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    When to settle with debt collection

    Hi there. First let me explain my situation. I have 4 maxed out credit cards. One with Lowes, Chase, Best Buy, and Paypal. Totaling about $14000. I have reached a point where I can no longer afford to pay anything on these cards and need to settle them. My wife took some money out of her 401k so we could try and settle with these cards. As of now I am current with bestbuy and chase, 2 months behind or so on Paypal, and 4 months behind on Lowes. So I decided to start with Lowes. I called and they said I would need to call a collection angency I am supposing they sold the account to. I called Allied Collections and talked to them for about an hour. After explaing my situation and offering to settle they offered to settle atr %60 which was about 3200 of my balance. It sound great but I need better. I need to be able to pay off all 4 cards with the 401k from my wife. I need to settle at at least 40% or 30% would be great. I asked them to go lower and said 60% was the lowest they could go. I asked how they got that number and basically said that is what the credit card company said. I thought they were in charge of this debt now not the credit card company. Now during the conversation I did mention the word bankruptcy and that I was trying to avoid it but if I could not settle all of my accounts it would be an options in a few months. Well after not being able to settle we got off the phone. I called back the enxt day to try again and they no longer had my account on file and told me to call Lowes. Well Lowes told me to call them! So after going back and forth 3 times I finally got in touch with the company i charge of the cards which is GE capital althouh I think they changed their name. Apparently my account had been filed as banckruptcy. I guess because because I mentioned possible banckruptcy dureing the conversation. I told the company to take that off because I do want to settle with this company. They removed it from banckruptcy status and now it is back with Allied. Any advice on my next step? Thanks! Feel free to ask for any more details.

    #2
    Originally posted by wannabeteacher85 View Post
    Hi there. First let me explain my situation. I have 4 maxed out credit cards. One with Lowes, Chase, Best Buy, and Paypal. Totaling about $14000. I have reached a point where I can no longer afford to pay anything on these cards and need to settle them. My wife took some money out of her 401k so we could try and settle with these cards. As of now I am current with bestbuy and chase, 2 months behind or so on Paypal, and 4 months behind on Lowes. So I decided to start with Lowes. I called and they said I would need to call a collection angency I am supposing they sold the account to. I called Allied Collections and talked to them for about an hour. After explaing my situation and offering to settle they offered to settle atr %60 which was about 3200 of my balance. It sound great but I need better. I need to be able to pay off all 4 cards with the 401k from my wife. I need to settle at at least 40% or 30% would be great. I asked them to go lower and said 60% was the lowest they could go. I asked how they got that number and basically said that is what the credit card company said. I thought they were in charge of this debt now not the credit card company. Now during the conversation I did mention the word bankruptcy and that I was trying to avoid it but if I could not settle all of my accounts it would be an options in a few months. Well after not being able to settle we got off the phone. I called back the enxt day to try again and they no longer had my account on file and told me to call Lowes. Well Lowes told me to call them! So after going back and forth 3 times I finally got in touch with the company i charge of the cards which is GE capital althouh I think they changed their name. Apparently my account had been filed as banckruptcy. I guess because because I mentioned possible banckruptcy dureing the conversation. I told the company to take that off because I do want to settle with this company. They removed it from banckruptcy status and now it is back with Allied. Any advice on my next step? Thanks! Feel free to ask for any more details.
    Ouch, have you tried moving the balance to 0% (or just lower) APR cards so that you won't pay as much or any interest in the meantime?

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      #3
      Yeah I basically told them I have no money to pay any credit cards and that is not going to change any time soon. I have had to borrow money from family to keep up for the past year and now paying them back leaving no money for credit cards. I know it was a mistake but me and my wife had alot of unexpected things like a baby lol. Anyway, I just want these credit cards gone. My credit score is already horrible so I am prepared to take a hit. Do you think if I give this place time they will go lower? Should I wait until there 90 days is up and it returns to lowes or gets sold to another collection agency?

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        #4
        It might interest you to learn that some debt is sold to collection for as little as 1.8 cents on the dollar (source).

        So a collection agency that bought, for example, a $10k debt from a credit card company may have paid as little as $180. So anything they can collect over that $180 is in their best interest. They have business overhead, so it may be more like $250, but you get my point: they will try to get the most out of those responsible for the debt they bought, and most will assume the original value is as low as they will go. This is obviously not the case, once you discover that they paid very little in the first place.

        So my advice would be to let the collection agencies call you, and keep giving them the same line: "I simply do not have that much money, but I have $X and am willing to settle for that right now." With a consistent response like that, they will see that they're going nowhere, and may eventually agree to your price.

        Then, get IN WRITING from them a contract that says the paper check you are mailing in to them for that amount satisfies the obligation. Make copies of everything and keep them FOREVER. Send by US mail with delivery confirmation so you can verify receipt. Never give them electronic access to your account!

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          #5
          One thing I am curious about is the way they said they could not go below 60% because that is what the credit card company told them. I tried calling the credit card company to deal directly with them but they said I had to go through Allied. And I do have 40% cash I am ready to give them. Just let them sweat I guess. And is it a big deal with the bankruptcy thing they did?

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            #6
            Just to add this, the debt collectors have not called at all today.....weird?

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              #7
              Wish you hadn't taken $$$$ from 401K.. Does your wife know the sum that will be owed to IRS for tax and penalty for early withdrawal of 401K? Plan on a large tax bill Apr. 2015

              Are you willing to sell anything no longer used, no longer needed or loved?

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                #8
                Yes we realize that we will have to pay additionial taxes on that as well as any credit card settlements. Only way we could get a lump sum to settle with.

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                  #9
                  Are you done using credit cards? It sounds like you have a vague idea as to how to get this mess paid off, but if you are aren't done making messes, then this is all a waste of time. How did you end up with so much in credit card debt and have you taken the necessary steps to make sure that this never happens again?

                  You need to raise capital. I wouldn't touch the 401K ever again, so you will need to pick up extra work. (part time job, extra hours at full time job, side work, etc.) I'd also start selling things that you don't absolutely need. Then, I'd take a hard look at where you're money is going every month. Eat out less, cancel cable, downgrade cell phone plans, etc.

                  Can you post your monthly budget so we can see it?
                  Brian

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                    #10
                    Well me and my wife only dated 3 months and had a pregnancy surprise. She already had a 3 year old as well. I am a teacher so my salary is not that great and neither is my wife. My mother gave us the down payment needed for a house. When we got the house we just felt like we could afford the credit card payments and slowly but surley ended up 4 credit cards being maxed out. We realize our mistakes and are making plans to get better. We have cut a few expenses, have started doing an envelope budget system, and have worked out a payment plan with the family members we borrowed from. We came up with this budget hoping we would have enough to also pay credit cards but we just couldnt swing it. This was the only way to get a lump sum of about $4500 which I am hoping I can use to pay off all 4 cards. A chase care with about $1600, Bestbuy $3500, Paypal $3500, and Lowes $5500. This is why I could not accept the 60%. Would leave too little to settle with the others. Normally we get about a $6000 tax refund but I realize because of the 401k and credit card settlements we will be lucky to get $1000. We sat down, looked at numbers, and came up with what we feel is the best plan. And I am confident in the plan as long as I can settle with these credit cards. We even have a plan for putting money in savings and not being able to touch it and all kinds of things. Basically we know where we screwed up and want to fix it now before it gets way out of hand and we owe $50,000 some how and must file for bankruptsy.

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                      #11
                      What is your income?

                      How much debt do you have in total? Mortgage + car payments + etc?

                      I'm guessing you are paying PMI on the home loan or maybe did a FHA loan?

                      What did you buy at Best Buy?
                      Brian

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                        #12
                        Total income each month is about 3500. Total debt including the house and cars and everything probably around $130,000. Pretty sure it was FHA. At best buy we bought electronics when we bought the house like televisions and computers and such. And then I was stupid and thought I needed a new computer every year. Like I said I think me and my wife have figured out our issues and won't get like this again but in order to start rebuilding I need to get these credit cards payed off. Just wondering what my next move with the Allied people should be. Like I said I find it weird they did not call me once today. Makes me nervous lol

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                          #13
                          My next move with the creditors would be to negotiate a settlement. They bought your debt for 30 cents on the dollar if that. Low ball an offer out there. Threaten bankruptcy if they don't take it.
                          Brian

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                            #14
                            Well tried that yesterday. Called and their first offer was 60% and I said 20% hoping to end at around 40%. But they would not budge from 60% saying that was there limit as far as going down. I asked why and they said it was based on the credit card company. And I did threaten bankruptsy and they told the credit card company to file the debt as bankrupt. Had to call the credit card company and told them I was nopt filing bankruptcy and got it sent back to allied.

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                              #15
                              Can you sell some of the electronics, televisions and things you bought and up your offer to the credit card companies?

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