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  1. #1

    Default How to Settle Your Credit Card Debts

    My question involves collection proceedings in the State of: PA

    Hi everyone. I owe about $20,000 on 3 credit cards and have decided to pay them off using money I received from an inheritance. I know several people who were able to successfully settle their debt for less than they owed. I am not in collections and all my accounts are current and have been making monthly payments on time. Even if I could save just a few hundred it's worth it in my opinion to try and lay less. Some of these balances are over 5 years old and have been making minimum payments that whole time. I understand any debt forgiveness must be accounted for as income on my 1040. Any advice? Thanks.

  2. #2
    Join Date
    Mar 2013
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    18,340

    Default Re: Settling Credit Card Debt Advice

    Quote Quoting Mr.Fix_It
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    Some of these balances are over 5 years old and have been making minimum payments that whole time.
    You've been making minimum payments on all the accounts?

    You're not in default on any of them?

    If yes to both questions you can forget getting a discount. The credit card companies will be happy to collect minimum payments forever.

    Oh, you can certainly call up and ask, but don't count on it.

    You would have to default, get your credit trashed, have the balances grow with their attorney fees, risk getting sued, before they are likely to consider any settlement.

    If you aren't in default, just pay them off, start fresh with no credit card debt, and learn some credit card discipline so you don't fall into the same trap again.

  3. #3

    Default Re: Settling Credit Card Debt Advice

    Good advice. Yes I'm current on every account. Never missed a payment. My FICO score is mid 700s as well so I don't want to trash my credit, default for 180 days or however long it takes for them to be willing to settle for less. More I think about it I'm the ideal card holder. Rack up a debt I can't afford in a timely manner and pay the minimum on time every time - why would they help me pay it off and lose all that interest? No leverage.

  4. #4
    Join Date
    Oct 2006
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    16,474

    Default Re: Settling Credit Card Debt Advice

    Quote Quoting Mr.Fix_It
    View Post
    My question involves collection proceedings in the State of: PA

    Hi everyone. I owe about $20,000 on 3 credit cards and have decided to pay them off using money I received from an inheritance. I know several people who were able to successfully settle their debt for less than they owed. I am not in collections and all my accounts are current and have been making monthly payments on time. Even if I could save just a few hundred it's worth it in my opinion to try and lay less. Some of these balances are over 5 years old and have been making minimum payments that whole time. I understand any debt forgiveness must be accounted for as income on my 1040. Any advice? Thanks.
    I am going to disagree with some of the other posters. I have quite a few tax clients who have negotiated credit card settlements even when they had not missed any payments and were still in good standing with the credit card companies. It certainly would not hurt to try.

  5. #5
    Join Date
    Mar 2013
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    18,340

    Default Re: Settling Credit Card Debt Advice

    Quote Quoting Mr.Fix_It
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    Good advice. Yes I'm current on every account. Never missed a payment. My FICO score is mid 700s as well so I don't want to trash my credit, default for 180 days or however long it takes for them to be willing to settle for less. More I think about it I'm the ideal card holder. Rack up a debt I can't afford in a timely manner and pay the minimum on time every time - why would they help me pay it off and lose all that interest? No leverage.
    Though it couldn't hurt to ask I can't imagine any credit card company doing it. They are making 10% to 15% interest on the $20,000 they loaned you. That's $2000 to $3000 a year while you pay minimum payments that barely reduce your balance. Why on earth would they say "OK, give us back $15,000 (or whatever) and we'll call it quits?

    Go ahead and pay the balances off ASAP. The sooner you do that the sooner your bank account starts growing with money you don't have to send to the credit card companies.

    If you still have any of your inheritance left after that and you have a car loan I suggest paying that off, too.

    Paying interest is flushing money down the toilet. The lenders love catching it at the other end of the drain.

  6. #6

    Default Re: Settling Credit Card Debt Advice

    Quote Quoting llworking
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    I am going to disagree with some of the other posters. I have quite a few tax clients who have negotiated credit card settlements even when they had not missed any payments and were still in good standing with the credit card companies. It certainly would not hurt to try.
    Do you have any tips or suggestions to increase my odds?

  7. #7
    Join Date
    Jan 2010
    Location
    New Jersey
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    3,666

    Default Re: Settling Credit Card Debt Advice

    Quote Quoting Mr.Fix_It
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    Good advice. Yes I'm current on every account. Never missed a payment. My FICO score is mid 700s as well so I don't want to trash my credit, default for 180 days or however long it takes for them to be willing to settle for less. More I think about it I'm the ideal card holder. Rack up a debt I can't afford in a timely manner and pay the minimum on time every time - why would they help me pay it off and lose all that interest? No leverage.
    If you settle for less then what is owed, you will still hurt your credit rating as the card company will report to all credit bureaus that you settled the loan for less then what was owed.

  8. #8
    Join Date
    Oct 2006
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    Default Re: Settling Credit Card Debt Advice

    Quote Quoting Mr.Fix_It
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    Do you have any tips or suggestions to increase my odds?
    No, I do not. I simply know many clients who did so. None of them indicated that there was any particular complexity to it either.

  9. #9
    Join Date
    Oct 2014
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    8,238

    Default Re: Settling Credit Card Debt Advice

    Quote Quoting Who'sThatGuy
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    If you settle for less then what is owed, you will still hurt your credit rating as the card company will report to all credit bureaus that you settled the loan for less then what was owed.
    And the discharged amount may be taxable income, so be prepared for that if you settle these debts.

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