Short answer
Capital One is the credit card issuer most likely to sue in order to collect, and its own settlement letter says it will report a settled account to the credit bureaus as settled with an outstanding balance. Both of those facts should shape how you handle a Capital One debt.
Key points on this page
- Capital One is quick to use the courts to collect on delinquent accounts, more so than other card issuers.
- If your debt is mainly with Capital One, bankruptcy protection is worth serious consideration.
- Item 9 of the Capital One settlement letter states that if the account is settled before charge off, the remainder of the balance is charged off and the account is reported to credit reporting agencies as settled with an outstanding balance.
- Item 8 of the same letter states that forgiven principal of 600 dollars or more is reported to you and the IRS on a 1099-C. A balance that has been forgiven and settled by agreement is not an outstanding balance.
- Reporting a balance that is no longer owed falsely characterizes the trade line and skews debt to income and utilization figures, which can affect approval and interest rates on later loans.
- The coupon or free gift in a Capital One collection letter is a collection ploy to get you to call. Since this page was published, the reporting problem on settled accounts is being addressed through disputes with the credit bureaus.
My experience working with financially-challenged consumers and their creditors nationwide since the economic downturn reflects that virtually every national issuer of credit cards, even larger regional credit unions, have gone as far as they can to assist their struggling account holders. Capital One is an exception to this. How Capital One goes about settling a debt with you, their treatment of credit reporting after agreeing to reduce your balance, and the fact that they are the most likely to sue for collection, all combine for one huge exercise in caution and awareness.
Credit card issuers offer plans to reduce interest rates on credit cards through hardship plans, debt management plans, credit counseling plans, or offer balance concessions through debt settlement, which go a long way in helping their customers avoid bankruptcy. In this way (credit card payment concessions), Capital One is not all that different from other credit card banks.
Capital One, in my Experience, is Tough to Work with
Banks who are paying attention know that working out some type of arrangement with account holders, who will otherwise be forced into filing chapter 7 or 13 bankruptcy, is in their best interest. Creditors will generally offer fair concessions as a final option because they will lose the least. For more about this see: Banks Choose to lose the least.
I am not sure Capital One is paying attention.
Capital One is quick to use the courts in order to collect on delinquent accounts. They would apparently rather their account holders file bankruptcy.
I continue to encourage seeking bankruptcy protection if your debt is mainly with Capital One.
Now we have Capital One choosing to be spiteful, and perhaps illegally, with those few credit card holders they may offer fair concessions to. To see the collection letter referred to below in its entirety: Capital One Collection Letter
The coupon for $50.00 you will see in the collection letter linked above is not all that new a twist to get a delinquent CapOne credit card member to call MRS Associates (a debt collector). It is worth noting however, it is only a collection ploy and nowhere near worth taking advantage of the perceived “FREE STUFF”. The main problem I want to draw your attention and provide awareness to, is number 9 on page 2 of the collection letter.
9. Credit Reporting of Your Settled Account. If your Account is settled before it is charged off, the remainder of your Account balance will be charged off. We will then report your Account to credit reporting agencies as settled with an outstanding balance.
Fair Credit Reporting Act (FCRA) and the requirement to report only complete and accurate information to the Credit Reporting Agencies (CRA’s)? This would FALSELY characterize the trade line and SKEW any later debt to income and/or utilization formula rendering them inaccurate as well. This means that Capital One could be causing consumer’s damages post debt settlement, when they are applying for future loan products whose interest rates and even approval will be factored on a credit report that contains erroneous and false information.
Reporting a balance still due and owing when it has been forgiven would falsely characterize this trade line in your credit report. How do we know the unpaid portion of the settlement is forgiven? Let’s look to number 8 on page 2 of Capital Ones collection letter:
8. IRS Reporting of Debt Forgiveness. If we cancel or forgive $600 or more of principal on a debt you owe, we must provide a 1099-C tax form to you and the IRS. Please consult your tax advisor and the instructions accompanying your tax forms for more information.
How can number 8, indicating the required reporting of forgiven debt to the IRS, comport with erroneously reporting an outstanding balance when it has:
- Been forgiven
- Been settled for a lesser amount agreed to by both parties, thereby leaving no “outstanding” balance
If you have a Capital One story to share, especially as it relates to improper credit reporting, I invite implore you to share it in the comment section below.
UPDATE: Since publishing the above Capital One article about credit reporting and settling Cap One credit cards a couple years ago, some softening of options available to account holders who fall behind has occurred. We do still see the poor credit reporting policy on settled accounts with Capital One, but have also seen how that is getting addressed using disputes with the credit bureaus.
If you are serious about resolving unpaid credit card debt with Capital One and have other credit card debts to resolve, it is important to prioritize accounts and target the best savings with the available money you have and can project saving up in the short term. If you have an experience with Capital One collections, credit reporting, or lawsuits, please share in the comments below. If you have questions about how to handle debts with Capital One, post in the comments for feedback.
I have a judgement against me from Cap1 for $1750. The judgement was filed in 9/2010.
They tried to garnish my bank account for the full amount a couple months ago. They were unable to because my back account is federally protected (Social Security Survivor payments for my son).
I live in Nebraska and it says that a judgement can stay on your credit report for 20 years. I would like to buy a house next year. From the looks of things, I will be refused a mortgage with this on my credit report.
What steps should I take to remedy this?
Should I hunt down who, possibly, holds the loan and offer them 50%? Should I contact the courts and see who was the attorney of record and try to negotiate through them, if they are even still around. Should I contact Cap1 directly and find out what I can do? Or should I wait to buy a house for another two years and hope it falls off my credit report?
Ideally, I would really want this all settled in a year so I can apply for a mortgage.
Credit rating 648
Review this page about settling a judgment debt. You will learn what you need to know on that page. You will likely have to deal with the law firm that tried to levy your bank account recently.
The judgment does not stay on your credit report for 20 years, but if left unresolved it will likely prevent you from buying a home for that long.
I have a judgment against me for a Capital one card. It was placed on me by a Texas court in beginning of 2012. The amount of the judgment was for around 5200 however the charges on the card were just shy of 2300. The rest was fees and attorney’s fees. I was going to negotiate it for around 1k as that was nearly half of the original amount but they new law firm that has the case says it is around 12k. I was out of work that could pay my bills for 2 years. I can show them that my budget does not meet my basic necessities. However, I got a little back from taxes and would like to settle for that 1k. How might I go about getting this done. They acted like they did not want to negotiate and I do not want to file bankruptcy for this one item because I would like to purchase well before the 7 years after filing bankruptcy. Can you help?
Capital One accounts do not settle below half the current balance owed very often. That is made less likely when there is a judgment against you.
You can be approved for FHA home loan underwriting standards 2 years after a bankruptcy.
So there is nothing that can be done?
To get them to settle for as low as one thousand dollars? No, not in my experience.
I have a judgement from Cap1 on my CR from 2009.
I have tried relentlessly to negotiate a settlement.
I contacted the attorney that represented Cap1 and he has no records of this judgement. Cap1 has no records and has also issued me an unsecured card. I have tried 3 other law firms that work with Cap on litigation and no one can find any record of this judgement by the docket number or my ss number.
I cannot get this removed from my CR and the attorney who was representing Cap1 in this judgement has no records and refuses to send any letter….HELP PLEASE
Have you disputed this with the credit reporting agencies yet? If you have anything in writing from CapOne or the attorney involved that they have no record of the account, I would use that in a credit reporting dispute.
Have you checked the court record to verify that you are the person fully identified int he original summons and complaint? It may be that the filing lists a similar or identical name, but different address, or other identifier not related to you. That would help you in a credit reporting dispute too.
I would also look to file a credit reporting complaint with the CFPB, but perhaps not until I see the result of any dispute I send to the credit bureaus.
I have a similar situation, where Cap1 and their attorneys have no record of my debt, yet a Judgement lien persists. How do I get the lien removed?
The lien is from a court case and there should be an abstract of it with the county recorder. Get that and use it to confirm the court you were supposedly sued in, and get a copy of the lawsuit that was filed out of that court. Post an update when you have a copy and lets go from there.
Question. I negotiated by phone with a representative from Capital One to settle my credit card debt. I want your advice to cover myself in case they may decide not to act as promised.
I would like to do the pay by phone. I may consider also the payment option.
I appreciate recommendations.
This is what they wrote:
Dear …
I am prepared to offer you a settlement amount of $10,000 (this is not the exact amount but an approximation). If paid on 01/30/2016 by 8:00 p.m. ET, we’ll consider your account paid in full for less than the full balance.
Settling your account will prevent it from possibly being reviewed by a law firm for potential legal action. Please note, no decision has been made to sue you. If a lawsuit is brought against you in the future, you will have an opportunity at any court hearing to raise any applicable defenses or property exemptions.
If you accept theis offer please contact me at the number below to make a free payment by phone. If you would prefer to mail in your payment, write the last 4 digits of your account number on it and include the attached slip. Please allow 7-10 days for mailed in payments to be processed.
If you cannot pay the settlement amount by this date, give me a call. I have other payment options available to you. If your account is being serviced by a third party, your call will automatically be routed to them.
Sincerely,
Name,
Account Supervisor
1-800-272-9756 Ext. xxx-xxxx
P.S. A payment of $10,000 by 01/30/2016 will settle your account.
How much (approximately) is the full balance of your Capital One account?
How many months past due are you?
If you have the money to settle in a lump sum I typically suggest doing so. Paying over the phone using your normal bank account is now more preferred than alternative payment methods.
My capital one issue is not a credit card but instead with Capital One Auto Finance. I had a vehicle loan from 02/2007. Original loan amount was $42,465. I voluntarily turned the veh. In June of 2009.
Currently status on Experian shows: “Account charged off. $10,082 written off. $10,082 past due as of Nov 2015.”
Monthly payment: $0
Terms: 75 months
Recent balance: $10,082
Status Details: “The account is scheduled to continue on record until Sept 2016
On my Experian credit report Capital One has reported every month since March of 2009 “CO” with the latest reporting as of 11/15.
The loan originated in AZ I now live in NV. Both states have a statue of limitations of 6 years so Capitol One can not sue my over the Debt any longer.
I did receive a 1099 form from Capital One in the past and included it in my Taxes. It is my understanding that since the account is “Charged Off” the credit report cannot show a balance owed but instead is supposed to have a zero balance. I am confused/irritated by their monthly reporting. Equifax and Transunion both show similar reportings, however, they both show a monthly payment of $880.00 and the monthly reporting is missed payment. Is this reporting legal or is this a form of “re-aging”?
I am also perplexed on how the report shows Dec 2008 = 30 late, Jan 2009 = 60 days late, Feb 2009 = 90 days late, March, April, May 2009 = CO, and Jun 2009 as the “R” repossession date. Is it common practice to CO and account when it is at 90 days late and three months prior to the repossession?
The account item is currently investigated secondary to a dispute I have filed, however, I am wondering if the final result is the account gets deleted from my Experian report will it only reappear the following month if Capital One reports another month of “CO” for either Dec of 2015 or Jan of 2016?
I had been contacted in late 2009 by Capital One. They were attempting to collect the $10,082 amount. I informed the rep that I had made every attempt to keep the vehicle. I had asked to refinance the vehicle before the Reposession and was told by Capitol One, “we don’t refinance our own loans” to which I responded with, “but I bet you repo them send them to auction and sell them for a bunch less than is owed and eventually come back on us to get the difference don’t you.” I explained to the Rep attempting to collect the $10,082 that I had no interest in paying 10k for a vehicle which was taken from me by someone who wouldn’t work with me to keep it. I told him a $1,500 BK was cheaper than 10k for a vehicle I no longer have. I never filed a BK and have never heard any further from Capitol One.
How should I proceed from this point. Knowing that I can not be sued is why I have decided to dispute this item in hopes of cleaning up my credit score. I am aware that I could wait nine months for it to fall off but why not try to get it handled sooner if possible.
Your advice is greatly appreciated.
Thanks
Dave
It is not the case that a charged off account should only show a zero balance. The charged off balance Capital One is reporting stays until they sell the legal rights, you arrange something else with them, or it ages off later this year.
The monthly reporting does not sound like Capital One is reaging.
Review that link for more about charge off. Lenders can take the charge off account hit early, but it is not a typical practice.
I do see accounts reappear after having been removed as the result of a dispute, and not just with Capital One.
If your dispute results in a deletion it will be an oddity given what you have shared. Nine more months is not too much longer to wait.
I actually can’t file bankruptcy because I don’t have the money. I haven’t actually been sued yet, but I just received a letter from Capital One stating that they are suing me and the papers are being filed with the court.
My income is from Social Security and I am 66. As far as I’m concerned, they can slap a judgment on me. You can’t get blood out of a stone. They can’t take anything out of my bank – there are requirements as to how much has to be left in a bank account before they take anything, and mine doesn’t meet the minimum.
I am presently paying my other bills with my Social Security money but unfortunately I could not keep up the payments with a couple of credit card debts that are the result of a failed business.
I figure I’ll lose in court and they will slap a judgment on me and want me to pay court costs and all I can say is, it’s not happening.
Sometimes it just is what it is.
Do you have any assets, like a home, that Capital One can put a lien against? What state are you in?
New York state, and no, I don’t have a home or car. I presently live with my family, but the house is in my sister’s name. I do have a tiny stock portfolio of about $300 – it was more but I had to sell some of it.
I have received letters from other credit card companies, and two companies sent me documents to answer, which I filed with them and the court. I never received any followup documents or a summons or anything. Each time I receive a letter from a card company, I write and inform them I am on social security – it’s a standard letter.
What I received from Capital One was a letter saying they’re going to sue me and have forwarded documents to the court, which my sister (a paralegal) says is basically the same as what I have received previously from other places. So I am just waiting for the ax to fall on all of these.
You just manage your affairs knowing the creditor and debt collectors are out there. If your situation changes you will want to look at resolving debts. Post an update if you need any feedback about Capital One, or any other account that went delinquent.
You are way ahead of this by being informed, and also by being responsive to the collection process, even when there is no way to resolve the debts.
thanks for all your advice – I will post back if anything transpires – eventually it will. Regards and happy new year.
I want to pay an old debt from capital one credit card. I do not know who to contact because I believe it past to a collections office. Please let me know what I can do.
I would first call Capital One and ask who they have placed the account with for collection, or if they sold your account, who to. If they can resolve the debt with you directly they will, but if they have it out with a collection agency or sold it, they can’t. You would then call the current collector to resolve the debt.
How much is the balance owed?
When did you last make a payment to Capital One?
Post a reply with your answers and I may be able to offer more feedback.
I owe Barclay bank $5941.94, Synchrony bank, 2118.34, Capital One $4772.23 & Prosper loans 5659.00 which was just written off 12/4/15. Do you think I can gat a better rate by negotiating hardship with collection agencies or the banks themselves. I already know what level I’m up to (3 missed payments ea.) I went from full time to part time due to disability & now receiving SSI. Just got a hardship offer in the mail & decided to look up company, NDI in Texas, to no avail and came across you site. Thanks, Looking forward to your response Frank M
Are you looking to set up lower monthly payments or to settle for a lump sum pay off (for less than the balance owed)?
Hi Michael. I have a question regarding my capital one credit card debt. I have a balance of $5548.00 that I haven’t been making any payments on for almost 6 months. I received a letter stating that my account will be charged off by 12/9 and I need to contact them and make a minimum payment by then. I called Capital One hoping they could negotiate with me and lower my interest rate. They said they couldn’t lower my interest rate. They said I would need to pay $988 by 12/9 and then make my normal monthly payments which will get me no where or just make my usual minimum payment of $150 and somehow catch up. The last option was a settlement but it wasn’t good. It was to make 2 $150 payments then the 3rd was $4950 which is basically paying what I owe anyways. I was hoping to pay about $3,000 by February. Is it easier to work with cc company or better to wait until its charged off in 2 weeks? Who will work with me more to pay less and have my cc debt gone?
Do cc companies or the company your debt is charged off to work with you more in paying a lower settlement amount?
Typically settling Capital One accounts will be at the same rate with the bank or with a debt collector they place the account with. Settlements on Capital One accounts do not tend to go below 50% until they are years old, and Cap One sues a lot, so it is better to knock smaller balances down than wait for some better deal that may never come.
Given they are not open to going lower, and your not have the money to agree to the higher amount, the choice to wait and see what you can get a collection agency to agree to is being made for you.
Capital One started selling some accounts again recently. If yoru account is sold you have a chance of settling for less than 10 percent depending on who buys it.
My husband has a capital one judgment against him that was filed in Minnesota back in 2009 for $1200. We are now trying to buy a home and cannot get an FHA home loan due to this judgment and were informed we needed to pay first. I can’t pay until tax time and our lease ends in March. If I pay them in Feb., how soon can this be fixed on my credit report so I can proceed with a home loan? What steps do I need to take? I am terrified we won’t have a home because we can’t continue this lease. Thanks for any help.
I would look to settle the CapOne judgment for 50% of the balance. Be ready for the balance to be more than the 1200 dollars from 2009 due to judgment interest. Most states cap judgment interest, and Minnesota’s is low, but needs to be factored in your savings.
Once you negotiate a deal and pay it you are looking for the satisfaction of judgment to be filed in the court. That can sometimes be a matter of days. The loan officer can typically help push your loan through after that.
I had three Capital One cards all small li mimics 300-700 one Orchard $320, 449 charge-off, Capital One Secure card, closed, with 120 days late.. Orchard was great prior to Capital One, I was paid up on both, when my bank card I used to pay with was stolen and I had some other bumps. Basically they racked up fees on the card, recorded late payments then closed both. Secure is marked closed by customer, which I did not, they bled fees and closed secure card. I called to stop the charge off process with phone rep but they really did not go any ware. I had purchased disputes with both and thought they were both in good standing, until it was too late. Is it possible to send proof of bank holds to get these accounts back in good standing? Who do I contact, the phone reps did not seem to want to assist in the least, but ironically invited me to apply for another. Capital One Card…. This company seems to ruin credit to assure they are the only bank that will steal your money. BoA and other banks wont issue a card or loan. Employment is also impacted as finical institutions and companies partner companies see any charge-off or outstanding account considered a risk.
Dish and Jared also have open accounts I need to address.
Goal
Eliminate Negative Entry – Entire Entry
DISH – Call to “Request Delete Record” Goodwill Letter
JARED – Goodwill Letter- “Request Delete Record”
Captial One – Goodwill Hardship Letter – “Bank Hold Letter” “Reverese Charge-off and Reopen Account”-“In Good Standing”
Captial One – Goodwill Hardship Letter – “Bank Hold Letter” – “Delete Record”
Orchard-Captial One – Goodwill Hardship Letter – “Bank Hold Letter” “Reverese Charge-off and Reopen Account”-“Good Standing”
Orchard-Captial One – Goodwill Hardship Letter – “Bank Hold Letter” – “Delete Record”
Your advice is appreciated, Sean
Did all of this go down with Capital One 4 months ago? What conversations have you had with Capital One up to now, and what were the results of that? Have the letters been the only effort at communication?
Michael,
Went through difficult times (economy, health issues) in 2008-2009. Lost home, savings, 401k, and accumulated credit card debt (2) Cap 1 cards for @ $3300 and $4500., and Chase Bank $4400. After losing home in Florida, moved back to Ohio with family util 2012, when health issues resolved, and I received SSDI. Have since moved back to Florida to retire. All (3) credit cards went to default judgments in Ohio municipal court in 6/2011, as I was unable to address the issue at that time. Trying to ‘clean-up’ some of my credit issues now, so that I can move forward with my life, but between these judgments, and IRS problems for the same period, it is all overwhelming. Tried to make a minimal settlement offer to Cap 1, but only received a standard form letter directing me to call their collections dept to make arrangements for payment.. SOL in Ohio is 5/2018, but afraid that they will only refile. I hate to file BK just to move forward. At this point, I can’t finance anything.
Any suggestions ? Thanks.
You will likely need about half the balances owed on the judgment as of today to have a shot at settling with Capital One. Is that way out of reach? Chapter 7 bankruptcy could run as little as 1500.00. Review this article about consulting with a bankruptcy attorney. It will help you if you go that direction.
If you do determine that settling is the right way to go, than calling to negotiate the deal and then requesting it in writing is the best way to reach your goals.
Hi Michael,
I signed up with LexingtonLaw to facilitate with my credit repair. I recently disputed, rather, requested to CapOne validate debt I’d had with them. I was cognizant I had 2 past accounts with CapOne that I neglected. But part of the default settings for LexingtonLaw is to dispute all negative entries. In any event, the debt was validated by CapOne. They stated the debt had been transferred to a collection agency, for whom will be reporting on my credit, In addition to CapOne verifying and validating the debt, they’ve also decided to report negatively on my credit, as of last week.
I’m trying to do my best to repair my credit and avoid all negative marks by any means necessary. Is there anything I could do to have CapOne stop reporting negatively as they don’t have the account anymore? Any advise would be greatly appreciated.
Regards,
Jay
If your Capital One account is showing accurately there is little to be done other than resolve the account (if that makes sense with your goals and ability).
Did Capital One sell the account, or send it out for collection?
received papers saying I was being sued by Capitol one for a credit card from 2 years ago. The amount is $1150. Should I contact the law office and try and make a settlement and set up payments. I get really nerves over these kinds of situations and don’t want to sound like a babbling idiot. We are in a much better financial situation right now and for the next month could easily make payments of $250. I just want to be done with this in a quickly manner. So I can be done with this stress and back to focusing on my family.
Thanks for your help,
Misty
Can you afford to pay half-ish of that amount in order to settle it for less and be done with it? That is often better than signing an agreement to make several payments over time. It can sometimes mean the difference between having a judgment on your credit report.
I MICHAEL
I reply from other forum.
I have this same problem with cap.one. After settled Now reported closed – derogation outstanding balance but they sent me a 1099C. And I pay as agreed to by both parties. Ihave a letter showing that the account has been settled.. I can prove i made the payment by the date that was set up for the settlement amount . Please help.. I don’t know what to do now.
Are you saying you paid the settlement that was agree to by Capital One in writing (they agree to accept less as payment in full), but they are still reporting a balance due on your credit reports?
If that is what is happening I would file a credit reporting complaint with the CFPB. Please post an update to this comment thread when you know the result of that.
You said to reply here (From the other forum)
Update…
Capital One on my credit report. was paid /Settled less of full balance…… but. it says closed/Derogatory, why?,Should it say Paid (Closed).,??? It was paid by agree settled and they sent me a 1099 which I put it in my taxes…
It is normal for Capital One to show as a closed account and as a derogatory item on your credit reports. Nearly any account that goes without the contracted minimum payment will show as a negative with the credit bureaus. If an account goes several months without payment it will end up closed by the credit issuer.
capital one claims federal law says they cant settle for less then half the balance 150 days old should I wait for charge off
This Capital One debt collector misspoke, hasn’t a clue, or something else entirely. There is no federal law that I know of that prevents Capital One from settling for less than 50% before or after charge off. There is only a Capital One rule that prevents the collectors accepting less than half the balance as a settlement.
Why are you under the impression that Capital One will settle for less than half?
Hi Michael,
I talked with Capital One via phone today regarding Debt Settlement. I have not made payment since, 11/25/14, called today to negotiate. They first offered 65% then went to 50%. Financially, I would love to try for 40% as financial times are very hard for me at this time. I am getting money from family as is now to repay this. My balance is 18749.40. I am sure it was $17K+ at last payment. So there are fees and interest added I suppose? Is this okay? They wanted to settle on phone and then mail me agreement. I would prefer to have agreement faxed before payment on phone. I would prefer to pay with a cashier’s check via mail, so they don’t have any account info. I have read everything you have written multiple times. I am so afraid I am leaving something out and will not be free of this debt. I also know I am going to be liable in taxes for the difference in the settlement. Do you have any idea of what percentage I can expect to pay for that difference? i was thinking 30% minimum. I also didn’t know if I was only liable for Federal taxes or state also? I know you are not an accountant, but thought maybe you had experience to answer this? I am scared to death I am going to miss something! I do have access to a fax machine. I thought if I paid by a debit card via phone, I could then cancel that card and request a new one (bad idea?) Michael, I want to thank you for this website. Your info has been so valuable to me. I appreciate any advice you can give me to get rid of this forever and if you have any idea what my tax liability is in $ amount on the forgiven debt. Also, if I should/could pay early in payments in estimated taxes. I have read you settlement documents. They are dated 2013 and I was afraid maybe some things had changed since then. Sorry to ramble. Thanks again my friend!
The fees and interest added to your original balance can be traced back to your agreement. Most often you see monthly late fees of around 35 dollars, possible over limit fees of 40-ish dollars, and starting in month 3 of missed payments, upwards of 30 percent default interest.
The inflated balance is normal.
Today’s trends are still for 50% settlements with Capital One. Holding out for 40 percent is only something I would do if you just have no way to come up with the extra money to settle for half.
I do sometimes coach people to accept the settlement and set up payment over the phone, but have the payment date be a week or 2 in the future, so that the settlement letter from Capital One has time to get to you. It is also why I prefer folks use a different bank account to pay the settlements with. That way you only transfer the money to your special settlement fund when everything is in order.
Having said that, I also encourage you to call Capital One and record the phone call. Tell them you are recording and why. Cover all the details you need to with them, and save that recording until you get the letter, and then still keep it saved. If anything goes wrong, you have all of that to back you up in your complaint to the CFPB that should result in a pretty snappy fix from Capital One.
In other words, all the fear and risks of yesteryear about paying settlements and dealing with legitimate debt collectors, while still valid, are not the worry they used to be.
You may not even have a tax liability from forgiven debt. Read through that critical report and use some of the IRS docs I link to, or create your worksheet full of assets and liabilities. That should give you a good clue of how much you may owe in taxes next year. If you pay a state income tax, that could certainly become part of the equation, but you should talk to a tax pro once you have all your figures together.
Nothing about our current discussion has changed much since 2013, other than the CFPB has since further proven they are great advocates for consumer if you experience any Capital One snafu, payment or otherwise.
Thanks so much! I’ll update if I have any info that might help others.,
I have an account with capital one that was charged off 4 years and 8 months ago. They are reporting EVERY month a $1,744 balance on a card that had a $500 limit. The charge off amount is showing $1,471. There was never a judgment filed on the account. I offered a written settlement, and they wrote back asking me to call. When I called, they only stated that they could not offer a settlement, and that they were not currently actively collecting on the account. They also stated that a 1099 had been sent (which I have never gotten), and that any payments made would be strictly voluntary. I inquired about what the balance is, and what amount was forgiven, and was told that information couldn’t be disclosed, just that any payments made are strictly voluntary. This is the ONLY negative on my credit report, and It is absolutely killing my score due to showing that the credit limit is exceeded. What is my smartest and most reasonable plan of action?
Capital One being the only negative on your credit report, and being that it is nearly 5 years old, it should not have that big an impact on your credit reports, unless your reports are thin to begin with. How many accounts are showing on your reports total?
Hi ,
Capital one took me to court through a 3rd party collection agency and loss. The court dismissed the case with prejudice but they just sent me a 1099c for cancellation of debt. Should I have received a 1099c for a case that was dismissed? If yes, is this taxable?
Thanks
If the debt was yours, yes they can send the 1099c. The courts decision would not preclude Capital One from following IRS guidance on cancelled debt.
Cancelled debt is considered income for tax purposes, but that does not necessarily mean you would owe tax on cancelled credit card debt.
Thanks for your reply.
So they used a 3rd party collection agency to take me to court, they loss because they could prove the debt was mine but I have to pay taxes on debt that the court through out? Please clarify how this 1099c is valid? why would I pay taxes on this if the debt wasn’t determine in court to belong to me?
If I fill out the insolvency for, wouldn’t that reduce other credits that might already be given credit for?
Did you have a Capital One credit card that you used to make purchases for goods and services?
If you did, and you failed to pay the principle balance owed that was in excess of 600 dollars, the IRS considers that income if it is cancelled/forgiven. The link in my comment immediately above provides more details. You would want to talk to a tax professional about how the insolvency rule will apply to other tax credits.
Hi Michael,
I had informed Capital One that I could not pay on credit card debt until a future time because of extenuating financial circumstances. It was my intent to resume contact with them when I could get my head above water to pay on this debt. To my surprise I received a 1099-c in January of 2014 cancelling $5,223.59 of the $6,415 credit card debt on 12/31/13. I dutifully filed the 1099c with my 2013 federal income taxes as income and paid appropriate taxes on this amount. I, like everyone else was shocked to see that that are reporting my account as charged off to the three credit bureaus but also reporting that I owe $6,514. I have done the appeals with the credit bureaus and had the account corrected but of course the next month it is showing that I owe $6,514. In fact, I spoke with a representative (devil’s advocate) with Capital One and had a go around with him about the unfairness of this punitive practice. I knew this would happen when I told him that Transunion was reporting zero owed on the account and how can Experian and Equifax reporting I owed $6,514. Of course he made sure that Transunion now reports that I owe $6,514 as is also shown on Experian and Equifax. So he obviously didn’t like me challenging him.
My question is that is it worth negotiating with them to pay on this account and have them send a corrected 1099c? I want to improve my credit score and this keeps knocking it down. At the same time I don’t want this ruthless corporation to get away with writing off my debt to reduce their taxes and at the same time have me pay taxes on my debt.
Thank You, Robert
How long ago did you stop paying Capital One?
What state are you in?
What credit and financing goals do you have in the next, say 3 years?
I stopped paying March, 2011. State is Pa. I am aware of the 7 yr. rule for it to fall off reports. I’d like to look at getting a VA Home Loan this year. Capital One knocked my Transunion score down from 660 to 638 and my Equifax score from 678 to 613. I had filed a correction with these two credit bureaus to change the amount to zero, which they did. Capital One came right back and reported that I owe them $6,415 to knock the scores down. I am thinking of filing a complaint with CFPB.
Read this pending IRS rule first: https://www.aicpa.org/interestareas/tax/newsandpublications/taxnews/pages/20141014.aspx
Do you know any seasoned mortgage brokers that do VA loans? Talk to them about how underwriting will view the CapOne balance being reported as owed, but set beside the 1099c that they sent you, and that you included in your tax calculations this year. It would be great if you posted an update with what you learn.
Thank you for the advice. I will have to do that. I just got off the phone with Capital One and offered to pay $1,291.08 to settle as agreed which is the difference between what they are reporting to the credit bureaus and what they reported to the IRS as cancelled debt—-$6,514.67 less $5,223.59. They told me it would be a voluntary payment and they would keep reporting the balance owed after the payment. Unbelievable how rigid and when you think of it, stupid a company can be. So they lost out on the proposed payment because they won’t list it as settled as agreed. I said why would I pay they all the money back when they got a tax write off and I paid taxes on the cancelled debt. Is this corporate arrogance or corporate indifference or both?
With Capital One I want to say both, but really it is a convoluted tax/accounting system; combined with what are not so bad systems for collection and credit reporting; that all combine into what you have happening to you.