Credit Card Settlement : Do You Have to Pay the Settled Balance at Once?
Posted on | October 21, 2009 |
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Hello,
I have talked with my financial service provider and was told that once the card debt is settled, the newly settled balance must be paid at once (lump sum). Otherwise, the settlement will be canceled.
He said monthly payment is simply not an option in case of settlement.
Is that true, that once a credit card company accept to settle your debt for lower amount and you agree, you must pay the new balance at once and you cannot make monthly payment?
I found it fish…
He told you the truth. A settlement is paid in full .
Did he also inform you that it will remain a derogatory entry on your credit report and will not raise your score. IT will in fact lower it. The debt will be listed as charged off/payed in settlement and also list the amount that was not paid.
If the amount that was charged off in the settlement exceeds $600 then they (the creditor) must file a 1099C with the IRS and also send you a copy to file with your income taxes as income (see source).
You should first check to make sure the debt is not time barred in your state. If it is beyond your state statues to seek legal action, then you could simply let it go and all they can do is hound you. Either way it will remain on your credit report for the same period of time, 7 1/2 years from date of last missed payment. http://www.ftc.gov/os/statutes/031224fcra.pdf
If it is time barred and you make any payment, then you reset your states SOL and they can seek action in court if you do not get a written contract stating the settlement is payment in full.
Any reccomendations on paying off a credit card debt of $20K ...Does debt settlement really work?
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6 Responses to “Credit Card Settlement : Do You Have to Pay the Settled Balance at Once?”
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October 21st, 2009 @ 1:20 pm
A settlement is a settlement. If the cardco said that those were the terms, then those are the terms. They do not have to wave any accumulated interest due if they don’t want to. By carrying a balance, you would be incurring new interest. Why should the financial provider agree to wave existing fees and interest only to see them be built up again?
I suggest that you abide by the terms and save yourself some grief.
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October 21st, 2009 @ 1:45 pm
He told you the truth. A settlement is paid in full .
Did he also inform you that it will remain a derogatory entry on your credit report and will not raise your score. IT will in fact lower it. The debt will be listed as charged off/payed in settlement and also list the amount that was not paid.
If the amount that was charged off in the settlement exceeds $600 then they (the creditor) must file a 1099C with the IRS and also send you a copy to file with your income taxes as income (see source).
You should first check to make sure the debt is not time barred in your state. If it is beyond your state statues to seek legal action, then you could simply let it go and all they can do is hound you. Either way it will remain on your credit report for the same period of time, 7 1/2 years from date of last missed payment. http://www.nolo.com/legal-encyclopedia/article-29792.html
October 21st, 2009 @ 2:12 pm
A settlement is an agreement. You agree to pay a certain amount in a certain manner and they agree to consider your debt paid off.
Get it in writing before agreeing to it.
Make sure you aren’t paying a debt that is older than 4 years or whatever the Statute of Limitations is where you live.
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October 21st, 2009 @ 2:35 pm
Settlements don’t always have to be paid in one lump sum. If the credit co./collection agency allows monthly payment arrangements, it’s usually no longer than 3 months. In the end, it’s the creditor’s rules you’re dealing with.
Also, paying on a debt that hasn’t had any activity for several years can drop your credit score as well. Sometimes it’s better to leave it alone if the creditor/CA isn’t actively pursuing the debt.
And if they settle the debt for $600 or more off the balance owed, you can expect a 1099C for the debt. Even if you don’t, you still must claim it as income on your taxes.
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I’ve settled my own accounts in the past. One took 3 months, a few at 20% discount in a lump sum.
October 21st, 2009 @ 3:14 pm
When they agree to let you "settle" for less than what you originally owed - then yes…. settling means you pay up in full and at once.
If they allowed monthly payment on a settlement…. wouldn’t you turn around again in a while and ask for yet another reduction and yet another "settlement"?
They already forgive a huge amount of what you originally owe and could just turn around sue you in court and get everything you owe them plus their attorney fees, etc.
Take the settlement and pay in full according to their terms.
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October 21st, 2009 @ 3:53 pm
Very much ” Yes” /one shot normally.
( If they accept as a spl case the matter will b different.)
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