Should I settle my debt ?

[letsrun4it]

Hi guys, looking for a little advice from anyone with experience or expertise in this area.

I have some personal debt from closing a business, on credit cards, totalling $33k.

I own my house and I'm going to sell it to resolve this situation. I will conservatively walk away from my house with 200k, so paying off 33k will not be a big problem.

I am currently less than 2 months late on one of my credit cards, $10,500 of the debt is on there. I told them I'm about to list my house and I'll be able to pay it off soon. They then offered me a settlement of $4100 to pay it off now. I can come up with $4100, should I take their offer?

On one hand, I know how settling for less can affect a credit score.
On the other, it's hard to pay $6000 (and $1000+ in interest that occurs between now and then) more just to protect my credit score which will already be blown up after this situation.

 

[sgtedrobinson]

You will get a 1099 at the end of the year and have to pay taxes on on the unpaid amount. It will count as income.

 

[W8Train]

Hi guys, looking for a little advice from anyone with experience or expertise in this area.

I have some personal debt from closing a business, on credit cards, totalling $33k.

I own my house and I'm going to sell it to resolve this situation. I will conservatively walk away from my house with 200k, so paying off 33k will not be a big problem.

I am currently less than 2 months late on one of my credit cards, $10,500 of the debt is on there. I told them I'm about to list my house and I'll be able to pay it off soon. They then offered me a settlement of $4100 to pay it off now. I can come up with $4100, should I take their offer?

On one hand, I know how settling for less can affect a credit score.
On the other, it's hard to pay $6000 (and $1000+ in interest that occurs between now and then) more just to protect my credit score which will already be blown up after this situation.

Take the deal, contingent upon them reporting to all three credit bureaus that the account was "PAID IN FULL, CLOSED BY CONSUMER" which you will get in writing before handing them a check. Only pay the credit card company, and not a collection agency!!! Sarge is right, you will pay taxes on the debt forgiveness, unless you are deemed Insolvent (which I doubt you are with $200K in equity in your home).
Selling your house is a drastic move just to pay off a $33K debt, unless you want to move anyway. Housing elsewhere is going to cost you, and will it be less than the net expenses of owning, considering the after tax effect? Housing values are low at this point, and once all the foreclosures and short-sales are cleared from housing inventory, values should start to increase. I would request a Modification Package from the bank, and claim hardship. They will see that you have a recent pattern of paying late, and you can negotiate a lower fixed rate and even extend the term of the loan, drastically lowering payment. Have your attorney make sure there is no prepayment penalty clause in the modification agreement, so when things turn around financially, you can start to make extra payments on mortgage without penalty if you choose.
Regarding the other $22K in credit card debt, contact each of them, and say the magic words "I want to pay you but ........................"<fill in your situation here. Ask for them to lower your interest rate in return for regular payments. They may freeze your account, not allowing you to charge additional amounts, but your monthly payments will be much lower.
A reduced house payment through Modification, plus lower credit card monthlys, might help you to weather this financial storm and even build up a reserve. Good luck and all the best to you.

 

[richiec]

You will get a 1099 at the end of the year and have to pay taxes on on the unpaid amount. It will count as income.

Yes, you'll get a 1099 at the end of the year and you're responsible for paying 15.65% (rough guess, I don't remember the exact %) for social security and medicare (possibly some income tax also, don't know where you live). I would rather pay the $900-$1,000 "tax" than $6k. But that's just me

 

[pesty4077]

I know some will not like this, but IMO, business and personal credit should never be mixed. Businesses come and go. I had a Business producing close to 1 million a year back in 2005 to 2008, economy failed after that, but my debt is still there for this business. Is this really my fault because of a messed up economy? Why should my personal credit be ruin? I mean I had people employed and pay my bills on time before the fall.

Now, my advice is this and I been through it. I would have taken that house out of my name and then talked to the credit card companies. It is unsecure debt, what that means is they can not even do anything to you legally until they go to court. Most do not. Do you know if you filed BK, in 2 years you can have close to a 700 fico? In most states, they can not come after you after 4 years of last activity. I went through this and through a divorce and came out not owing much. I got my house reduced to 748 payments, when rent is costing 1600 in my area. I settle the second for 4000, it was 55,000. That making affordable program works if you know the system. It won't do nothing in your case, you have too much Equity.

These companies could give a shit about your credit, they only want their money. Most don't care if they screw your credit after you pay them. You need a guy who knows his shit about this. Someone who will negotiate for you. If you are lost and need solid advice, I have a guy who is my best friend, that can help you, he specializes in this. Just PM me for his info.

 

[letsrun4it]

thank you guys for some really thoughtful responses.

I want to get out from under my mortgage, this experience has taught me a lot about what I value. I'd rather have a paid off house, live within my means, not have credit cards, a car payment, anything.

I'm also engaged, and my fiance has inherited a bunch of money and I'd much rather get married with this stress and financial mess in the past. I'm not so much embarrassed about it, because I'm not broke and shit happens to entrepreneurs...but it'd rather just have it cleared up.

 

[letsrun4it]

Actually after checking my settlement offer (direct from cc company) they are actually offering me to settle 18k for 7k. If I wait until I sell my house, that 18k could be 20k.

I'm actually shocked that a cc company would offer that when I'm 1 month behind. Maybe it's because I've avoided their 20 phone calls a day (not exaggerating)

 

[Deansreturned]

Take the deal, contingent upon them reporting to all three credit bureaus that the account was "PAID IN FULL, CLOSED BY CONSUMER" which you will get in writing before handing them a check. Only pay the credit card company, and not a collection agency!!! Sarge is right, you will pay taxes on the debt forgiveness, unless you are deemed Insolvent (which I doubt you are with $200K in equity in your home).
Selling your house is a drastic move just to pay off a $33K debt, unless you want to move anyway. Housing elsewhere is going to cost you, and will it be less than the net expenses of owning, considering the after tax effect? Housing values are low at this point, and once all the foreclosures and short-sales are cleared from housing inventory, values should start to increase. I would request a Modification Package from the bank, and claim hardship. They will see that you have a recent pattern of paying late, and you can negotiate a lower fixed rate and even extend the term of the loan, drastically lowering payment. Have your attorney make sure there is no prepayment penalty clause in the modification agreement, so when things turn around financially, you can start to make extra payments on mortgage without penalty if you choose.
Regarding the other $22K in credit card debt, contact each of them, and say the magic words "I want to pay you but ........................"<fill in your situation here. Ask for them to lower your interest rate in return for regular payments. They may freeze your account, not allowing you to charge additional amounts, but your monthly payments will be much lower.
A reduced house payment through Modification, plus lower credit card monthlys, might help you to weather this financial storm and even build up a reserve. Good luck and all the best to you.

This is incredibly on point. GET EVERYTHING IN WRITING BEFORE YOU DO ANYTHING!!! NO EXCEPTIONS!!!!!

 

[pesty4077]

Actually after checking my settlement offer (direct from cc company) they are actually offering me to settle 18k for 7k. If I wait until I sell my house, that 18k could be 20k.

I'm actually shocked that a cc company would offer that when I'm 1 month behind. Maybe it's because I've avoided their 20 phone calls a day (not exaggerating)

This is where experience prevails. Next time they call you answer them. Be nice and pretend you plan to pay the debt. Ask who you are speaking too and mailing address. Then kindly send them a certify letter, that they sign for stating you do not want them to call your personal phone number and to cease all future call and respond by mail only. By law, they are suppose to stop calling you. here is a sample letter:

 

[TheDirty]

Simply my opinion.. But you borrowed the money, you need to pay it back.

Citing a poor economy for your losses, or that you employed people and were current on your bills until - is absolute bullshit reasoning. And who gives a flip about your FICO score? It was credit that got you into this mess after all

Sell the home, pay back the money you owe, and live the rest on your days paying with cold hard cash.

 

[HammerT1]

I'm not to fond of credit card companies. I had an ex wife go into my safe and take cards that had a zero balance. She maxed those puppies out and tossed the statements out each month. In two years time I never got a phone call to my cell despite them having it. I paid back every penny and it ruined me fincially. Between that and bank somehow letting her withdraw from an account that was only in my name.
I've talked to so many people who renegoated their debt to amounts that make you go wtf! Several of our neighbors did it intentionally. I'd go for a lower amount. There people who specialize in the negoations and are damn good at it.
I get why you did it. My in-laws had a long tern client subcontract out $500,000 worth of work. In their business payment doesn't happen till 30-60 days after completion. Their client burned them after 30 years of doing this back and forth subbing out to each other. Said we're loosing everything so why should we go down alone. So sue us. Of course they left out the part where their client had paid them in full and they took the money and stashed it
In-laws turned around and only way they could make payroll was to use their credit cards. Still makes me sick.
there is a reason a lot of business insulate themselves. So the can walk away with less debt. My experiences really changed the way I feel about credit card companies. Look out for number 1,

 

[DK0223]

sorry to HJ thread, but i take it its better to pay off the credit debt yourself, rather than hiring a debt consolidation agency, which in turn would hurt your credit score?

 

[Pumped Up Ya]

sorry to HJ thread, but i take it its better to pay off the credit debt yourself, rather than hiring a debt consolidation agency, which in turn would hurt your credit score?

Hand job the thread?

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[DK0223]

Hand job the thread?

Sent from my SPH-D600 using Tapatalk 2

Lol hijack bud

 

[pesty4077]

sorry to HJ thread, but i take it its better to pay off the credit debt yourself, rather than hiring a debt consolidation agency, which in turn would hurt your credit score?

Most are no good, however there is some that specialize in this and will do better then you ever could. They would improve your credit score and negotiate the debt for you, and you can concentrate on other things, then take hours and hours to do that. They know more laws then you, like the phone call one I just stated. Most do not know that. There is other laws that would make the debt collectors backtrack their steps. It is unsecured debt, they are not going to repossess anything. That is why you need someone that knows. These credit card companies know the laws and if you don't, they will run all over you.

 

[Knight9]

Most are no good, however there is some that specialize in this and will do better then you ever could. They would improve your credit score and negotiate the debt for you, and you can concentrate on other things, then take hours and hours to do that. They know more laws then you, like the phone call one I just stated. Most do not know that. There is other laws that would make the debt collectors backtrack their steps. It is unsecured debt, they are not going to repossess anything. That is why you need someone that knows. These credit card companies know the laws and if you don't, they will run all over you.

How do you find a reputable one? I have a 10k amex bill where they froze my checking acct with 1600 in it and will be taking it after the court date that's set. I was called by the attorney trying to settle the debt and I offered 3k which was rejected. I stopped negotiating after that.

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[DK0223]

Most are no good, however there is some that specialize in this and will do better then you ever could. They would improve your credit score and negotiate the debt for you, and you can concentrate on other things, then take hours and hours to do that. They know more laws then you, like the phone call one I just stated. Most do not know that. There is other laws that would make the debt collectors backtrack their steps. It is unsecured debt, they are not going to repossess anything. That is why you need someone that knows. These credit card companies know the laws and if you don't, they will run all over you.

Well I owe a little over $4k, is there a certain amount you have to be in debt to receive help?

 

[richiec]

sorry to HJ thread, but i take it its better to pay off the credit debt yourself, rather than hiring a debt consolidation agency, which in turn would hurt your credit score?

Well I owe a little over $4k, is there a certain amount you have to be in debt to receive help?

Listen, there is no "debt consolidation" for your situation. You have 1 debt, a credit card. Debt consolidation is typically when people have multiple lines of credit with multiple payments that are consolidated into 1. These companies negotiate a payment that'll be affordable for you. This doesn't make your debt go away faster.

Read this:
The Truth About Debt Consolidation - daveramsey.com

vs

this:

DebtConsolidation.com

Pay off your credit card, stop spending money you don't have. You're bringing your issues to this thread when you've already gotten the answer you NEED in yours.

 

[letsrun4it]

UPDATE:

I ended up settling my debt thru Citi. Total of 19k settled for 7500$. First time it showed up on my credit report all it says is "Account Closed at Customer Request" and my credit score jumped 58 points. That debt would have been 22-23k before I would be able to pay it off so that was huge for me.

 

[M_T Pockets]

LetsRun you will have one less thing to lose sleep over.