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
Short answer
Bank of America tends to keep an unpaid card with its internal collection department at 90 days, but it does assign accounts out before charge off, and it can sell them after. Call the bank and ask who has the account now. Charge off is an accounting entry, not the end of the debt.
Key points on this page
- To find out which way your account went, call Bank of America and ask who it was placed with or sold to. If the balance was sold to a debt purchaser, that buyer may have sold it on again.
- You can also run the name of the company contacting you against the usual suspects in debt collection and debt buying, to work out whether they are an assignee or a buyer.
- Charge off is an accounting function. The debt remains collectable, and there is no FDIC insurance on charged off credit card debt. The FDIC insures depositor funds.
- Only one party should report a balance owed. If a debt buyer reports a collection account with a balance, the original creditor should show no balance owed to them.
- Disputing a valid entry is usually a waste of time and postage. A dispute works when the reporting is inaccurate, out of date or erroneous, or when the furnisher never responds to the investigation, in which case the item should be deleted.
- Debts past the statute of limitations often settle at the steepest discounts. Never let the collector know you need the account resolved for a home loan, because they will not go as low. If you are not resolving them at all, a cease communication letter, sent certified with return receipt, triggers rights under federal and state law.
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.
In 2010 we were foreclosed upon but successfully refinanced, our primary mortgage with the lender, Bank of America, who was also the owner of our 2nd, Home Equity Line (both originated by Countrywide). In late 2010, we received a 1099-A from BofA for the Home equity line (balance of $53,000).
We did not file bankruptcy, but did demonstrate insolvency for the other debts we negotiated partial payments on and had received 1099-Cs on each.
We have not filed this 1099-A with the IRS since Florida is a recourse state with a long period for collection, 5 years (I believe).
Is there any action we should take at this time or should we wait until the recourse period lapses?
Can we file an amended 2010 return and include the 1099-A, with the insolvency worksheet? Looking for guidance. We are current on our renegotiated mortgage and BofA refused payments after the foreclosure hearings on the 1st in 2010 and stopped sending us monthly statements also back in 2010. the Home Equity line shows up as ‘charged off’ on our credit report.
Thanks.
It sounds like your loan is likely one BofA viewed as part of the consumer relief side of one of their national settlements. If I am wrong on that, contact them now and see if the debt qualifies with the newest settlement they made with regulators last month. But the 1099-A suggests your loan was factored in for accounting already.
Have you connected with a tax professional, or a consumer law attorney specializing in these issues regarding your questions?
Dear Mr. Bovee,
Per your suggestion to another poster who wanted to compensate you for your generosity, I’m going to donate money or food to a local Food Bank. I’m not sure how I landed on your website but I am glad I did. You are a credit to humanity.
I have a quick question. I foolishly ended up with a judgment against me in Florida and the lawsuit was from Bank of America and LVNV Funding. They sent a “Continuing” Garnishment Writ to my employer but I’m a 1099 independent contractor so when my employer responded that Writ was voluntarily dismissed. A new law firm (Andreu, Palma & Andreu) took over the Open lawsuit and got a new Continuing Writ of Garnishment. I wanted to get this put behind me so I was able to reach an agreement for $5,600 to settle. The Settlement letter shows FIA Card Services not Bank of America and it is very brief . I’m worried that if I pay LVNV Funding the $5,600 then it may not actually settle the outstanding judgment . When I asked the collection employee about the name difference he said BofA and FIA Card Svcs are one and the same and that his phone lines are recorded so I didn’t have to worry.
Do you think I should go ahead and pay money to an attorney to file something at the court to confirm their acceptance of my $5,600 to settle this in full?
Truly appreciate your kind assistance to me and all of the other posters here.
FIA and BofA are, for all intent and purpose here, the same. LVNV is a debt buyer. Look at your credit report(s). Does the Bank of America account show a zero balance owed?
Thanks for supporting those in need in your local community. Low income legal aid offices in your area are sure to be underfunded, and are a cause I get behind for money donations.
Wow, thank you for such a quick response. I’ll also donate money to a Legal Aid Office at your suggestion. This was an old debt and it only appears as a Judgment. So you think I’m probably safe to go ahead and pay the $5,600 to Andreu Palma & Andreu and follow up to be sure they voluntarily dismiss the Writ of Garnishment and paperwork with the court to prove the Judgment is settled?
Can you recommend any collection attorneys in Tampa in case I want to be sure the Judgment gets satisfied with the $5,600?
Thank you for such a helpful website!
I sent you an email with contact information to three consumer law attorneys in the Tampa area, all with the debt collection experience you need. I would talk your situation over with one of them (they likely offer a no cost initial consult), prior to taking your next step with payment on the settlement.
Hi:
I have an interesting situation. I had a 14k cc debt with bofa that i stopped paying on in 2006. It is no longer showing on my credit report. I confirmed with bofa that they sold off the debt to a collection agency. I called the agency, they said the account was closed due to dispute and not in collections. I don’t know how to settle this old debt now that I am ready, and wonder, how do I proceed?
What is your goal with settling the debt? What is the name of the agency that has it? I can better respond with feedback if I knew the answers to those questions.
Good evening Michael. I stumbled upon this site while I was trying to research an issue I’m having with three old (5 1/2 yrs) charge off accounts. Awesome advice on here so I’m hoping you’ll throw a little my way. I have three accounts that were charged off in early 2009 that have reported every month since then on my credit report. In 2009 I also had two other CCs and an auto loan that also charged off but theyve never reported after being charged off. So Im really frustrated at the fact my credit score is barely over 6 after all this time with no negative items since and did some research and found an article at myfico.com that reads “When an OC does a CO, they must, under IRS regs, post it as bad debt on a closed account in order to take the IRS tax benefit of the CO. Then they can challenge the unpaid debt itself, by collection activities. But the account is closed, and no further monthly delinquencies can occur, or be reported.” If this is correct does this mean that they’ve been wrong in reporting this for so long and this is whats killing my score and if so will a dispute get this corrected? Also if corrected, how far back will the correction go and what effect will it have on my credit score going forward?
Guy – I am not entirely sure what the commenter on the FICO forum was trying to say. Charge off is a GAAP accounting principle first, that later turned into a credit reporting reference.
I am not sure what all is meant by the commenter from the FICO forum you are quoting, and I really struggle to understand “challenge the unpaid debt itself, by collection activities”.
Let’s start from scratch.
What state do you live in?
How many positive trade lines do you have on your credit reports right now?
Did you open up any new accounts since these older ones went into default?
Thanks for the reply! I live in NC and Ive opened up three secured cards, one two years ago and the other two 9 months ago. No missteps with any of them and have been using them and either paying off the balance or just a portion of the payment. Credit line for all three combined is around 1500. I think that what he was saying is that once the delinquency reaches the 180 day mark they are legally? required to charge it off as not collectible. Then it transfers to in house collections or sold off and that this activity doesn’t show up on the credit report, under the adverse account tab, but transfers to the collections portion of the report. I guess I’m wondering why these three keep reporting monthly delinquencies 5 1/2 yrs past the charge off date when the others didnt and if this is what is killing my score from improving. Im just reading forums from everywhere, where people have much better scores, with shorter time periods and similar credit issues. IE my TU score has gone up 13 pts in a year. EX is the exact same and EQ is wayyy below 600. Thanks for the help.
Thanks Guy, the additional details help. It is possible that BofA credit reporting is somehow stuck on stupid, and filing a dispute regarding any fresh delinquency, or monthly negative attribute, may help. You would file those with the credit bureaus and with BofA. If the picture is not clearer when those responses come back, lets go from there.
A couple of additional questions for clarity:
Do the BofA accounts show a balance owed to them still, or do some or all show a zero balance owed?
Are there any additional collections showing up from agencies or buyers on your credit reports? Is so, please post what you see with those.
Tried to send this in an earlier reply but it got cut off.
I wanted to give you a little more detail on what the report says on the Capital One account.
Date Opened: 04/09/2005
Responsibility: Individual Account
Date Updated: 07/06/2014
Last Payment Made: 01/20/2009
Pay Status: >Charged OffMaximum Delinquency of 120 days in 07/2009 and in 08/2009PRL<
Rating-C/O
Hope that helps clarify what I was talking about. Thanks again for your help. Can I send you some money for this?
I would still look to disputing any recency reporting on this debt as referenced above. Capital One has to be the most belligerent of credit report furnishers among the larger banks in the US. See this post from years ago where I cover some of the shenanigans: https://consumerrecoverynetwork.com/why-does-capital-one-hate-america/.
I am not sure what you would send me money for, as we are just openly exchanging comments on the site, but no, I do not work with consumers in any paid capacity at present. My policy for help I cannot or will not charge for is to ask you to pick up an extra bag of non perishable food when you are next at the grocery, and drop that off with your local food bank.
I wanted to give you a little more detail on what the report says on the Capital One account.
Date Opened: 04/09/2005
Responsibility: Individual Account
Date Updated: 07/06/2014
Last Payment Made: 01/20/2009
Pay Status: >Charged OffMaximum Delinquency of 120 days in 07/2009 and in 08/2009PRL<
Rating-C/O
Hope that helps clarify what I was talking about. Thanks again for your help.
The charge off is just an accounting term the creditors use. I have a similar issue with AMEX where I became delinquent in 2009. they stopped reporting for a few years and then started again in May 2014. My score also suffered a lot. There really is nothing you can do except wait it out and allow it to fall off your report. I tried complaining to the CFPB but there was nothing they could so.
Best way for you to improve your score until it falls off is to keep your credit utilization low, make timely payments on your active cards/loans, and keep your credit applications to a minimum. Good luck!
Wow! Michael, the amount of time you have spent with these other people is so awesome with a wealth of information within. I am hoping you may have some insight and advice on my situation.
I have 3 accounts marked as charged off by Bank of America & Capital One. All accounts were satisfied by their respective collectors; the collectors even removed their collection accounts off of my credit report when I sent them Goodwill letters. The problem now that I am facing is BofA and Cap One won’t budge on removing my Charge-Off’s. I have sent Goodwill letters to CapOne and I got a response from their Executive Office telling me no. I emailed the CEO of Bank of America and received a no from their Executive team as well. This is how each looks on my credit report:
Bank of America 1
Date Closed: 10/2008
Balance: 0
Current Status: Payment after charge off/collection
Description: Purchased by another lender
Bank of America 2
Date Closed: 10/2008
Balance: 0
Current Status: Payment after charge off/collection
Description: Purchased by another lender
Capital One
Date Closed: 12/2009
Balance: 0
Current Status: Payment after charge off/collection
Description: Settled-less than full balance
At this point, I do not know what to do and am hoping I have not exhausted all options. As others have mentioned, I too am looking for a Mortgage and doing my best to clean up my report as much as possible before applying.
Thank you!!
Kelvin – I wish I had some encouraging things to share that meant you could continue to try to get these negatives from BofA and CapOne off of your credit reports with some measure of hope.
You do not need these to come of your credit to get a home loan approved. What are your credit scores now?
Thank you for the lightning fast response. My credit scores range between 641-658. I know I could be approved for a loan mortgage (At least I am pretty sure) but I know I would get one of the worst possible rates possible. So I take it there really isn’t any methods I haven’t tried that even prove somewhat successful?
Kelvin – Scroll up a little from this comment to KC’s from earlier this morning. Qualified for FHA financing with a better interest rate than expected with 3.5% of purchase price down payment. All things being equal (stable employment, good debt to income etc), you may be surprised by what you can access with your scores, and an otherwise healthy credit profile (other than the charge offs showing from Bank of America and CapOne).
Hello,
Received a transfer of account from Green Tree on a Beneficial Home Equity Loan from 2007 ($28k). Haven’t made a payment since 2009 (due to 3 years unemployment and spouse on SS disability at 1/3 of previous earnings). I currently have a job that pays a decent wage, but as of 9/2/14, I will once again be unemployed and not looking forward to it. So, my question is this; How do I handle this debt collection from GreenTree? Should I request a debt validation? Should I try to negotiate for a settlement. Please bear in mind that we have no savings, no retirement, etc. We have no credit cards, just a mortgage and a car payment and a child in college. We filed bankruptcy in 2004 and have just over a year to go before it’s off our credit report. I’m concerned that with the upcoming unemployment and the knowledge that it may take me up to a year or more to get decent employment, that we may have to file bankruptcy again. Any information/suggestions would be helpful. Thanks.
Jay – What state are you in? What amount of money are you able to pull together if you were to offer a settlement?
We live in Indiana and I’m not sure, maybe $1200-$1500.
The SOL for you to be sued to collect a deb like this is 6 years in Indiana. It is very unlikely you would be able to settle the Green Tree debt for 1500 dollars.
You may indeed need to look at bankruptcy again, and can do that now since it has been 8 years since your last. You do not need to wait for the prior bankruptcy to come off your credit reports. I might wait to see if I get sued for collection before filing for bankruptcy protection. And in the mean time, things could improve enough for you to raise more money to offer a more realistic settlement.
Michael, thanks for the information. In your opinion what would be a decent offer for a settlement with GT? We would prefer not to file bankruptcy. Is there any way a person can find out just how much the junk debt buyer paid for the bad debt?
Thanks.
Jay – Try not to get hung up on what a debt collector pays for the legal rights to collect on defaulted accounts. Knowing that information is not all that meaningful to negotiations, even in the scenario where you might be able to get that information, which is in court defending against being sued.
How these accounts get resolved can vary, and the targets you would look to settle for can be impacted by local markets, your still living in the home/planning to leave, how far underwater the home is, etc.
Are you planning on staying there?
Hi Michael,
I had two BoA VISA cards charged off in Oct and Nov 2011, respectively. One card has a balance of ~$31,000, the other a balance of ~$5200. Both cards are charged off on my credit report with the full balances. I’ve contacted both the BoA collections and recovery departments, and FIA card services indicate the accounts are still owned by BoA but now handled by Trak America (31k) and Hannah & Associates (5k). My wife also had a charge off of $6700 for a BoA VISA, which I just recently settled last month with Portfolio for approximately 50%.
My credit history with Capital One, Discover, Sallie Mae and utilities are spotless and my credit score (even with the charge offs) is fair-good at 670. In the Fall of 2011 I took a new job, and my income has increased 2.5 fold from 2011 to now, and therefore I have the finances to settle the debts at ~40%.
The catch is that I want to purchase my first home in the near future – obviously getting a mortgage with the charge offs are a huge problem, even with the 670 score (even though I now earn almost 100k). The vast majority of the debt on the 30k card is interest, because (unbeknownst to me) my wife was using that BoA card to pay all of the bills until the card was maxed with principal and interest. Thus, I thought I would offer 1800 for the 5200, and then start my offer at 10k for the 30k account.
My plan was to use my savings for a down payment, but my lender is indicating that securing a mortgage in 2014 will be almost impossible until I settle the charge offs. What do you recommend – and do I have any chance of securing a mortgage without settling these accounts (my students loan balance is ~25k with a clear history)? Will settling the card account with the lesser balance have any positive impact on my score and possibility for a mortgage?
Thanks,
KC
The direction for home loans and unresolved collections has been, and continues to be, tougher underwriting standards, and requiring accounts show paid (settled for less is the same thing).
Your negotiating target balances for settling with BOA are on the lower side of realistic. If you can afford to pay 40% in a lump sum, you are ready to get the deals together.
I do not think you have a shot at getting a home loan through by just settling the smaller collection with BofA. If you are not ready to settle both, how long would it take to pull together the money needed to settle both?
Thanks for the honest opinion.
I have the money to pay off the cards now – but don’t have the money to pay off the accounts AND put down a decent down payment. My mortgage agent has forwarded my information, along with a written statement explaining the charge offs, to the underwriters. I will hear the outcome and/or recommendations later this week. My agent indicated he has never quite seen a credit report like mine (670 score with such high charge offs), so he has no idea what the underwriters will do. Also note that I said I would offer approximately 30% – I can always settle for higher, or hold my ground and play the waiting the game…
I have another question. When I ‘fell’ into this mess, BoA had severely over-extended my credit – my wife and I had more credit on 3 BoA cards than our annual GROSS income. BoA kept increasing the credit lines, and informed me (on more than one occasion) that the only way to lower my credit would be to cancel one of the cards. I was keeping the credit line open to get a mortgage, which obviously backfired when my wife used the cards to pay bills. I have taken some time to reflect on this matter, and most of my other creditors would have refused to increase my credit, because those accounts require proof of increased income to approve the request for a credit increase. Can I lodge a complaint with any agency on this matter? Yes, I take full responsibility for the debt, but (IMO) BoA should accept some liability for over-extending credit.
Lodging a complaint against BofA increasing your credit limits beyond any reasonable underwriting criteria will not lead to anything in my opinion. It would probably be a cathartic exercise though, so probably some value to it from that angle.
Let me know what you hear back from you loan officer and lets go from there.
Hi Michael,
Following up, I’m approved for an FHA loan. In essence, the charge offs prevented me from securing a traditional mortgage, but my current finances and my collective credit history with all of my other vendors allowed me to go FHA. I have since settled my BoA card with the lower balance (for 50%), and am negotiating a settlement for the higher balance. I found a house for a much lower selling price, which also allowed me to purchase a home with a monthly mortgage at ~15% of my gross income. I need to settle the last charge off to secure a traditional refinance, but this will only come into play in about 5-6 years, when I will want to drop the PMI from my monthly payment. In all honestly, the FHA mortgage has one of the best interest rates and APR on the current market, with only 3.5% down, so it’s a win-win until I want to drop the lifetime PMI (which was instituted after all of the crappy subprime mortgages and Fannie Mae/Freddie Mac chaos).
Thanks!
Great work KC! Glad you found the site, and our correspondence useful. And thank you for coming back to post an update.
Michael, I owe $1200.00 on a charged-off Kohl’s account. I was called by J.C. Christiansen and Associates and negotiated to settle for $700.00. I asked them to send me the offer in writing. They only offered to email me the offer. Would an email be just as binding as a written offer? Now that I’ve talked to them and negotiated they are only giving me 2 days to secure the offer with my checking account. They said they sent me an offer last week in the mail (which I haven’t received yet), Is it better to send a money order or another form of payment, as opposed to giving my checking account number over the phone? Thanks for your help.
If the email is an attached document, and not a the agreement in the message body, I would accept it. I would also be okay with using an ACH payment, or check by phone payment. But only if you have a written outline of the agreement, or a full recording of all of the details, and also only with an established debt collector like JC Christiansen.
Mike:
I owe a total of $63,398.22 on 3 credit cards that I haven’t paid in 6 months; all have recently been charged off. I’ve retained legal counsel for possible bankruptcy as I can’t pay them due to a down turn in my business (I’m self-employed). I may be able to make a settlement offer (I could pay off 25% of the debt). Does it make sense to wait a little longer and or have my attorney make the offer?
Who are the credit cards debts with? That answer will help me offer more complete feedback.
Credit Card Breakdown:
Alliant Credit Union VISA: $24,811.15
US Bank VISA: $23,114.56
Capital One VISA: $15,472.51
Thanks for the additional details. 25% settlements from your credit union and Capital One are probably off the table. Negotiating 25% with US Bank is no longer all that likely either. Are you looking at chapter 13, or chapter 7? Are any of these debts in the business name only and not yours?
The debts are in my my name. I’m a small sole proprietor business. I was looking at Chapter 7. They’re my personal credit cards.
Hi Michael:
I never heard back after my previous post. Any thoughts? Catherine
Sorry to have missed that Catherine. Avoiding bankruptcy is a worthwhile goal, but should you? Can you continue your business and meet your needs after the chapter 7? Are you concerned about possibly being locked out of the home loan market for 2 years? Did you intent to take out any parental plus, or personal student loans in the next 3 years?
Even settling at 25% with those creditors of yours, or debt the debt collectors that have, or will have them, you are still looking at costs in multiples over the national average for a chapter 7 bankruptcy.
You can see what happens with the attorney making the offers, but if anything over 25% is a show stopper, and there are additional costs with the attorneys efforts, I would put this behind me.
Yes I can continue my business and meet my needs after the chapter 7?
No I am not concerned about possibly being locked out of the home loan market for 2 years? And No I don’t intent to take out any parental plus, or personal student loans in the next 3 years?
CAN YOU CLARIFY WHAT YOU MEAN BY THE FOLLOWING:
Even settling at 25% with those creditors of yours, or debt the debt collectors that have, or will have them, you are still looking at costs in multiples over the national average for a chapter 7 bankruptcy.
Also, based on your final comments are you saying bankruptcy may be the best option?
Yes, I am saying that chapter 7 would be the better option based on the little I know of your situation. Mostly from the perspective of costs, but also now from credit and finance goals too (no need to refi a home loan or get a new one, no student loan needs). See this post about comparing the impact to your credit, and access to credit products, by settling debts compared to bankruptcy: https://consumerrecoverynetwork.com/credit-report-score-rating-debt-relief-programs/
National average costs for a chapter 7 bankruptcy are about 1800.00. That is start to finish, all court costs and fees. Based on your debt load, and settling with your creditors at 25%, you are looking at more than 15k in costs, not including the fees for the negotiation service. Now add that Capital One will not likely be settling for 25%, and that it is now more rare to negotiate a 25% payoff with USbank (though still possible), and you are looking at more than that.
If you learn something about how the bankruptcy will impact you that gives you pause from filing, lets dig in and find a way that settling can work for you.
Hi Michael:
A follow-up to my situation. I was sued by Capital One and negotiated a 50% settlement (payment over 4 months). I am unable to do Chapter 7 at this time as I’m making too much and have too much cash on hand with receivables. I guess having the money and the uptick in business is a good thing!
I negotiated a settlement with Alliant for 32% ($8K on a $24,800). I have US Bank as my final debt ($23K). I will sit tight on this one until I save up more cash and/or hear from them.
You are doing awesome Catherine! Thanks much for the update too.
Who was the last debt collector to contact you about the USbank card?
My last contact was with US Bank’s Collections Department back in Feb/March 2014. I advised them at that I was being represented by an attorney and was considering bankruptcy.
I haven’t been contacted by a debt collector representing US Bank yet but I’m sure I will be at sometime. I haven’t reached out to anyone at US Bank as I don’t have any funds at this piint to settle with them so I’m letting sleeping does lie (for now). I’ll start saving dollars for the last & final settlement.
It is best to lay low if there is little to no funds to access and apply towards a solution.
The reference to attorney representation in their files can create a scenario where the account is not dropped into one of their general collection buckets. You will be contacted eventually, and if not, you can reach out to them when you get to a point where you have 25% to 35% of the balance saved up.
Thank you Mike for all of your information. I do plan on resolving this as quickly as I can. Needless to say, I am nervous and I would much rather settle this than worry and wonder every day, I just needed a 2nd opinion and I am very grateful.
Yeah, I agree. In your opinion, do you think there is much of a threat of a pending lawsuit in this situation? I know there’s no way to guess. I’m trying to buy a little time before contacting them but like I said, I don’t want to push it.
Kyle – I know only what is in these comments, which is far too little. But my opinion is that you are not at risk. Having said that, I am also of the opinion you should look at resolving this as soon as possible.
OK, thank you for the advice. If you were me, would you risk continuing to “hold out”, in hopes of reaching graduation next year, before any lawsuit may develop, or would you just try and settle it now and be done?
My sense is that you want this behind you, and if I felt that way too, I would just get debt collectors and the bill behind me.
The name of the debt collector is Progressive Financial Services. My situation is that I am in school full-time and will graduate in one year, and I could really use the money for tuition. But, I don’t want to push it and end up being sued, especially for the full amount. If it seems likely that I would probably be sued by then then it might be worth the peace of mind to just contact them and try to settle instead of worrying every day between now and then.
Thanks for the additional details. I do not think your starting a dialogue with Progressive Financial Services about settling with them will cause them to sue. Just be realistic about what you can settle for, and try not to get hung up on what they pay for debt like yours. Most debt buyers do not collect a penny on 80-ish percent of what they buy. The price paid will not have much, if anything, to do with what you settle with PFS for.I would target between 30 and 50% if it were my debt (smaller balances do not often settle for the best percentages). I would not go for any payment options, just a single lump sum, and after the deal is documented similar to the prior settlement letters you received from PFS.
Hello, I have a question regarding how to handle a charged off credit card. My card has an outstanding balance of roughly $1200.00. I have received two offers to settle, with the last one being $735.00, with a deadline to respond of March 5th. I didn’t have the money at the time so I didn’t respond. I have the money now but I am wondering if I should contact them to see if they are still willing to settle for that amount or if I should hold out. I’m nervous that they will sue me and ask for the entire balance, but I’m sure they bought the debt for next-to-nothing. I know there’s no way to know for sure what their plan of action is, I just thought I would ask your opinion. Thank you for your help.
Kyle – What is the name of the debt collector? That would help me offer more than general feedback.
If you have 50 to 60% to offer in order to settle the balance now, and the account is not with an attorney debt collector who is preparing to sue, and your credit profile looks like someone whose financial situation has not yet turned around, I like your chances. Being proactive and calling debt collectors to make an offer to settle does not necessarily make you a lawsuit target. Depending on the debt collector, the opposite would be true.
I have an AMEX card I stopped paying in late 2009. The card was charged off a couple of years later. Today, I got an alert from Experian saying that my score dropped 50 points because AMEX listed the card as charge off recently. It seems to me that they are trying to Re-age the account. AMEX reported no Data for two years and not reports as Charge off killing my score. Is there anything I can do?
JR – Was there any new information that showed up on your credit report regarding the AMEX account? Something like a collection account being added? Have you viewed the credit report(s) changes? Your answers will help me offer actionable feedback.
Nothing was added other than recent Key Deragtory. i dont know why AMEX stopped reporting for 2 years and started again. It would have been better if they updated very month. I’m thinking of writing them and also contacting the CFPB
JR – That is the direction I would go, only I would call AMEX about the credit reporting issue first. Document the gist of that call in a formal credit reporting dispute you send to them certified mail return receipt. You can copy your dispute to the credit reporting agencies (send those certified mail return receipt too). That documentation will serve a purpose if you file a complaint with the CFPB. You can also just skip right to filing the complaint with the CFPB.
michael,
i filed a complaint with the CFPB against AMEX for numerous violations by their collectors such as First Source Advantage, Nationwide, & NCO. AMEX actually confirmed at least 4 Violations in their response. i have a few other instances i did not list where AMEX violated my rights. I’d like to use this to negotiate and wipe out my balance or at least reach a favorable settlement. What do you think is the best way to approach AMEX. thank you!
Who is the last known debt collector? What is the balance owed today? What state are you in?
I am in NY. balance is about 7K. last known collector is now Jaffe & Asher, a law firm collector. the SOL is 6 years in NY which I am 6 months away from since i first became delinquent in early 2009. However, NY has had a few cases where the SOL is borrowed from the creditors state which in my case is Utah (4 years)
I have to think that AMEX confirming at least 4 violations by thier collectors to the CFPB investigation has to be worth something in getting this resolved. Thanks!
You would likely fair better using an attorney to bring and FDCPA action. I can email you contact details to some with the experience you need.
AMEX has never really staffed well to handle settlement and negotiations on their own. The rely on all of the companies and attorney collectors in the collections pipeline they set up. But your attorney will be able to converse with counsel for AMEX easy enough once an action were filed, or prior to.
i would very much appreciate if if you could email me names of attorneys in NY who you might be ideal to deal with AMEX. Thank you.
JR – I sent you a couple in the city. It would be great if you were to post an update with how you progress.
Hi Michael,
I had a Bank of America Credit Card, which is reporting as Charged Off on my credit report.
Date Opened: October 2005
First Reported: November 2009
Date of status: May 2012
Credit Limit/Original Amount: $10,800
High Balance: $12,000
Recent Balance: $10,740 as of March 2014
The status states that the account was changed off. $10,740 written off. $1,545 past due as of March 2014. The item is scheduled to continue on my record until December 2017.
In the past, I have also been contacted by Gatestone Collection agency regarding the debt though I have never acknowledged the debt with the collection agency.
I’m hoping to purchase a home in the near future so repairing my credit is important to me. My question is as follows:
1.) Did Bank of America sell the debt to Gatestone Collection Agency or does Bank of America still own the debt?
2.) If Bank of America did not sell the debt, why did Gatestone Collection Agency contact me?
3.) If I pay the debt in full, will Bank of America reinstate my original credit card account maintaining my original opening date and credit limit and/or minimum remove all negative items (i.e. late payment history, charge offs, and high balance) from all 3 credit reports completely?
4.) If yes to the above, what documentation should I request from Bank of America before paying?
4.) If Bank of America no longer owns the debt, and it is in fact owned by Gatestone, what is my best course of action?
Dave. Thanks for the details.
1. Your BofA account was probably not sold to the Gatestone collection agency. Gatestone is likely collecting for FIA card services. Your comment references BofA still showing on your credit reports that a balance is owed to them. This generally means the account has not been sold.
2. Gatestone is probably calling you to try to get you to pay so that they can collect a contingency fee. Contingency debt collectors get to keep a small amount of what they collect (say 15%).
3. There is zero chance BofA will reinstate your charged off account. You could not pay them triple the amount owed to do that. Nor can you pay off the full amount and get the charge off collection removed from your credit report.
I would recommend settling the BofA debt with Gatestone for as good a savings as possible (40% is a realistic target, but you may be able to get a little lower); get the deal documented following the outline here; wait 30 to 60 days and check to be sure that any BofA reporting now states that the account has been settled, and that there is a zero balance owed.
Michael,
Great article! It was like a refresher course for me about that process. I found this article because I am having a problem with Bank of America. Two years ago, I settled a large amount of credit card debt with a number of credit card companies, including Bank of America. Since then, I have been getting my credit reports periodically to check them. Recently, I finally looked a some of the finer details of the report, especially the BofA credit card. All of the other settled accounts show a Charge Off/Failure to Pay entry in the month of my last settlement payment, and then nothing thereafter. However, BofA shows a Charge Off/Failure to Pay entry for each month since my last payment to them in April 2012.
When I spoke with them today, they said that they do not report a settled account after it has been settled, that the credit reporting bureau is in error, and that I’d have to work with them to get it corrected. However, this error is the same across all three credit bureaus. It seems to me very unlikely that all three bureaus would have the same error on the exact same account. To me, it seems very likely that BofA has some glitch in their system that may be causing this.
What is your take on this situation? Have you heard of this before? Do you have an opinion on how I should proceed to get this resolved?
Thank you very much for your insight!
Paul
Michigan
Paul – I do see issues with Bank of America credit reporting from time to time. All banks and debt collectors have some glitches in this regard.
If it were me, I would send a dispute about the issue to all 3 credit reporting agencies, while copying BofA on them too. Send all letters certified mail return receipt. Keep a copy of all letters and the return green card from mailing in a safe place. Give the the 30 days time to investigate your dispute and get back to you. The issue may be resolved once Bank of America gets a more formal credit reporting dispute communication (as opposed to customer service line getting a phone call).
If that does not lead to the desired result, the paper trail from that, along with your notes about what you were told by BofA today, and all that transpired years back when you settled with them, can and should be compiled in a credit reporting complaint with the CFPB. But lets cross that bridge if it is proven necessary.
Thank you very much, Michael. I will follow up when I have completed those steps.
Hi Michael!
AWESOME article! So, I see how much help you were able to offer some other commenters with their credit issues, and I have a few that I would LOVE some help with.
1. I had an account with Bank of America (checking, savings, and a credit card) and when I signed up, I enrolled in something called “Credit Protection Plus”. The main point of this program was to help me out incase I was fired, sick, or for some other reason lost my source of income. According to the program, in the event that loss of income occurs, a monthly payment will be waived and your account will not continue to increase, and you will not be penalized for the non payment. So, in June of 2012, I became very ill. I had to take a bunch of time off work, and in the end it was discovered that it was my workplace that was making me ill. So, when I took my first leave of absence, I notified B of A that I was sick and wanted to use my “Credit Protection Plus” (a program that I believe I payed into the whole time I had that card, which was since 2006). They sent me a form, that I filled out in its entirety, and sent back to them. Thinking that they got it and that I was taken care of, I stopped making monthly payments on my card. Well, 6 months later, they closed my credit card account as a charge off and the balance had gone from around $700.00 to $3,000.00. What on earth can I do to fix this!?!
2. A few years ago, I enrolled in classes at UNM in Albuquerque, NM. Well, I ended up leaving the state before the classes even started. I didn’t even attend one of these classes. My dad told me he would drop me from registration and all that stuff. Well, turns out dad is forgetful and a charge for a bunch of money from UNM showed up on my credit report. I tried calling the school directly to dispute it with them and they said that there is nothing that can be done. Is this true?!? I mean, I could understand if I went to the classes and failed them, but I didn’t even go!!
3. I have heard from people that medical bills on your credit report are not taken as seriously as other delinquent bills. Is this true? If not, how should I take care of my medical bill debt?
4. Last question, thank you for being so patient! I had an account with Verizon Fios because they sent me a box for cable service and I never recieved it. Find out a month later, my neighbor did. As soon as I got it, I sent it back to them and I paid them what they said I owed. The weird thing is that this account still shows up on my credit report, and as negative? Why is that? When will it show as resolved? I paid it mostly because I wanted to help my credit score (because it was a B.S. charge) and it hasn’t helped it at all.
Thank you SOOOOOO much for your help, I have been trying to find a way to fix my crappy credit for SO long now and I started to think that the light at the end of the tunnle just might be a train! I really appreciate ANYTHING you can do or tell me to help. Thanks again! : )
Kelly
California.
Kelly Anne – There are some very real concerns that are being raised about payment protection plans with large credit card issuers. What, if anything, did Bank of America say to you about the credit protection plus program after you brought it up all this time later? When is the last time you contacted BofA about the account?
It is terrible that they would still charge you even though you moved out of state and never attended a single class. I would suggest you put together a complete chronology of all that took place with the UNM student debts (dates, names, results or lack thereof). Once you have all it all put together, file a complaint with the CFPB here.
Medical debts that go to collection are… a collection. They will impair your credit, and your DTI ratios, etc. How many medical debts are we talking about, and what are the balances? How long ago were the debts incurred?
If the Verizon account was showing as a negative when you paid it, it is normal for it to now show as a paid negative (an account that went to collections but that is no longer owed). Paying the account to help your credit, with an expectation that the needle on your credit score would move, is not a realistic expectation if you have many other collections.
I live in Connecticut Mike
Thanks Leisa. An expired SOL for legitimately using the courts to collect from you can lend to different negotiation approaches. I am going to encourage you to speak with an experienced debt collection defense attorney in Connecticut about how your bank of America business line of credit is viewed for SOL purposes. If viewed as a revolving account, the SOL passed after 3 years, if as a written account, and given you said the last payment was 5 years ago (even though business closed more than 6 years), you still have at least some risk of being sued.
If the SOL is indeed passed, you have some decisions to make about settling. And if you do choose to continue to resolve the BofA debt, you could certainly be more stubborn and not agree to any paperwork they are asking you to complete.
Talk to the attorney about the language they are using that concerns you. It would concern me too. I have never seen that verbiage in a doc when settling debt with Bank of America, whether business or personal accounts. But it sounds like boiler plate language. So you could be looking at a form used for all sorts of things.
I have a list of experienced consumer attorneys you can call. Many of this type attorney offer a no cost initial consult. Would you like me to email that to you?
That would be great. I would like to contact a lawyer
Thank you for your help
Leisa
Hi Mike,
I am glad I found this site. My mother and I had a small sign business that ended for me in 2005 and two years later the business dissolved with my mother. We had a small credit line that I thought was taken care of and wasn’t informed until about 5 years ago that we defaulted and owed Bank of America. I found this out when they deducted money from my checking account. At that time I was unemployed and had no way of paying a settlement of 5,000 owed 12,000. Now I have received a letter saying I owe 17,000 with interest etc. I have spoken with the lady there and she is telling me I need to fill out confidential personal financial statement that states (this statement is submitted to you for the purpose of inducing you to extend or maintain credit to me(us) etc. I had offer her that I can close my 401k that only has 4,000 dollars and would that settle it. I am very reluctant to fill out this form. I don’t own any real estate etc but I want this resolved. Something is telling me not to fill this out.
Thank you for your help
Leisa
Leisa – Is there a judgment in the courts on the Bank of America business line of credit? If so, is the judgment against you personally, and the business? If sued on the LOC, was BofA the plaintiff?
Hi Mike,
Currently there is no judgement. The business was an LLC. Its been dissolved for over 6 plus years.
They are looking to settle but they are asking for me to fill out a financial statement and in that statement it says this statement is submitted to you for the purpose of inducing you to extend or maintain credit to me(us) whether as direct obligor(s) or indirectly as guarantor(s) or orther indirect obligor(s) of credit extended to others.
What does this really mean. It sounds if I am reapplying for a loan.
Thanks
Leisa
Thanks Leisa. I should have also asked what state you are in? Once I reference the SOL for you to be sued I can offer some more focused feedback.