At some point ,you may be faced with dealing with a scum of the earth debt collector. Rather than being harangued via mail and phone calls , there are some simple things you can do to reduce the debt, or ,get out of the debt all together. If your credit is of no use to you , then none of the intel below would be effective.
Statute of limitations: There are some myths and truths about the statute of limitations , so it's crucial to know the lender's legal claim to sue you in each state.
1. Each state has different laws as to their statute limitations to collect on any particular type of account given to you . Some, are more than 7, some are less ,so it is important that you don't make the mistake of going to court with that in your head. The statute starts when the account is charged off . Each bank has different guidelines as to when to charge off an account, but it's usually between 180-240 days, some do it in as little as 90 days.
Let's say that the statute is 7 years(everyone seems to quote 7 ,as the fixed number)and it has expired, how do you deal with this? Well, if all else fails and you cant settle the debt, you go to court. Here's how this works for you:
If you are being sued by a lender or collection company,(which you still can be even if the statute has run out) and you don't show up to court, then an automatic default judgment is issued, you lose. Now, if you showed up ,and the statute indeed had expired, that would be called a dismissal. You are released from the debt. Give em a courtesy call to say "fuck you".
2. Dealing with the collection agency: There are two types of collection agencies: those that are contracted,(in-house,outsourced) and those that buy debt in the secondary market(Great business at one time).
Here is how this works in your favor:
Once the debt is charged off, you really do have more options. When a lender contracts with a slum-shop, there is always a 25-30% fee that the bank has to eat when the account is collected. That fee is passed on to you. There is also interest that is still accruing on the account. Plus, there are phantom charges that you would never get anyone to explain to you. You have to work backwards as opposed to the current balance to get the right amount you want to pay. The common rule is to figure out how much the account was when it was charged off by the original lender. Eg: you owed 1000(charged off amount)+250(placement fee)+8% (accrued interest)+ Phantom fees such as late fees, administrations fees, office party fees, you name it. You want to focus on the charged off amount per the date of charge off, plus the interest. This is where you negotiate from. This is where they will negotiate as well. Now most contracted agencies will take 40-70% on the dollar to settle . You are essentially trying to settle on the amount that was charged off as opposed to the amount after it was placed. The reason the bank will settle with you is tricky. Lets say they settle with you for 500.00 on your 1000.00 charge off. The remaining 500+interest is then sent to the IRS as a write off, that you are responsible for. Smart fucks. They really didn't lose anything. Make sure you get the interest waived in writing. This is why they never want to talk to you , and would rather have you deal with the agency instead.
Outside agency(third party collections) :
Believe it or not, this is even better. Here is how:
When a collection buys paper from a lender or collection market pool, they pay pennies on the dollar for your account. Most people don't know this and think that a 5,000 dollar charge off, is really 5000.00.
Here is the inside stuff:The facts are that the highest amount that was paid for you account was maybe 10 cents on the dollar and that is high. You would only expect that if your account was a fresh charge off(180-240). This is called prime paper. If your account is old, (3-5 years) and nearing the statute ,it may be as low as 2-3 cents on the dollar. This is called secondary paper ,and may have been placed 2-3 times with agencies. So at tops (10 cents on the dollar),you're account is really worth 500.00 , so anything over that, is profit for the agency. This is worth knowing because the idea of taking you to court is not really what they want, since that would eat up the profits. Imagine if you only paid 1000 on a 5 k account. That is a handsome profit for the agency and they know it. This is heavy info that they would prefer the general public not having any knowledge of. Let's say you didn't have the 1k to pay in full, well that would sound like the deal would be a non -starter. Not true. Most of them will break it up into 2 payments or so, maybe 3 if you are lucky.
Get it in writing: So you have struck the deal but what does that mean?
Here ares some things you absolutely have to have from the agency prior to sending funds via certified mail, return receipt requested. A letter confirming the debt, and the amount agreed to, for settlement. A letter stating that all three credit reporting agencies will receive a correction (no later than 30 days after paying the account)on your credit the correction should read :paid charge off/settle in full. All communications will cease and information will be reported to original creditor. This is important in case the account has been recalled , or sold to another slum fuck.
You can even deal with student loans that have fallen into deep default, the same way. One catch though, Student loans that are federal have no statutes. Don't call them , volunteering information unless you are ready to do a deal. You will be garnished, and your tax refund confiscated.
FICO : Paying off a charged off account really doesn't help your FICO score, but what it will do is allow other lenders to see that you are willing to do the right thing.
For the forum brothers.
Statute of limitations: There are some myths and truths about the statute of limitations , so it's crucial to know the lender's legal claim to sue you in each state.
1. Each state has different laws as to their statute limitations to collect on any particular type of account given to you . Some, are more than 7, some are less ,so it is important that you don't make the mistake of going to court with that in your head. The statute starts when the account is charged off . Each bank has different guidelines as to when to charge off an account, but it's usually between 180-240 days, some do it in as little as 90 days.
Let's say that the statute is 7 years(everyone seems to quote 7 ,as the fixed number)and it has expired, how do you deal with this? Well, if all else fails and you cant settle the debt, you go to court. Here's how this works for you:
If you are being sued by a lender or collection company,(which you still can be even if the statute has run out) and you don't show up to court, then an automatic default judgment is issued, you lose. Now, if you showed up ,and the statute indeed had expired, that would be called a dismissal. You are released from the debt. Give em a courtesy call to say "fuck you".
2. Dealing with the collection agency: There are two types of collection agencies: those that are contracted,(in-house,outsourced) and those that buy debt in the secondary market(Great business at one time).
Here is how this works in your favor:
Once the debt is charged off, you really do have more options. When a lender contracts with a slum-shop, there is always a 25-30% fee that the bank has to eat when the account is collected. That fee is passed on to you. There is also interest that is still accruing on the account. Plus, there are phantom charges that you would never get anyone to explain to you. You have to work backwards as opposed to the current balance to get the right amount you want to pay. The common rule is to figure out how much the account was when it was charged off by the original lender. Eg: you owed 1000(charged off amount)+250(placement fee)+8% (accrued interest)+ Phantom fees such as late fees, administrations fees, office party fees, you name it. You want to focus on the charged off amount per the date of charge off, plus the interest. This is where you negotiate from. This is where they will negotiate as well. Now most contracted agencies will take 40-70% on the dollar to settle . You are essentially trying to settle on the amount that was charged off as opposed to the amount after it was placed. The reason the bank will settle with you is tricky. Lets say they settle with you for 500.00 on your 1000.00 charge off. The remaining 500+interest is then sent to the IRS as a write off, that you are responsible for. Smart fucks. They really didn't lose anything. Make sure you get the interest waived in writing. This is why they never want to talk to you , and would rather have you deal with the agency instead.
Outside agency(third party collections) :
Believe it or not, this is even better. Here is how:
When a collection buys paper from a lender or collection market pool, they pay pennies on the dollar for your account. Most people don't know this and think that a 5,000 dollar charge off, is really 5000.00.
Here is the inside stuff:The facts are that the highest amount that was paid for you account was maybe 10 cents on the dollar and that is high. You would only expect that if your account was a fresh charge off(180-240). This is called prime paper. If your account is old, (3-5 years) and nearing the statute ,it may be as low as 2-3 cents on the dollar. This is called secondary paper ,and may have been placed 2-3 times with agencies. So at tops (10 cents on the dollar),you're account is really worth 500.00 , so anything over that, is profit for the agency. This is worth knowing because the idea of taking you to court is not really what they want, since that would eat up the profits. Imagine if you only paid 1000 on a 5 k account. That is a handsome profit for the agency and they know it. This is heavy info that they would prefer the general public not having any knowledge of. Let's say you didn't have the 1k to pay in full, well that would sound like the deal would be a non -starter. Not true. Most of them will break it up into 2 payments or so, maybe 3 if you are lucky.
Get it in writing: So you have struck the deal but what does that mean?
Here ares some things you absolutely have to have from the agency prior to sending funds via certified mail, return receipt requested. A letter confirming the debt, and the amount agreed to, for settlement. A letter stating that all three credit reporting agencies will receive a correction (no later than 30 days after paying the account)on your credit the correction should read :paid charge off/settle in full. All communications will cease and information will be reported to original creditor. This is important in case the account has been recalled , or sold to another slum fuck.
You can even deal with student loans that have fallen into deep default, the same way. One catch though, Student loans that are federal have no statutes. Don't call them , volunteering information unless you are ready to do a deal. You will be garnished, and your tax refund confiscated.
FICO : Paying off a charged off account really doesn't help your FICO score, but what it will do is allow other lenders to see that you are willing to do the right thing.
For the forum brothers.
