Bank of America – Settling My Charged Off Credit Card and Debt Collectors
I do have some knowledge of credit repair/collections/debts, etc, but I have some specific questions that I don't have answers to and there is a disconnect that happens in my mind when I begin trying to figure out where they truth actually is with respect to collections/charge off procedures, etc. I want to take the necessary steps to clean up my credit, but there are serious issues that I am having because there was about $35,000 of credit card debt that I let go, spread over different credit cards and I don't want to make mistakes tackling this issue.
Therefore, if you don't mind, I will ask several questions:
1) Part A: When a consumer (such as myself) stopped paying a credit card account....i.e. Bank of America...and it is 3 months past-due, am I correct that at that point, it sits in the internal collections department of BofA? (I had this happen to me, but not sure if this is correct).
Part B: After this account was Charged-Off, did BofA sell the debt or did it assign the debt, and how would I know?
Part C: Since a Charge-Off is a Write-Off (and in this question - BofA), usually doesn't the bank, BofA write the ENTIRE amount off their books as uncollectable debt and get covered by FDIC for the entire amount, and if so - how then can they sell the debt to a collection company if they already got paid...or do they only sell 10% of it for (i.e. - 10 cents on the dollar for the entire amount) and get covered for the other 90%?
2) Part A: I noticed that on my report there are charge-offs and open collections. In speaking to mortgage lenders, they expressed a concern and told me that all my open collections would need to be paid if I wanted to buy a house. Are these open collections assigned by the original creditor or was the debt purchased, and what about in the case of charge-offs....if it was a write-off, how could a collection company purchase it?
Part B: (Sort of mimics part A, but slightly different) When it says "Collection" on the report, not "Charge Off", does that mean this is a newly created collection item after the sale, after the Charge-Off occurred by the original bank, or did this collection report, while this was with the original creditor?
3) How would I know when specifically to use the debt-validation tactic? (as I read your blog on backfiring and I don't want it to backfire on me)
4) Is there a point in disputing an item that is being reported by a collection agency/original creditor, if there is still a balance being reported? (wouldn't they verify it anyway?)
5) Part A: Statute of limitations normally is 4 years from last DLA date....should I wait until this expires to try to delete the item or would it not matter? (as after 4 years they legally cannot collect on it)
Part B: Is there a point in settling a collection/charge off account (if this is reporting under different collection agencies), if the original DLA expired on the original bank account, or is there no way to stop them from selling/assigning and selling again to new collections...and how can I permanently stop this process?
If you can answer all of these, you are a hero because after reading too many forums and all kinds of sources, I still cannot fully understand the truth about this and where should I begin.
Thank you for your time and I really appreciate your help in advance.
What are the pros and cons of settling my charged off bank of America credit card that is with a collection agency?
—Adrian
1a. Bank of America does currently tend to keep accounts in internal collection departments when the credit card has not been paid for 90 days. That is not always the case though. BofA can and does assign unpaid credit cards out to assignment collectors prior to charge off.
How to Find Out What Bank of America Did with Your Unpaid Debt
1b. You can find out which way Bank of America went with your account by:
- Calling Bank of America and asking who your account was placed with or sold to – just keep in mind that if your credit card balance was sold to a debt purchaser, that buyer may have sold it off to another debt buyer.
- Running the name of the company trying to collect from you against a list of usual suspects in the debt collection and debt buying world and identifying whether the company is likely an assignee or buyer.
BofA insurance claims against the FDIC for charged off credit card accounts:
1c. Where are you getting your information about banks insurance claims with the FDIC? The FDIC insures depositor funds.
Banks charge off credit card debts that remain unpaid. If they sell the debt right away or later on, they would make an accounting adjustment at that time. Charge off happens as an accounting function. If Bank of America is later paid through a debt collector they hire, or sells the debt for say 9 cents on the dollar, they adjust the accounting.
You mentioned you are somewhat confused after reading many web sites and forums. I would suggest not putting too much value into anyone of them that gave you an impression there is FDIC insurance for charged off credit card debts.
Charge Off Shows on Your Credit Report From the Original Lender
2a. In this instance Bank of America. A debt collector may report an additional entry at some point as well. If a debt buyer is reporting the collection account, the debt buyer will show a balance owed, while the original creditor would need to show there is no balance owed to them (as they sold it off). Be sure your debt balances are not being reported as owed multiple times to multiple places.
Just because an account is charged off does not make the debt noncollectable. Charge off is an accounting function. The debt remains. As mentioned above, if something is paid on the debt after charge off, the amount paid, if received by the bank, will cause an accounting adjustment.
Debt buyers purchase charged off debts. It is a practice that became popularized after the savings and loan crisis in the 80’s. They buy the debt because the bank is a willing seller. The legal transfer right is your original creditors.
It is possible to purchase a home with unpaid collection accounts. Lending standards have tightened some. It is not too surprising you are being told that unpaid collection accounts are a barrier to a home loan. The barriers are set by the lenders and underwriting standards. The underwriting can change a bit from lender to lender or even from person to person. Resolving the accounts by settling them may indeed be required though.
Collection Agency Shows Up for the Same Account on Your Credit Report
2b. Accounts below that heading are all collection accounts. Accounts that appear there are generally going to be accounts sold off or assigned out to a collection agency.
Charge off is an original creditor reporting item and would appear in the banks trade line they have on your credit report.
Debt validation is your right:
3. Requesting a debt collector or debt buyer validate sets a few things in motion.
My cautions about debt validation are generally (but not always), aimed at someone who wants to resolve old credit card debts by settling them for less than the balance owed. If you want to verify the amount owed, or that the debt collector is the proper party to negotiate with, you can do that over the phone with your original creditor.
How and when a debt validation request would backfire on someone who wants to settle a debt will be situational. There is no way to cover this caution well without knowing a great deal more about who the debt were with originally, where they have been placed for collection along the way, and who has the debt now. If you would like to provide all the details about the accounts in a comment reply below, I can get into more useful feedback.
Credit report disputes:
4. There is a point to disputing an entry on your credit report. It requires your dispute be investigated.
If that investigation turns up inaccurate, out of date, or erroneous reporting, it gets fixed. If there is no response to the investigation efforts of the credit reporting bureaus by the furnisher of the information (bank, debt collector), the item should be deleted. If sending a dispute just because you don’t like something on there, but the item is valid, it would likely be a waste of time and postage (though not always).
Credit Cards in Collection and your states SOL
5a. If the statute of limitations is past in your state, disputing collection entries for credit card bills will run into the same issues as in item 4 above.
The longer its been since a payment was made on the account your disputing, there may be a slight increase in the percentage chance you get an item removed because no one responded to the credit reporting agencies investigation request.
A balance being reported as still owed on a collection account is not going to be the only validation metric. You could have a zero balance being reported by Bank of America, and no one else reporting the account at all. That would not mean you can easily dispute away the charge off entry on your credit report.
Settling Credit Card Debts Past the Statute of Limitations
5b. If old charged off credit card debts are passed the statute of limitations for you to be legitimately sued in order to collect, and the accounts are with debt buyers and collection agencies, it may still make sense to settle them for less than the balance owed.
In your case, you are looking to purchase a home but underwriting suggest you settle the old debts before being approved. Settling debts that are past the SOL for you to be sued are often done at the steepest discounts. Just be sure you are up to the negotiations and never let on that you are trying to accomplish something other than just settling and moving on with your life. If a collector is aware you have a credit purchase or credit report need, they may not go as low in the settlement they agree to otherwise.
The shelf life of unpaid debt:
There is really not much you can do to permanently stop the next debt collector or debt buyer from getting your debt and at least making one attempt to collect from you.
Bankruptcy is probably the most thorough way to eliminate collection calls and letter, but even then, collection calls can happen.
If your debts are passed the SOL for legitimate lawsuits, and you are not going to attempt to resolve any of the debts, you can always write cease communication letters to any debt collector or debt buyer you hear from. A cease communication letter triggers certain rights under federal and state laws. It’s the epitome of telling the collection agency or debt purchaser to go pound sand. If they don’t follow the law after receiving the cease communication letter, you can pursue them for collection violations. Be sure to send the letter certified mail return receipt requested and keep the green card and a copy of the communications you send in a safe place in case you need them later.
For more information about some of the topics covered above I would recommend reading:
About Michael BoveeMichael started CRN in 2004 with a mission to provide people in need with detailed debt and credit help and education. Michael has participated as an expert panelist in federal consumer protection rule making, collaborated on state law changes governing debt consolidation, has worked as an expert witness in court matters related to the debt relief industry. He is available to speak with you about your financial struggle and helps people resolve their debt problems daily.
Hello,
I have a 40,000.00 charge off. Judgment issued in 2010, the Law office no longer has it, BOA has it, with zero debt, charged off in 2018, and I paid taxes on it that year. I’m trying to get the Judgment released in the county, to sell my house, “they said they would file it two weeks ago. They only give me faxed communication. I’m lost:(
I am not sure I understand. Bank of America sued and got a court judgment, but is no longer pursuing collection of the judgment and forgave the full balance, to the extent you received a 1099c from them and claimed the forgiven debt on your taxes. Is that accurate?
…surprised…$2000 account only 90 days past due…..was offered a 30% settlement with 90 day payments….since I’ve settled several other accounts lately, my trashed credit must have led to the lenient terms….
Let no one fear trying to do this on their own…..thank you Michael for this website and what you do….
Nice work Bill!
Hi Michael,
Thanks for the article. I am currently being sued by BoA for $4,000 in credit card debt. I did respond with an “answer” and i have a court date set. I am assuming the debt is still in house with BoA collections. But, perhaps not. If it is still in house, would I be able to offer a lesser amount, and still still obtain a “pay for deletion” letter?
Thanks Mike!
Bank of America has not sold debt since 2015, so they still own it, but they have likely assigned it to an external collection law firm who has filed the lawsuit.
You can still settle for less with the law firm.
Bank of America is not known for agreeing to pay for delete. They will update your credit to show a paid collection once your settlement is complete, and that is enough to still accomplish major credit and finance goals.
I am confused. My credit card is with Bank of America The amount is $4,000 It’s been two years and I have not heard from them to work out a deal.Why is that?
Not hearing from your bank about an unpaid debt is not completely uncommon.
You do not have to wait for something to happen, you can be proactive in reaching out to them.
You may call and learn they have it out with a collection agency, and have to resolve this through the collectors, but that is common too.
Let me know if you want help doing that.
When I looked up my credit report for Bank of America it said it went to another party. That was awhile ago. Still no word from them. I was under the impression that these other parties were cut throat….. I live off Social Security can they take money from that ?
Some collections can be, and others, not so much.
Your social security cannot be garnished, and they would have to sue and get a judgment before any extra ordinary collection actions could be attempted.
I 2 credit cards with Macys. The first a Macys Retail, the second a Macys-American Express. I was working less than full time and regular household bills, car notes, 2 dependent children in the household. I began falling behind on both accounts, due to taking g care of priorities. I called Macys both card departments multiple time, explaining my situation. I asked about a hardship program and was told no such thing and the customer service representative said I needed to be at least 3 payments behind to work out any deal – how backwards I thought. However, I did judt that! In the Interim my debts were sent to a collection/Atty office. I called that office over 5 times, left messages asked to speak with Atty to resolve the matter and explain to them as I am to you. My explanation fell on deaf ears. Finally I received an ugly letter pay or court ( was the premise of it). So I called again, spoke with a young lady told her this story as well AND she worked with me. So, now because I settled the amount it’s on my credit report. How do I have this removed. Please advise – Thank you.
Hello,
Can you provide a BOA address where a settlement offer would be presented. I can’t find anywhere…
Thank you for your time,
Charles
Mailing offers to settle your debt is ill advised. Check out this video about 3 common mistakes I see people make when they are trying to settle debt.
I just received this below in an email from Bank of America regarding an old credit card. I’m in Texas and the statue of limitations is 4 years. Does that mean they cannot sue me? Or is the “date reported” what they go by? Also, do you think its possible to contact them and ask for 20%?
“We’re offering you an opportunity to settle the debt on your charged off account ending in 0663 for $1560. The settlement amount is 29.84% of the current balance owed of $5228.00.”
This is what Equifax shows for this account.
THANK YOU!!!!
Status: CHARGE-OFF
Date Opened: 06/04/2005
Balance: $5,228
Date Reported: 12/24/2016
Amount Past Due: $5,228
Date of Last Payment: 07/2011
Date Major Delinquency First Reported: 02/2012
Date Reported: 12/24/2016
Months Reviewed: 97
Activity Designator: Closed
Charge Off Amount: $5,228
Date of First Delinquency: 09/2011
It looks like it is passed the SOL to sue (go by when you last made a payment), and that could mean you are able to get BofA to accept less than their current offer. Call bank of America and see what they say. You will want to convey that you cannot raise the roughly 30% deal the letter offered, and are limited to a nice round dollar figure closer to 20%.
Let me know how it goes.
When does something this old come off of your credit? Can they keep adding it like they just did? And if I pay a settled amount, would it help my credit score this late in the game?
They even offered me a payment plan for 12 months. I thought it was a very fair deal since they were not willing to negotiate earlier on. I will contact them and let you know what happens!
Thank you very much. I love reading your blog….I have learned so much from you.
One more question for you please. I have another credit card showing on my report that belonged to my ex-husband. I show as an authorized user. Am I able to dispute that and have it removed from my credit report? It is around the same time frame.
I would send a dispute on that if it were me.
The credit reporting for something like this currently runs up to 7 and one half years from when you stopped paying.
It is common for a credit reporting item to be updated.
If you pay a settlement today you will have the benefit of a resolved collection. This can improve your debt to income ratio, and long term, your credit scores. Do not expect an immediate bump, though that is possible.
Hi ,
I was a international student and had a credit card debt of 3k . I have left united states for some family emergency and now unable to pay the debt. I have my sister and brother in law and I don’t want them to be troubled by the bank . I most likely would never return to USA. What do i do ?
How long ago did you last make a payment on your Bank of America credit card?
I would like some advice regarding paying off a credit card debt from Bank of America for less than its value. Who should help me handle this? I have been sent a letter from a the law offices of Weinberg & associates wanting to hear from me within 30 days or it will be sent to trial I would like to clear this up asap.
What is the balance owed on your Bank of America account? Can you pull together half that amount quickly?
What other collections or late pays are showing on your credit reports? Are there other credit cards being kept current? The worse your credit looks the better in many of these situations.
Paying $365/month. Balance due is $20k w/BOA. My mother is struggling and needs a permanent place to live. I want to help her but any excess cadh is going to pay BOA. ready to pitch paying BOA and use funds to help my mother. Have 720 credit score but at this point I don’t care about the score. If I stop paying BOA, what is the worse that can happen??
You can be sued for collection by Bank of America. Can you raise around $5,000 to settle this? You have at least 7 months to do that if you are current now. That would prevent being sued later.
I rec’d notice that Bank of America has filed a credit card debt suit claiming a $14K balance. My last discussions with them 15mos ago was they wouldn’t set up a payment plan with me because as a stay at home wife, I don’t have my own W-2 income. The firm that delivered the notice of suit appears to be interested in helping to settle it. My question, do I need to engage counsel and if so, do you have any referrals in the Houston area?
Is your goal to settle your Bank of America account in a lump sum? If so, can you raise about half the amount BofA is suing for?
Are monthly payments the only option you have?
Hi, I had some questions on my debt. I had a debt with Bank of America (or, my info says, successor in interest to FIA Card Services) for around 10k. The last account statement I received was around Oct 2014. This was then turned over to a collections firm – it has gone through several collections firms since and recently (as recent as Friday) I’ve received a letter from an attorney that is now collecting on this … although, the signer on the letter says legal assistant and *not an attorney. They are now trying to collect on this.
I see now that this law firm has filed a lawsuit in the state and I will be getting served with a summons shortly.
Question – what are my options? Should I call the attorney/collections to try and settle? Any tips now on settling – what to say, what not to say? Do I ride this out with the lawsuit (I haven’t seen papers yet)? Do I call the law firm/collector?
I don’t have 10k – can’t get 10k. But in the past they hadn’t been willing to settle on this. I’d be able to offer 4k or so but don’t know if that will get me anywhere? Suggestions? Payments are not really an option for me since I won’t have any additional funds in the next few months, I’d prefer a lump sum.
This is a good dose of questions, so I appreciate your time and advice.
You can sometimes target as low as 20% settlements with Bank of America accounts that regular debt collection companies contact you about. Once your account reaches an attorney who has sued, 50 percent can be an optimistic outcome. You are close to the 50 with that 4k. Can you raise a bit more money?
If you do have the capacity to fund a lump sum settlement, you can often find the better outcome is achieved by starting off by defending the lawsuit. Read though this post about settling when sued.