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What do I need to know about paying debt collectors?

I am in the process of paying off some debt. I have taken care of all of my little debt and now am on to the credit cards. One of the debt collectors for my credit card offered a settlement. I owed $4600 and they said I can settle for $1860. They said I can do this with 4 payments of $465. I am suppose to make my first payment next week. What do I need to know/be aware of when it comes to making sure that once I pay this, it will be settled?

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Anonymous

Asked by Anonymous at 9:19 PM on Mar. 1, 2011 in Money & Work

Answers (9)
  • On your tax return for next year, the difference between what you owe and what you pay will be considered income, and you will have to pay taxes on that amount.
    rkoloms

    Answer by rkoloms at 9:22 PM on Mar. 1, 2011

  • Did you initiate the contact with the company? Just make sure they are the company that is in control of that debt and have all paperwork they send you...marking the payments made.
    CassiRae3

    Answer by CassiRae3 at 9:22 PM on Mar. 1, 2011

  • Get it in writing. Be sure that you are dealing with an authorized representative.
    tootoobusy

    Answer by tootoobusy at 9:22 PM on Mar. 1, 2011

  • Just remember that for certain things, when you settle a debt the amount that they have taken off your balance has to be claimed as income on your taxes. I had to do this with my student loans, so I'm not sure if it's the same with credit cards, ect.
    Anonymous

    Answer by Anonymous at 9:23 PM on Mar. 1, 2011

  • You'll get a 1099 for next tax season because the difference in what you owe and what you settle for counts as income. It will show up on your credit as settled for less than the balance which is decent but, not great. If they don't go by their word and settle it like they say they are breaking the law and you can sue them. When it is paid off you can get a letter saying that the agreement was settled.
    matthewscandi

    Answer by matthewscandi at 9:24 PM on Mar. 1, 2011

  • make sure you get it all in writing. the settled amount and even photocopy checks or money orders used to pay them.
    laura970

    Answer by laura970 at 9:37 PM on Mar. 1, 2011

  • Do NOT for any reason give them your checking account number and let them electronically withdraw the payment. They WILL take as much as they can from you this way, without permission. Send them a check for each payment. Get the agreement in writing BEFORE you mail off the first payment.
    slw123

    Answer by slw123 at 8:16 AM on Mar. 2, 2011

  • Get it in writing.
    tasches

    Answer by tasches at 2:50 PM on Mar. 2, 2011

  • They WILL take as much as they can from you this way, without permission.


    That is against the law and they can be sued for that.



    matthewscandi

    Answer by matthewscandi at 11:09 PM on Mar. 3, 2011

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