Dear Steve,
I opened an account with Discover back in 1993 and had good credit with them up until 2005 when I became ill, went out on disability, spent 2 years off and on in the hospitals, became inundated with medical bills and had to make tough choices on what bills I could continue paying. My credit with Discover went downhill fast and in 2007 they officially charged off my account with a balance of $4,975 including a lot of interest and junk fees. Over time I have received multiple offers from 3rd party companies to settle for a portion of my original debt but so far I have not done this. I recently received a new offer from a company called Northland offering a settlement of $1,504 over 12 payments which at the end of this, Discover would consider my account satisfied. I am considering taking this offer but I would rather pay the $1,500 in a lump sum versus dragging this out for another 12 months. My credit reports show that Discover will fall off of them in August 2013 however I am aware that this does not mean that they will stop attempting to collect on this debt just because it is no longer listed on the report.
I have been working hard to get back up on my feet and get my family / life situated. I recently pulled my credit report and it was fairly ugly. I had a couple of past judgements against me from this timeframe when I was ill but I have paid those judgements in full, they are satisfied. There were some other errors on my reports that I have disputed. There were 12 medical bills that were listed through collection companies that I have gone ahead and paid for a “paid in full” status – those should be reflected on my credit reports within the next 45-60 days at the most,. There are 4 more medical bills that are with collectors that I do not plan on paying – they are erroneous but I have been unsuccessful in getting them removed – they will be falling off over the course of 2012.
The only item that I have left to resolve is Discover and I am not sure of the best way to do that. I do not feel it is right to just let it expire and shirk my responsibility but I would like to work with Discover versus a third party if possible…..I just feel like it might limit any future issues or confusion if I deal with them directly. What is the best way to do this? I have a lump sum of cash that I can pay once we reach an agreement on the amount. What is a reasonable settlement % for a debt that was charged off in 2007? Are there any scenarios or instances where I should not pay a debt that is this old? Is there ever an instance where they will allow me to settle and then reissue a small credit line to help re-establish my credit? How do I go about re-establising my credit now that i am paying all of these bills? I want to do the right thing now that I am able but I want to do it the right way and if possible, the most advantageous for my credit rebuilding attempts.
Any advice on how to deal with Discover as well as how to get my credit headed in the right direction when I am unable to obtain any credit cards in my own name right now would be much appreciated. I know that in order to boost my credit score, I have to have cards in my name to establish a good payment pattern going forward, I am just not sure how to accomplish this.
Thanks for your help!
Debbie
Dear Debbie,
It sounds to me like you are on the right track.
The offer from the collection agency or new debt owner sounds like a good use of debt settlement. Just make sure you do the following before settling:
- Get the offer in writing before you send any payment.
- Make sure the offer states this will satisfy the debt in full. We don’t want anyone to come back later and say they are collecting on the forgiven balance.
- Be aware you may get a 1099C for the forgiven debt. If you are not insolvent, where your liabilities exceed your assets, you may owe tax on the forgiven amount.
- If you decide to take them up on this offer make sure you send your payment by some traceable means. You will be best off having some proof the payment was received and the payment was cashed.
- Put the settlement agreement and your proof of delivery and payment in a safe place with your other important papers. You might need it years from now if someone says this wasn’t settled.
In my opinion, since you can afford the payment and have cash on hand it is a no-brainer.
The advantage of doing this is that it will end this debt and prevent it from reappearing again and again in the future as it is sold on and on to others to try to collect.
Rebuilding your credit is a simple process. Stupidly simple in fact. Here is my guide to good credit.
I have every confidence things are going to work out just fine for you.
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