which I think I would have received). The clerk’s office in my district had nothing under my name. Can I be sued in a different part of the state in which I do not live? That sounds unlikely, but this is my first time.
The letter, which came from the law office, states the following, “The court has granted judgment on behalf of the creditor and against you on March 10th, 2009 in the amount of $1,613.88. Pursuant to New York state law, interest accrues on the judgment amount from the date of the judgment at the rate of 9%.” It goes on to state that, “Although our client is authorized to take any and all judgment enforcement efforts permitted by law, it still desires to work with you to help you succeed in repaying the balance due… Please read the Notice of Judgment Debtor on the reverse side of this letter for a summary of your rights… Remember, if you don’t call us, we can’t help you… put this behind you”.
This reads as if they have past the intent to file suit and more like I missed a court date in which a judgment was made against me. At the same time it seems to be missing key information like a case number, which judge and which court. Their letter only refers to the court as, “the court”.
There is a C&S file number (and I do not know what that stands for) and an Index number, but no account number. The law office is based in upstate NY, the collection agency is based in Illinois and I live in New York City.
My question to you is should I send a standard letter of validation or the letter which asks for validation of the debt in addition to: “It has been brought to my attention that you are attempting to collect on an account that is in legal dispute. Therefore, please consider this response as my legal dispute and request for you under public law 95-109, 15 USC 1692g. S 809 to obtain verification of this alleged debt or a copy of a judgment against me. I furthermore request the name and address of the original creditor stating that this alleged liability is mine so that civil action can be implemented to resolve this erroneous accusation, if necessary.”
I have been receiving letters from this law firm for quite some time but I have never asked for the debt to be validated. Does that matter?
Thank you very much for all of your help and guidance!!!!
Lynne
Hey Lynne,
This letter doesn’t sound legitimate. They should have attached a copy of the judgment from the court, which they didn’t. In addition you should have received a summons and a judgment from the court, which you didn’t… which leaves me thinking this is possibly a very shady collection agency.
Well first of all you’ve got to find out EXACTLY what is going on. How is it that the law office has your address but the court doesn’t? This doesn’t sound right and I would not be surprised if what they have done is illegal (suggesting they won a judgment in court when they haven’t). Still though, more facts are needed. You need to make absolutely sure that court has not been held, and if it did… how they managed to do so without summoning you or informing you in any way.
And no… I don’t see how they would have sued you in another county/district. So why don’t you do the following….
Write a letter to the law office stating that Court has not been held and no judgment has been awarded. How could you have sued me in court, won a judgment in your favor, and never have contacted me about it? I’ve received no summons from any court about a court date. Therefore I would like for you to provide me with proof of any such suit, court date, and judgment. I am assuming that you cannot do that because they have not occured. Furthermore, if you fail to provide me with such documentation (considering the court in my county has no record of such a suit against me), I will assume the letter you mailed me, of which I attached a copy, is fraudulent under New York State Law.
Furthermore, if no suit and judgment has occurred, as you’ve declared in your letter, please consider this my formal request for validation of the debt as described under the Federal Debt Collection Practices Act. Note this is not a refusal to pay, but rather is a request that you provide me with any proof that I am legally obligated to pay you. In providing validation of the debt, please include a copy of the original contract, which should include my signature, indicating that I ever entered into an agreement with your client.
If this is a shady collection agency, as I suspect it is, this may be the end of them bothering you. And if court was held, you have the right to request the judgment be recended since you were never made aware of the suit in the first place and therefore had no opportunity to verify their claims or to prepare a defense.
Make copies of the letters and send mail registered USPS.
Lynne,
Also, you could check your credit report to see if any judgment shows up.
http://annualcreditreport.com
I want to know what happen if your are undcumented and you have debts . I gave my ID number for a Baleys (1000) contact and also for surgery (over 2.500 which is my case) and cell phone bill (500)
please help me
Hey Juan,
Well if you remain in the U.S. then they will try and collect the debts the same as if you were a U.S. citizen.
Hi Barry,
Thank you very much!
All the best,
Lynne
Hi Barry,
Thank you so much for your information. Currently, all of my credit cards are charged off, which total about 10,500 and an unsecured beneficial loan for 5,000. I am an unemployed grad. student but will start making money in about 6-8 months upon finishing school. I need to clean up my credit for my future career and that is why I decided not to file Chapter 7.
My credit report is only showing 2 collections but those are all who keep calling me. Should I send the debt verification letter first, since the letters are within 30 days? After that, if verified, will agencies, settle for less, if i set up a payment plan?
I havent paid any of my cards for about a year due to extreme circumstance. But now I must get on track and I’m a little lost.. but my career depends on it.
Thanks for any help you may provide!
Steve
Hey Steve, well you need to see if the original creditors still own these debts and if so then try and bypass the collectors. Otherwise I would validate the debts and then try and get them to remove the negative strikes from your credit report in exchange for payment on the debt. Remember anything not put into writing never happens. And even in writing you’ll have to force their hand.
Hey Barry,
I wanted to let you know I was able to settle a $15k debt for $3,100. I followed your plan of waiting six months. I called and initially they didn’t accept my offer, but I called back about 3 weeks later and they did.
Excellent news Jerome! Good for you!
Barry,
I need some help!
In 2006 I was sent a certified letter from the National Arbitration Form stating
That a Claim had been filed against me by a company called NCO (Never Heard From Before) They had bought my account from MBNA credit card Company I thought was taken care though card Insurance when I was out of work due to injury .I called the Form and was asked to respond to the complaint. I filled out the response form explaining my side of the story, sent it with copy of original contract, copy of checks and waited.
At this time the company NCO started calling my home, I explained I needed validation of the debt. They continued to say I needed to pay them $5426.they where going to win & wanted to work with me, I gave up trying to talk to them on the phone (This was less than $2000. debt in 2003) I sent the cease & desist letter asking them to stop contacting me buy phone that all contact was to be in writing! But still they called!
I receive a letter from the form three weeks later the case was assigned to_ _ _ _ _ and
I would receive their decision shortly.
Then in February 2007 I received the letter. The undersigned Arbitrator in this case find and concludes that the above case Be Dismissed Without Prejudice.
I also received a copy of statement showing that it was paid from NCO!
Well I thought that’s it! NO More problems!
Well I decided to check my credit the other day and I requested my three free credit reports!
What do I find NCO has put a $13000. Debt on my report from this Company!
In my contract with MBNA they had to except the decision from National Arbitration Form!
What do you make of this?
Can I fight this with the credit report companies or should I fight it with FTC?
I would first contact NCO to find out why they placed this on your credit report. Then I would go to the online dispute pages of Equifax, Transunion, and Experian and file a dispute. I’d call them too if that option is available. If you have no response from this then I’d hire an attorney. Now if you’re a good writer and know that you are in the right here, then you might opt to write the letters yourself…. that basically you are attempting to avoid legal action and also avoid getting their State Attorney General and the FTC involved and if they will do the right thing then all of this can be avoided. What I can tell you for a fact is that collection agencies do NOT like to be sued. It costs them money so keep that in mind as you deal with them. Last resort hire an attorney but give them a chance to correct the mistake without suing them.
Hi Barry
First of all THANK YOU SO much for this website.
Its been a godsend of information to calm me down
when the stress level rises.
I have a few question though
I currently own 17K in CC.
11K in one and 6K in another one
I had cancelled the 11k card and told them directly
that i had no job and no way of paying them.
That was six months ago.
Since then i have kept making small payments on
the 6K, since the interest is much smaller.
I am not sure if this is a good idea to keep paying
one while ignoring the other one?
Also do you recommend that I never use
the 6K card to make small purchases?
On top of this I even own the state unemployment
company due to a judgement with an old employer about
how i was laid off. He won.
So i owe them an overpayment and its sad
because I can’t even apply for that anymore.
Any advice on that?
Hey Carmen,
Paying on one debt won’t matter in the big picture. If your goal is to pay what you can afford to pay, then paying the lesser of two debts is perfectly acceptable and in my opinion, shows that you are committed to paying your debts. So you are unemployed and can’t pay all your bills? Welcome to the party… and I’ve a suspicion that America’s version of this party is just getting started. So there’s hundreds of thousands of Americans out there just like you. Here’s what you need to know. You need to take an honest look at your financial position and only pay what you can afford to pay. This means that, once on the phone to bill collectors, you don’t give in to intimidation and make promises to make them a monthly payment which you simply cannot afford.
Here’s what I did once I got in over my head. I stopped payment on ALL my credit card debt. I mailed each of them a registered letter explaining that I was in a bind financially and would begin repayment of the debt once I had restored my footing (this was the truth). I then saved money and paid off a car and sold it (I had another vehicle anyway I was sooo stupid). Once I had the car paid off and an emergency fund of $1,500… I dropped a money bomb on the first creditor and got the other two back under the limit. This stopped the phone calls which were occurring about every thirty min. Within just over a year I had two creditors paid off in full and am STILL working on the third. Thanks to the recession I’ve been limited to only working 40 hours and may soon be laid off. But most importantly what I did was make a concrete decision, informed my creditors, and stuck with the plan. I took control of the situation and felt much better afterwords. I’ve felt fine about my finances ever since. Make some educated decisions and stick with them. Know your limits and make decisions based on those limits.
I have had 3 credit cards that have been on collections since 2006. I’m trying to repair my credit now since I’m in a point in my life that I need to settle down and build a life for me and my family. I’ve been researching online about it and decided I would write all these collections agencies a debt verification letter because the amounts that they are asking me are outrageous. Some are more triple what I thought I had owed these companies. I looked over my past bank statements and it was much lower than what I owe that says on my credit report. My husband says I should sue this debt management company that I used back in 2005 when I knew my debt was out of control. After about 6 mos, they didn’t help me with my debt since I’ve been paying them religiously per month but the CC companies still charge me late fees, overlimit fees and about 20+% finance charges. I cancelled their services and decided to just stop paying these companies because I was fed up with all the money they were charging me. Now, all I wanna do is get this over with and settle all my debts by negotiating with the collection agencies. Is 25% of the full amount a good starting point to negotiate? If they do decline, how high can I tell them I can go or stop I should say? Also, I live in TX and I know the SOL is only 4 yrs. Should I just wait 1 more year so it’ll be deleted out of my credit report? (assuming the clock started 2006) My BOA is the most I’m pissed about since I know for a fact that I only used about $4500 when the CC was open but since all these fees and years went by, I owe them $12,000 now. I refused to pay this since they are making a lot of profit off of me. What can I do with this account?
This will stay on your credit report for a long time. It’s difficult to get the negative strikess removed. You can try and negotiate. I would try 25% since many collection agencies will accept that. You have to tell them what you can afford and thats all. I would try and settle for 25-40% with all collectors. You can try and force the collection agency to remove the negative strikes from your credit report in exchange for payment, they might accept these terms and they might not. Most importantly you need to get everything in writing. If they won’t put it in writing that means it ain’t gonna happen. Negotiating with these collectors takes patience. They won’t take your offer the first time, you have to stick with your offer day after day.
I have to still pay 758 to chase credit card. The case has been transferred to a collection agency(but not sold off). I spoke with the collection agency and they agreed to a payment of 350. I asked them to fax me this and the letter states that
“the collection agency is willing to accept 350 as full and complete settlement of the above referenced account.Upon receipt and clearance of your payment as offered, we will notifiy our client to update its records accordingly regarding this settlement.”
Is this statement enough for me to assume that they will be closing my account and tell “payment in full” to the credit agencies.
Please reply
Sorry i forgot to add one more point:
The fax does not have the signature of the collections manager.
It is simply a plain document in their official letterhead
Hey Sam,
You’ll need to contact Chase and ask them if they accept this settlement. If they say yes you’ll need to document the date and time of the calls, as well as the people’s names with whom you spoke. Here’s an article you should read from a DP reader who was in your exact position… and her creditor was Chase Bank…
http://debtprison.net/wordpress/170/collection-agencies-get-everything-in-writing/