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.
If it has expired, and you do not wish to pay the debt, send
the collector an "Expired SoL Letter.
You must understand that this letter does NOT relieve you of responsibility for
the debt. The letter only lets the other party know that you are aware of your
rights. If the collector decides to pursue court action, then you must appear
in court and raise the expired SoL issue, otherwise, you run the risk of the
collector obtaining a default judgment.
If you wish to pay the debt consider the following
information before doing so:
Many collectors add additional fees to the original balance
that are not legal. Check out this page for more info:
Interest charges
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 but most will probably ignore you so,
you'll need to dispute the debt yourself directly with the CRAs. Use this link
to learn how to
dispute
credit reports.
Finally, consider the number of times the debt has been sold.
One way to determine this is by the number of collectors who have contacted you
over the years. Every time a debt is sold, it loses value! For
instance, an original debt of $10,000 is charged off by the original creditor
and then eventually sold to a 3rd party debt collector for 75 cents on the
dollar ($7,500). This first collector attempts to collect the debt but is
unsuccessful and ends up selling the account for 50 cents on the dollar
($3,750). After several attempts this second collector sells the account for 25
cents on the dollar ($937).
This of course is an over simplified example but the
concept is sound. For instance, when collectors call demanding $14,000! (the
original amount of the debt plus his collection fees and interest (for interest
- see above). Offering to pay the full amount would be a waste of your
hard-earned money!
Maybe it's been a few years since you incurred this debt
and now you are in a better financial position. If you feel inclined to pay
something, consider your offer carefully. Starting at 10 cents on the dollar
for a lump sum settlement payment may not be far off the mark. Collectors have
the choices of accepting your offer, providing a counter offer, or declining
altogether.
If they accept your offer, put it in writing BEFORE
paying! Debt settlement
letter
If they counter offer STOP and consider the offer carefully
before agreeing to it! A counter offer is usually the beginning of negotiating
a settlement. Make a counter offer of your own and continue until you and the
collector agree on a settlement. Again, if your offer is accepted, get it in
writing BEFORE paying anything.
If they decline your offers, boldly ask what they will
accept.
