Legal Question in Credit and Debt Law in Georgia

You handled this very poorly. NEVER talk to collectors about settlement by phone. Many are sleazy and will lie to get your account numbers. A settlement is worthless unless you can prove it, which means it must be in writing. So at this point you have no settlement. You should not be calling the collector; any communication should be written. Note that the new statement is presumed valid unless you dispute it in writing.

You have two choices:

(1) Reach a settlement in writing. Be aware that if they write off some of the debt, you will get an IRS form 1099 and will have to pay income taxes on the amount forgiven.

(2) If the amount is large and you cannot pay, consider bankruptcy as a possibility.

It would be smart to talk to a lawyer, unless the debt is small, before doing anything.

I would agree with the sentiments of Attorney Ashman. Never talk to a debt collector without first knowing your legal options.

If the debt is small and you wish to resolve it on your own, there are a few tips which will help you succeed.

(1) debt collectors are most anxious to resolve the debt at the end of the month and most will accept from anywhere between 20% and 50% prior to a lawsuit and 50% to 80% after a lawsuit.

(2) its ok to call, but get a settlement agreement in writing BEFORE you pay any money. The letter must note the original account number, the full balance, the settlement amount, to whom and where paid, and a notation that upon receipt of payment the creditors will mark the account as paid with a zero balance. get a physical address for payment.

(3) never give them access to your bank account. pay by money order or certified check and make a copy of it before you send it. send the payment by UPS/FedEx or certified mail so that it arrives by the due date. get the tracking information and print out proof of delivery. I like UPS/FedEx as they tell you not only when the package was delivered but who signed for it.

(4) 30 days after settlement, call and get a letter acknowledging the payment and that no further mnoney is owed. keep the letter FOREVER. You may need it and the proff of your payment if the debt ever resurfaces. Debts do resurface and if you throw away the proof, you may have to pay again. So do yourself a favor and keep the information.

What Attorney Ashman says is correct. There is an IRS rule that says any amount that the creditor givs up which exceeds $600 is taxed to you as income. However, not all creditors file a 1099c cancellation of debt. If you do get a 1099c, it is still better to pay a little more in taxes than the full amount of the debt. However, depending on what assets and other debts you have, some or all of the income can be excluded using IRS form 982. Ask your CPA (do not go to H&R Block) or Turbo Tax about it. If you get a 1099c, this calls for getting a competent CPA. If the CPA does not know, then find another CPA.

Bankruptcy is only a last resort if you have a lot of debts and no other options.

I give free email consults and charge $50 for phone consults. In a consult, I can go over your options in more detail. I also can resolve debts for a reasonable fee. Please contact me at [email protected] if interested.