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I had a friend call me an hour ago. She was absolutely frantic. She admitted that she's been hounded by a debt collector for a 2 year old $1900 credit card debt. She doesn't have the money. They offered her a $1200 discount if she pays the $700 in a lump sum. If she did, it's all the money she has -- literally. Nothing left to pay the bills, rent, food, gas, etc.,
I can help her out emotionally but I have no experience in financial matters like this. (And I can't give her any money.) She doesn't trust anyone else in knowing about her situation.
What is her best option? Should she counter their offer with a lower amount? By how much? The research I did online said to pay in Money Order only and not give access to draft from your account. It also said to get the agreement in writing, with a signature, so the remainder of the balance can not be sold to another collection agency. (Apparently, they're evil like that.)
It also said to negotiate to have the bad credit removed from her credit rating. Lastly, it said to finalize negotiations around the end of the month when the debt collector is more motivated to meet their monthly quota.
Is this research accurate? What would you advise?
ETA: I should add that she is only working 25 hours a week. She had lost her job a few years back and has only been able to find this part time work.
At this point she has to decide to pay it off or not. It's unsecured credit, they can't do anything beyond trash your credit and call once a day. Just use voicemail to screen calls.
Absolutely stupid to pay it off if she needs that money for rent, utilities, and food this month. That's just going to kick off late fees, **** the land lord off, etc, etc. And if you're month to month, that just keeps carrying on month after month. The damage to her credit has already occurred anyway, so paying it off in and of itself isn't going to do anything to immediately improve credit.
I assume she's single and doesn't own a home or have any other valuable assets. If so she's judgement-proof and should just tell them to pound sand. Okay, maybe she shouldn't say it that way. But she can tell them that she has no money, no assets, and a very limited income and that she simply can't give them anything. They can take her to court and will likely get a judgement against her for the amount; but likely she doesn't own anything they can put a lien on, and it doesn't sound like she makes enough to have her wages garnisheed so in the end they won't be any better off after getting the judgement.
Don't get me wrong, she'd be better off settling and making it go away, but it sounds like she's in a pretty tenuous financial position so I'm more inclined to tell her to hold on to what she has in case of an emergency.
I see no reason why she shouldn't make a counter offer. She can just say "this is what I've got, take it as settlement in full or leave it." I don't know that they would take it, but if they do take her to court it will look better for her that she tried.
Regarding the advice you found, I agree with not giving the creditor access to her bank account. Get the offer in writing, and make sure it specifically says that the account will be considered paid off for the agreed upon amount (some creditors will say over the phone that the payment will settle the account but not follow through when they get the payment). Then send a check or money order by certified mail, return receipt so she can prove that the creditor received the payment. Then hold onto the documentation forever.
I doubt that any creditor is going to remove that kind of information from the credit report, but I suppose it doesn't hurt to ask.
She doesn't own a home or even a car. She lives in a small apartment and is barely making it month to month.
She's concerned they'll garnish her paycheck above anything else. What would happen if she just ignored their calls from now on? She said she's willing to offer them $350 just to be rid of them but doesn't think they'll accept it so she's scared to make any offer at all. She's afraid to let it go to court because she can't afford an attorney or pay any fees associated with going to court.
While I realize this type of advice is not popular in a time when everyone seems to be out to 'beat the system', but, what is wrong with doing one's best to do whatever is right and honest? That's not really all that hard to figure-out.
Perhaps she should accept the $700 'payment in full offer' with the stipulation that she will pay half now ... and the other half when her credit report is cleared. Advice to simply 'blow off the debt that she incurred and promised to repay' ... is dishonest, regardless of how you cut it.
While I realize this type of advice is not popular in a time when everyone seems to be out to 'beat the system', but, what is wrong with doing one's best to do whatever is right and honest? That's not really all that hard to figure-out.
Perhaps she should accept the $700 'payment in full offer' with the stipulation that she will pay half now ... and the other half when her credit report is cleared. Advice to simply 'blow off the debt that she incurred and promised to repay' ... is dishonest, regardless of how you cut it.
This was my first suggestion, actually. She wants to do what's right and is NOT dishonest. She's not someone who is out to "beat the system." Here is her story:
She got the credit card on a special offer of 0% interest for three years. She bought a $2,000 computer. It would have taken her only three months to pay it off with her former job. She lost the job two months later. She "missed" a payment date because she forgot to put a stamp on the envelope.
Immediately, the credit card company increased her interest rate to 30%. This was in 2008. She still paid on the card faithfully for three years. The amount she paid in that time? Over $4,000. In 2011, she just couldn't do it anymore.
What the credit card company did to her is unfair and nothing short of robbery. For the balance to still be at $1,900 is ridiculous. She feels she's more than paid what she owes. I know where you're coming from but I'm inclined to agree with her. Enough is enough.
So, for the purpose of this thread, I'm asking that all future responses please refrain from judgments and focus on what her rights are and how she can be helped. She's beaten herself up over her "stupidity" already. It's wrecked her credit and given her health issues due to the stress. During the last two years she's dealt with this, no one had a clue. She's kept a smile on her face and is the type to help anyone else in need.
That's why I'm helping her. It's what she deserves.
She should just offer the $350, tell them that's ALL she has to give them or they get nothing, and get the agreement in writing, THEN send the payment. Pfffttt... on the credit report. It's not like she's trying to buy a house or a car.
She should just offer the $350, tell them that's ALL she has to give them or they get nothing, and get the agreement in writing, THEN send the payment. Pfffttt... on the credit report. It's not like she's trying to buy a house or a car.
This is what she'd like to do but she's afraid they'll say no and garnish her paycheck or take her to court. She wants/needs to avoid that because of the cost and the further lack of monthly income. She's not worried about her credit rating because she's sworn off credit of any kind. She's now strictly "cash on the barrelhead."
To be honest, I'm more worried about her stress levels and her health. Doctors have tried to prescribe antidepressants and other things but she refuses to take them. I don't blame her there.
She doesn't own a home or even a car. She lives in a small apartment and is barely making it month to month.
She's concerned they'll garnish her paycheck above anything else. What would happen if she just ignored their calls from now on? She said she's willing to offer them $350 just to be rid of them but doesn't think they'll accept it so she's scared to make any offer at all. She's afraid to let it go to court because she can't afford an attorney or pay any fees associated with going to court.
If she's barely making enough to pay her bills she can file a claim of exemption with the county clerk to have the garnishment eliminated. She shouldn't need a lawyer to do this. If they take her to court to get a judgement she really doesn't need a lawyer either, but if there are organizations who do pro bono work in your community it might be worth looking into.
The main thing to do is to be up front with the creditor about her situation. If they accept her explanation at face value they will be less likely to pursue judgement if they realize that it won't help them collect.
Quote:
Originally Posted by jghorton
While I realize this type of advice is not popular in a time when everyone seems to be out to 'beat the system', but, what is wrong with doing one's best to do whatever is right and honest? That's not really all that hard to figure-out.
Perhaps she should accept the $700 'payment in full offer' with the stipulation that she will pay half now ... and the other half when her credit report is cleared. Advice to simply 'blow off the debt that she incurred and promised to repay' ... is dishonest, regardless of how you cut it.
I agree, she incurred the debt and she should pay it. But at this point in her life paying off the debt would put her in a position where she won't have any money to cover the smallest emergency. If and when she's able to improve her situation she should go back and take care of the obligation, but now isn't the time.
Not having the money to pay the rent, keep the lights on and put food on the table will cause more stress than a bill collector who purchased her debt for pennies on the dollar. If she can swing $350 and still cover the essentials it's worth making a counteroffer. Otherwise, she should look at her budget and see what she can afford on a monthly basis and try to work out a repayment plan.
Is it possible she can pick up another part time job to make some extra cash? I realize jobs aren't always there for the taking, but there may be something out there that will help her get debt free even if it isn't the best job.
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