Individual Personal Credit Counseling Available!
Settling your debts, Part 3
Paying Your Debts Once You Have Settled
Note: This page addresses debt which are with a COLLECTION AGENCY ONLY. For debts still with ORIGINAL CREDITORS, go here.
Tips on Paying>
Never disclose where you work or bank.
If you are asked, simply say "no comment". The reason for this: If your settlement falls through, and the creditor gets a judgment against you, knowing where you bank or work will make it easy to collect the judgement.
Never pay your settlements with a personal check
How you make payments is very important, as it protects you from other creditors learning about your financial status and bank account numbers. For this reason, never send a personal check. Get a cashier's check or money order. Make sure you get the money order or cashier's check from a different bank than your own bank or the post office.
Make sure you keep a copy of your money order or cashier's check and put it in a safe place!
Collection agencies keep notoriously bad records and it's your word against theirs if you say you paid and they said you didn't...unless you have the copy of the money order or cashier's check.
I negotiated a settlement with a creditor for less than I owed. The creditor is now suing me for the balance. Is this legal?
Yes! You need to read the following information carefully.
Some collection agencies will agree to settle with you for far less than you owe and then turn around and hire another collection agency to collect the difference. However, in many states this is illegal. Once a creditor deposits or cashes a full payment check, even if she strikes out the words payment in full or writes "I don't agree" on the check, she can't come after you for the balance. The states in which this law is enforced:
- Arkansas
- Colorado
- Connecticut
- Georgia
- Kansas
- Louisiana
- Maine
- Michigan
- Nebraska
- New Jersey
- North Carolina
- Oregon
- Pennsylvania
- Texas
- Utah
- Vermont
- Virginia
- Washington
- Wyoming
Some states have modified this rule. In the following states, if a creditor cashes a full payment check and explicitly retains his right to sue you by writing "under protest or without prejudice" with his endorsement, then he can come after you for the balance. But those exact words must be used. If he writes "without recourse," communicates with you separately, notifies you verbally or writes on the check that it is partial payment, it is not enough.
- Alabama
- Delaware
- Massachusetts
- Minnesota
- Missouri
- New Hampshire
- New York
- Ohio
- Rhode Island
- South Carolina
- South Dakota
- West Virginia
- Wisconsin
Californians get a special break on full payment laws due to a legal loophole.
California lets creditors cross out the full payment language and sue you for the balance. However, when they passed this law, they also passed a separate law allowing California debtors to get around it. (Don't ask me why). Getting around this law requires specific steps and language. To use it, this procedure must be followed exactly.
Here is the procedure and the sample letters.
Part 1: Understanding the Principals of Settling Debts| Part 2: Negotiate Your Credit Rating |
Part 3: Paying Your Settlements
Do you have a question you feel we haven't answered?
For a small fee, you can talk to a counselor on the phone or Buy the Book!
|
