The truth about Debt Settlement...

I have read just about every article ever written on Debt Settlement. After working in the industry for some time now, I have the information I wish I had when I started.

When doing debt settlement your goal should be to pay back 50% of what you owe or less. If you do not have at least 50% of the balance to put towards getting these issues resolved, settlement of these accounts should be considered at another time.

In other articles I have previously mentioned the outcome of tackling a situation like this will widely greatly and can't be guaranteed. However, what I've done is compiled a list of very realistic, probable outcomes.

(Option A.) You wait until the statute of limitations run out on this debt

  1. You get sued before the time lapses - (forcing you to pay in full, settle, go to court / Stays on your credit report as a collection and a judgment.)

  2. The time lapses and you cannot be sued for the debt (Remaining financial liability and it stays on report for years). At which point you have the upper hand and can negotiate a better settlement and best reporting (i.e. "Paid" or possible deletion from your report instead of "Settled" causing a score decrease)

(Option B.) You attempt to negotiate with them on your own.

The truth is, many go this route. However, most people do have have the proper skills or vocabulary to successfully achieve a favorable settlement. Even those who do research or are coached by a "Professional" will certainly make major mistakes causing either a compromised position or an over-lap of the stated narrative resulting in them not entertaining an offer below 75% of the balance usually. These debt collectors hear the same story hundreds of times a day, knowing the law, or having an "Inside man" is usually what it takes to get the job done.

(Option C.) You hire a law firm to go in and fight these people on your behalf.

  1.  If the company does not follow through on the arrangement agreed upon, they can take legal action on your behalf.

  2. Experienced Attorneys can focus on your settlement with your credit rating as the main concern. if it's not achievable in the payment arrangement, your credit attorney has the power to send further audit letters after a settlement is reached with the goal of hopefully getting it deleted afterwards.

In situations like this, most consumers say that their credit is the most important thing to them, second to avoid a possible lawsuit. With respect to that concern, the Credit Bureaus have this big hang up on "Accuracy". Thus, how negative information is removed from your credit report is based on disputing or auditing information. Therefore exposing anything that isn't 100% verifiable and accurate. (Original contracts, signatures, typos ect...) 

 The situation that most are in is that their debt is "Validated". "They have all the T's crossed and the I's dotted."/ which means, they can prove that you owe the debt and you have to pay. However, how much and when is the game you are going to play. 

Can it be deleted?

The best case scenario is to pay 20-50% of the stated balance with a trade line deletion, which will most likely raise your score. However, it is ILLEGAL for any credit reporting agency to delete accurate information. (Essentially, allowing people who don't pay their bills get away with being lent more money they most likely will not pay back either.) There is a slight chance to achieve that, but It's not impossible to get a deletion in a settlement.

What if it's marked "Paid"/"Paid In Full"?

If after negotiations it is marked "Paid in Full", it has a chance to raise your score slightly depending on the scoring module. (I.e. FICO 9 doesn't penalize you for paid collections. However, most do not use this method of retrieving scores because it is too expensive for them to update)

What if it's marked "Settled"/"Settled in Full"?

If they will only mark it "Settled" because you have not supplied sufficient reason for them to do otherwise, It probably lower your score. (How much is contingent on the other information your reports.) However, it will lower your Debt to Income ratio and could still allow/help you to qualify for a home loan depending on the lender.