A debt settlement letter as proof of a negotiated agreement is critical.
Would like two specific questions answered based on Michael Bovee's article: "When it makes sense for creditors to settle". As we all know, the last 5 years have been very rough for Americans who are in debt - the mortgage crises, job loss, out of control interest rates. I try to keep up with most debt articles on the internet and TV and I have found that most of the time, when trying to settle a debt or modify a mortgage, many times the "left hand of the bank does not know what the right hand is doing". What I mean by this is that I personally know two people who were led to believe by the banks themselves that they were "settling" a credit card debt for less than was owed, and yet they were sued anyway for the part that was not paid.
The same with mortgage modifications - the right hand might say OK when the left hand is already starting to foreclose.
I am convinced that there is only 4 ways to deal with debt: either pay it; do not pay it and face the consequences; join a credit counseling program; or file bankruptcy. I find that debt settlement either on your own or with a debt settlement company usually leads to less than satisfactory results.
My two questions would be this:
1. When you attempt to settle a debt yourself with a bank, how can you be sure that it is still not going to attempt to collect or sue on the amount not paid?
2. Is it really true that every single person will eventually be sued if they stop payments to a credit card debt?
I know people who were never sued and owed thousands and yet I personally know someone who was sued by capital one for less than $300 of credit card debt. Of course bankruptcy attorneys would like to put a scare in you that all creditors will sue so they get your case, but how many do in fact sue and what percentage of people never do get sued?
How easy is it to get debt settlement agreements in wriitng?
—vincent
The 4 options you outlined did leave out settlement. Perhaps because the very limited experience you have to draw from are where two people were later sued for debts they thought were settled, but cannot prove because they do not have a debt settlement letter to back them up. My experience with negotiated settlements over the past 16 years shows it is a very effective 5th option for the right consumer and debt profile.
What ultimately happened with the lawsuits against the two people you refer to? Have the cases been resolved?
When settling accounts for less than the balance you must first receive a debt settlement letter.
The proof of the agreement should appear on the creditor, collector, debt owners letter head. The debt settlement letter should identity the account, the debtor, the balance and the terms of the settlement agreement, and a few other items. You never fund a penny towards any settlement offer unless this letter clearly laying out the settlement agreement is in hand first. There are a handful of times over the years where a balance has been inadvertently dropped into the collection pipeline for later collection efforts. The documentation and proof of payment is then used to put the issue to rest virtually immediately.
There has only been one instance in my professional experience where the issue needed to be raised to a whole new level, and it was with Capital One. They assigned the remaining balance after the credit card settlement was completed to an attorney in the same state as one of our members and authorized filing a lawsuit in order to collect. The efforts of our member and the efforts of CRN after providing all of the documentation, including the debt settlement letter and proof of payment were seemingly ignored. We wound up having to file complaints with the Attorney General in our members state, the FTC, and the OCC (bank regulator) in order to put the matter to rest.
I have to assume the two people you are referring to that got sued did not get and keep safe a proper debt settlement letter. No document means no settlement.
Not all personal loans and credit card accounts that go delinquent eventually are sued upon.
Someone is feeding you a line of bull. The thought is ludicrous. If that were true the courts around the nation would have nothing but unpaid credit card debt lawsuits to contend with every day, and only be able to handle a small percent each year.
The actual amount of suits filed each year over unpaid debt is likely less than 10%, but the ratio will be higher in some states (even a zip code will make a difference) . There has been an increase of lawsuits for unpaid credit card debt in recent years due to arbitration mills that have been shut down.
Lawsuits are the number one reason consumers should not choose the “don’t pay and do nothing” option you mentioned. You may be able to do that for a short period of time for a specific strategic purpose, but it is ill advised long term.
For CRN, less than 2% of accounts in our system are ever sued upon. That number is likely lower than most companies in our industry due to the fact we will not work with someone unless they can project the ability to fund all offers inside of 18 months (sometimes 24 months depending on the state and the individual circumstance).
Debt settlement through our DIY settlement education and ongoing support, or through the direct negotiation efforts of CRN, has led to overwhelmingly positive results.
Correctly negotiating unaffordable debts for less than the balance owed and getting debt settlement letters to back up your success is not complicated. There is certainly a formula to follow, but it is all fairly fundamental. Anyone interested in how to perform their own negotiations and obtain correct documentation of the settlement is welcome to post in the comments below for feedback.
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.
Hi,
Thanks for all the great information! I was offered a settlement through a credit card agency and never received confirmation of the settlement. But, when I called, they would constantly confirm the amount of the settlement and how many payments were left. So I didn’t think anything of it and continued my payments like normal. My last payment would be in August. I called the agency early July this year to change the date of the next automatic payment, and I was informed that Synchrony had taken the account back and they did not know why the account was taken back, as all payments were made on time using an automatic payment method. I called Synchrony and they have no notice of the settlement and will only honor it if I can find a written settlement from the agency. I call the agency to obtain one and they inform me they cant provide any information as they do not own the account anymore. They advised that Synchrony can confirm with them. I call Synchrony back and was told that they would look into it and it would take a week for everything to transition. Two weeks later, I call back today and was informed nothing was transitioned because it is against their policy to contact another agency. They were able to obtain all other information except for the most crucial one. Lots of back and forth, and still nothing has changed.
My question is, what can I do if there was once proof of the settlement from the agency within their systems, but I don’t have a physical copy and they cannot provide me one as the account is owned by a different creditor?
Synchrony bank is honestly the most difficult and unprofessional bank I have ever come across. The customer service representatives for the account/billing related matters are all located outside of the US, have heavy foreign accents and provide scripted responses. I do not know what to do and really cannot afford to pay the entire amount. I need to find a way to prove the settlement.
I would file a complaint against Synchrony with the CFPB. More on that here: https://consumerrecoverynetwork.com/filing-complaints-with-the-cfpb/
I would include a complete chronological history of all that has transpired.