Should I pay a debt collector for Advanta to keep my account from charging off?
I have been "negotiating" with Advanta for the past approx. 5 months. The collection agency for Advanta said there was a pre-approved settlement amount on file of $3100 (I now owe over $10k with the late fees, etc.) I countered with $2500 because honestly that is all I can put my hands on right now (and that will be a stretch). Anyway, they said they would submit the offer to Advanta and get back to me. When they called me back, they said Advanta ran an "asset check" on me by pulling my credit report and since I'm only late with Advanta they said they won't accept anything less than $5000!
They said they see on my credit report that there are items to which they can attach liens. We are upside down in the value of our house and there is absolutely nothing else they can attach. The collection agency said their hands are tied but that I need to pay a minimum payment of $201 to keep my account from being charged off on July 31st and to "buy some time" to keep negotiating with Advanta.
I know I don't' want a charge off on my credit, but I'm wondering what paying the $201 obligates me to. They've been asking for that since my account first became past due.
Should I pay the $201 to keep my account from charging off?
—GE
Only you can determine if paying the $201.00 that is being requested to avoid charge off is worth it. Here are some things to consider: Advanta is a month from charge off, so you are already 5 or so months delinquent in payment. This means your credit has been hammered with 30, 60, 90, 120 day late pays already.
Other than having a charge-off reported for this trade line on your credit profile, why are you trying to avoid it? If it is to avoid having the account assigned out to debt collectors – you are already dealing with them now. If it is because the perception is that after C/O is when you increase your risk of being sued – that is a legitimate concern virtually every time. But in this particular circumstance, due to Advanta being in receivership, it may be worth the risk since you cannot meet the offer they have on the table. Perhaps things become more reasonable once it is assigned to someone other than who you are speaking to now.
I will tell you that we work Advanta accounts on behalf of our members and/or guide our members through the process of DIY debt settlement with them. The roughly 30% offer you were told you were pre-approved for is pretty consistent with what I would have prepared you for if I were working with you.
Do you have the 2500.00 now? If you do, and can reasonably expect to come up with the 600.00 you are light to meet the original 3100.00 offer in the next 60 days or so – call them back in a few days and let them know you can fund 3100.00 if it can be split into 2-3 payments.
As far as challenging Advanta’s “Asset Check”. There is nothing to challenge. They did a quick skip trace and found something they want to hold over your head either as a matter of internal collection policy, or because they are a collector and that ploy has proven to be an effective collection tool.
My suggestion, if you want to avoid charge off and any additional risks associated with this unpaid debt: Contact them in a couple days, work out a deal for the 3100.00 over no longer than a 90 day payment plan. If you run into trouble come back to this post and update us in the comments section with your issues, or contact us for a consultation by clicking the Consult tab at the top of this page.
Here is to your success!
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
I have a quick question regarding a 1099-c. I have reached an agreement to settle a card at apx 32 percent of what was owed. The plan to pay is for 12 months.
Will I be issued a 1099-c on the initial charge off amount or will I be issued a 1099-c based on the final amount after my account settlement is done.
I trying to figure out not only if these settlement payments reduce my upcoming taxes and also if the form will come this year or next year post settlement
Thank you so much
The tax implication will be next year based on what you shared about the 12 month pay off on the settlement. That means you will need to be prepared for anything tax related from settling your Advanta account in April of 2018.
Tax on forgiven and cancelled debt is based on the charge off amount, and not typically on balances that are inflated by penalties and fees. But talk to your accountant about all of that.