If my credit score is already hurt, and the debt collector gives you a choice to either pay $10,000 or $12,000 to settle it, which would you choose?

being an ex-bill collector.. Even if you wait 7 to 10 years (depending on the state you live in) they can no longer collect on the debt. Yeah, it'll hurt your score in the short term, but, if you cant pay your bills..

@Blueskylaw: I'd choose $0, knowing that it would make the same dent in my credit rating.

I had no idea after years of watching him play sweet, sweet melodies on the guitar that he also had a side job.

On a side note, I can't believe that any of this psycho bullshit works on people in debt. After honestly trying to work with a bunch of them when dealing with my fathers estate, I found that the best way was just to ignore them and go on with life. They will hound the shit out of you relentlessly until you either pay them off quickly or blow your brains out.

@I_have_something_to_say: I've never been called by this kind of agency, but if I was it would be fun to play games with them. Sort of like the games I play with telemarketers. Anyone ever do this?

If you still pay less than the debt originally was, is it the debt collector's flaw that you got a deal?? If you put a TV under your coat and run out of a store w/ it, you're a thief. If you open a store credit card to buy that same TV and never pay on it, you're a debtor.

@David in Brasil:

I guess I should also have included
"and you want to settle it"

If the guy owed the whole amount, and could afford to pay $12,000, then I'm not going to get mad at a debt collector that convinces the debtor to do so.

I guess my question is: do we have an ethical responsibility to pay off a debt? If so, do we pay as much as we can or as little as we can get away with while still discharging the responsibility? I think that individuals should pay a debt to the best of their ability, which would mean that this debt collector was bringing people to terms with their responsibilities. He's cocky and nobody likes a debt collector, but he's doing the job right. The psychology wouldn't work unless there is some validity to the reasoning.

@Tambar: If you pay less than the original amount, either the debt collect will report it as settled less than full amount, or, they will sell the remaining balance to another debt collection agency. Sneaky Bastards!

@GuinevereRucker: Yep, back in my mid 20s, when I was dealing with major debt, I had some fun with an AMEX rep who suggested I sell my car. I was completely disgusted with how he'd obviously gotten my credit report, knew exactly what I owed on my car and how long I'd had it.

I just started fucking with him, pretended I was from Germany with an AWFUL accent, and all sorts of sob stories. It was fun for a few minutes, then it just got boring. The majority of these people are complete pricks in my experience and just not worth my breath.

Send a cease and desist letter and make the jokers deal with you only in writing. Read creditboards.com like it's your bible. It's the best way to deal with this kind of person.

@Blueskylaw: The debt collector doesn't tell you they can let you settle for 10k. The person said 10k and the collector lied and said that might not be enough. So basically the bank can authorize a minimum payment, and legally the debt collector can lie to try to get you to offer more. If the customer knew 10k was acceptable, he wouldn't have offered 12k.

Why is it I should care about people who have debt collectors hounding them?

I fail to see where sympathy is in order for people who can't pay their obligations.

I know we all hate repo-men and debt collectors but bottom line is if you over extend yourself then isn't that your own fault?

Why is it so hard these days for people to take personal responsibility for their own actions?

I've dealt with collectors like this. So long as you keep a written (or recorded if you got the approval) record of what has transpired these little tricks have minimal effect. The collectors are trained to recover debt, not empathize with the people they are calling on. If they did that, many agencies would be shut down and outsourced to local collectors that pay visits to people's homes.

Just stop and ask yourself this question:

What does it matter what a bill collector thinks of me? If instead of a $3,000 balance I had nothing due, he or she wouldn't give me the time of day. You only matter to them if you owe them money, and their attention towards you is hardly complimentary.

I had a friend had a LLC go under. The beauty of a corporation was that the business assets and the owners are different. The debt collectors tried to collect from my friend after the company was liquidated though bankruptcy and it was funny to watch. He kept saying "as far as I am concerned insert name did not need 50 pallets of blank." The funniest part was that he knew legally that he did not need to pay and the debt collectors tried every which way to make him pay.

[spelling/grammar Nazi on]

Ply. PLY.

[S/G N off]

@TEW: The debt collectors tried to collect from my friend after the company was liquidated though bankruptcy and it was funny to watch. He kept saying "as far as I am concerned insert name did not need 50 pallets of blank."

I've read this four times and still can't figure out what it means. I might be caffeine-challenged or something, but could you elaborate?

@Skankingmike: And if you irresponsibly lend money to people who probably can't pay it back but convince them to take the money anyway with glitzy advertisements and misleading repayment terms and then have to get bailed out by the government because you start losing money isn't that your own fault?

Why is it so hard these days for financial institutions to take personal responsibility for their own actions?

@T Axel Jones: Yes because Obviously everybody who gets money and then defaults were risky.

Bottom line is don't borrow money if you can't pay it back.

The point of corporations is to make money from people legally.

Last I've seen you have to agree to take a credit card, they don't' just send you one and say here use it forever it's magical! As a borrower you also agree to pay whatever god forsaken APR they tell you.

And the financial institutions are hurting from mostly home loans that were rolled up and given various credit ratings, not credit card debt(that was secondary).

you still didn't offer a reason to feel sympathy for somebody who wants to shuck his responsibility onto others.

@whyerhead: Really? Go on...

@Skankingmike: I have a debt collection agency on my ass because of some medical debt that I incurred when I was hospitalized for two weeks after sustaining a major injury. Prior my injury, I did everything "right"; I had a large emergency savings fund, perfect credit, no debt beyond rent and utilities, and was a textbook example of financial responsibility. All it took was one accident that was completely not my fault to shoot my financial record all to shit.

Yes, there are lots of people who can't manage their money and bring it on themselves. But don't be so quick to assume anyone who has trouble paying their bills fits that profile.

@Skankingmike: Oh, I completely agree. I hope they make your life uncomfortable for a bit, maybe you'll learn a lesson: Don't spend money you don't have. If you were irresponsible enough to get yourself into this mess you deserve the attention.

And, as for T Axel Jone's comment: At the end of the day, people know what they make and people should do their research. To imply that we need protection because we're so easily persuaded by shiny ads and carrots dangled on strings would imply that we're idiots.

I've made my fair share of stupid mistakes. That was my fault and my fault only. People make stupid financial decisions all the time. It doesn't make them a bad person, but it doesn't make them a victim either.

@Skankingmike: Because one of the largest segments of debt collection is for medical bills. Even with good insurance people can end up in massive debt. You have no control over your body suddenly deciding to cease working for various reasons, many of them have nothing to do with how well you take care of yourself. That could be you owing that money. These are not always situations of "deadbeats" a small fraction of those owing money are actually the deadbeat variety. Most lost jobs or had a health emergency. So yea people should care what is going on.

I would have declared bankruptcy and paid maybe 3000 dollars+attorneys fees or zero if I'm not making much money at all. At the point where the debt is that high and you can't pay, you aren't going to be able to take out a loan anyways.

Why do people still deal with debt collectors on the phone? Refuse to talk to them and only correspond in writing via certified letter. They can't play head games, you have a documented record of everything they say or claim.

i'm totally fine with this. i pay my bills in full. the collector is not your friend and doesn't have to be; he just has to do his job. The less I have to pay for other people's debt, the better.

@bohemian: I hear they are more likely to sue in that case. Apparently it doesn't cost much to have some methhead call center robocall you, but it does cost to have someone write a letter. Of course, that all assumes they really own the debt.

@HooFoot: If it's not your fault then there should be a law suit in order.

I'm sorry but i find most people who are financially in debt and collectors after them seem to be irresponsible.

@bohemian: SO what you are saying is our health insurance system is broken?

I mean that's basically what it boils down too.

I agree 100% I would love any change (positive) to come from Obama and the Health insurance in this country.

I just don't see that happening.

Word of advice; if you get super sick just claim you're illegal and have no form of ID that seems to work just fine.

@Shmonkmonk: If I lend money to a crackhead, I'm an idiot. If a bank does it, the crackhead is irresponsible and should have done his research. Why the double standard?

@AirIntake: If the bank puts a "are you a crackhead?" question on their application, I think about eight microseconds would pass before someone would sue for discrimination on behalf of crackheads.

If debt collectors can legally and ethically (as it seems to be the case here), get debtors to pay more for their debts, then debt collectors would tend to pay more for debts from companies, and companies would hopefully be able to better compete and not raise prices as fast (or make more money).

@snidelywhiplash: My friends company was liquidated though bankruptcy. All of the assets were sold and there was still a remaining balance on what the company owed. Since it was a corporation his personal assets were shielded from the debt collectors. The debt collectors were trying to make him pay for something he did not owe on. He would tell them that he did not personally need the items that they were trying to collect on (the outstanding debt) and they were from his corporation's account. I am sorry I have been told I don't explain my points very well. I also did not want to use names.

Either you have decided to settle your debt at less than what YOU OWE or you haven't . Once you go down the road of settlement compared to lower rates and fee forgiveness you have to be fully committed to settlement .

I think with many people who fall for this realize they're pushing their luck or are feeling guilty . The banks don't help matters when they jack your rates to loan shark levels .

Everything I heard is DO NOT TALK or negotiate with the bank or collector . You ask what will it take to settle or talk settlement numbers only -DO NOT DISCUSS . You talk numbers only .

It's up to the individual how badly they want to settle . It's ashame most credit card companies won't even consider changing excessive rates or fees until you miss payments so you can bring it to a head .

As a business I would rather have actual cash in place of a tax write off but if the credit card companies are willing to write off your debt so should you . Take the credit hit and consider any contact with the collectors/bank business only . DO NOT DISCUSS .

One thing to note I saw an article with in the last week where unpaid debt on a setttlement is taxable in many cases so if you settle a 20K debt for 10K that difference might count as income .

@HRHKingFridayXX: it's a statute of limitations thing. They can still try to collect the debt, but if it's beyond the statute of limitations in your state and you haven't done anything to reset the debt (admitting you owe it, making a payment, trying to work out a payment plan, etc) then they can't sue you for it. (well, technically they can sue you, but it'll be thrown out of court)

It is easy to hate on this debtor described in the above snippet. But, this guy was on the hook (with his wife) for debt related to a kitchen remodel and his wife had broken up with him, a new guy was living in his house and his wife wouldn't pay the debt. I felt bad for this guy, I wouldn't pay for a kitchen remodel on a house that I had been kicked out of.

@u1itn0w2day: "One thing to note I saw an article with in the last week where unpaid debt on a setttlement is taxable in many cases so if you settle a 20K debt for 10K that difference might count as income ."

True, but that is giving the creditor $10K to save a $3K tax bill. (or much less if you have little income that year)

@HiPwr: So instead they find out if you buy felt pads for your furniture: [consumerist.com]

@floraposte: Good point. If you use your Visa to purchase crack, the credit industry will find out.

@snidelywhiplash: Yes I caught that too "play his trade" should have read "ply his trade."

No spellchecker would have ever flagged it though.

@wickedpixel: I would guess some of it has to do with the amount and type of debt. 20k of credit card debt can't be that easy to shake.

@whyerhead: Actually, there are a variety of time periods and deadlines involved. Some of them vary by state (and a few of those are fuzzy, particularly around when the clock starts ticking). Credit report items that hurt your credit report are supposed to fall off in 7 years. Statute of limitations is the limit of when to file to get the courts to help with collections by means of a judgment and these vary from 3 to 10 years depending on state. These do not prevent attempting to collect, but instead, reduce the available pressure on debtors that understand the system. And if there is any payment made, the clock usually starts over (which encourages people to not pay anything once they understand this). Bankruptcy can limit or wipe out most debts, and then it can be illegal to try to collect a debt beyond the discharge (after the plan period in the case of chapter 13).

@Elcheecho: Awesome. So when you lose your job (bound to happen in 2 years or 20 years), and the lose your health insurance then you won't want anyone helping you with that will you? Objectivism's a B*****.

@Skankingmike: Even in the cases where the lender is not abusing the consumer, situations can happen, such as losing a job and having major health issues come up, that makes it impossible for people to pay bills that had full intentions to pay. You are using an overly broad brush to characterize everyone in a group as being like the subset that truly are bad (those that obtain credit without the intent to pay it all with interest).

I have no sympathy for the lenders that abuse the system (extreme fees unrelated to costs, abusive practices, utter incompetence in account management, mandatory binding arbitration, etc). In the cases of these lenders, I would be dancing in the street if all of their customers just suddenly stopped paying anything to them.

@HooFoot: Are you on board for universal health coverage?

@Elcheecho: If you don't want to be paying for other people's debts, then you need to be obtaining you financial services from companies that are not abusing people to extract extra money from them. That includes there being no mandatory binding arbitration clause in the contract and fees that reflect actual costs. You should also choose a company that is competent enough to hire qualified representatives domestically, and train them properly. And this should also include hiring competent computer staff to make sure all the systems operate properly.

@u1itn0w2day: It usually does count as income and a 1099-C is issued. There are circumstances where people who have little income can avoid paying the taxes on a 1099-C.

To avoid the 1099-C, you have to negotiate NOT for a reduced settlement, but for a reduction in the debt itself (e.g. you claim you do not owe 20K, but owe only 10K). Are part of this negotiation, you need to be sure the terms will say that your payment is payment in full. Creditors tend to prefer NOT to negotiate this way, because they don't get to use the difference as a business loss on their own tax filing.

@HooFoot: dealing with something similar now - we're not in debt with medical bills currently but it's devastated our finances. I had a big emergency fund set up, great credit, own a home, etc. All it took was one big health disaster to occur with my wife and all that was jeopardized. The sad part is that I have excellent health coverage with a large multi-national company. Even with that, the bills can get outrageous - $750-1000 a month. If we were uninsured, forget it - we'd be homeless.

I'm not an advocate of 100% nationalized health care but I do believe that there should be a happy medium between national care and the private system. When you're paying $750 for a routine physical in America, there's a problem there. No reason that should cost more than $100-$200, tops.

Frontline did a great special on the subject of national healthcare (it's available on netflix): [www.pbs.org]

@Tambar: Thank you for the deep insight. It will sure be helpful the next time I'm counseling a client whose soon to be ex-wife went out and spent tens of thousands of dollars on a credit card without telling him.