I also have a Deed In Lieu on my record last year, and its been a year since I've paid anything on the cards. The collections agents seem to be willing to go down to 30% of the debt. My credit is shot anyway, I'm just trying to stay out of court at this point. Is 30% a good deal, or will they go lower if I wait them out? I can't pay all of it, but I will ransack my 401K and IRAs to get this behind me and stay out of court if this is the best deal I'm going to see. Thanks.
Yes...but...this is going to create a whopping tax bill for you.
The IRS considers forgiven/settled debt to be the same as earned income...so you'd have to add $90K to your earned income and pay whatever additional taxes on that. Not all creditors issue 1099C forms for forgive debt...but most do. Assuming a 25% tax bracket (at least)...that's going to be at least $20K.
I don't think that waiting out for a better deal would be worth it....30% is a good deal. They could sue you and make having to file for Chapter 13 or 7 a reality...
I have no idea how you managed to accrue so much credit card debt but that's beside the point. Yes, 30% seems like very generous settlement but be advised: the amount they discount is considered income and therefore taxable.
Here's the deal pure and simple: Ethically, you owe them that money, 100% of it, so pay it.
If their offering you 30%, then their giving you a way out... TAKE IT!
And yes, 30% is great. GET IT IN WRITING so they can't say later that the agreement never happened!
I have read many books on finance and have never seen an offer that good.
That's usually the starting point you start haggling at to get them to charge you only 50% of your bill.
Geez - you're lucky - in a way I guess.
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I'm not a big fan of not paying your bills but, go talk to a bankruptcy attorney. 30% sounds really high to me. Your credit is shot no matter what you do. Do Not ransack your 401K or IRA. I know the thought of court is intimidating, but go talk to an attorney. You might not even have to appear in a court room. Check it out before you decide what to do and don't feel pressured into doing anything rash. The creditors will make it sound like your going to die if you don't act right now. It's their job to get you to pay as much as soon as possible. They get a commission off whatever you pay. Remember that.
If the Collection Agencies are willing to go down that low, it might be because they know the debt is beyond the Statute of Limitations. So they figure 30% is better than nothing. If you are outside of the Statute of Limitations you can use that as an affirmative defense in court to have the suit dismissed. As a comparison a "normal" settlement is going to be in the 40%-60% range for debts that are still legally collectible. The link below will provide you a list of the Statute of Limitations for each state.
But if you do want to settle with them you will then be issued a 1099 on the settled amount. So if you have 120K and settle for about 30K you are going to have to treat the remaining 90K as unearned income and pay taxes on that. That amount alone would probably put you in a high tax bracket so you would be looking at probably a tax bill around 20K. And not paying that to the IRS is going to be a lot worse than anything the Collection Agencies can do. This is not to mention the additional taxes and penalties you will incurr by withdrawing money out of your IRA and 401K.
If the suits are a real possibility you may actually want to look at Bankruptcy. Depending on the rest of your situation you may be able to file a Chapter 7 which is a "liquidation", or a Chapter 13 which is a payment plan.
Yeah that's really good. I was able to get mine down to 40% following the advice at http://CleanCreditClinic.com. I would recommend removing negative marks, and trying to get the accounts deleted as well. You 'll want to try and re-establish credit with a secured credit card or passbook loan (i.e. "credit builder" loan) as soon as possible. The only way to repair credit is to start to responsible use it again. Keep you balances 20% or below your credit limit and pay your bills on time.
You can do even better than 30%. There is a company called Asset Protector Group and they have a program that works toward settling at 10 to 20% off your balance. The best thing to do first is read a free 35 page ebook called "How To Control Your Creditors". You can find it at a webpage called debtendnow.com It is worth the time to read and educate yourself. I also watched some funny scenes from a movie called "Maxed Out", that educates you while you watch. My friend John was in debt for $100K. He is using a program that (APG) offers that works with you until you resolve your debt by settlement.
Hope this helps.
Rob