Q. I had a credit card with Bank of America back in 2007 that I used often and always paid for on time. Unfortunately, I lost my job in 2010 and was no longer able to make payments for that account, so I completely ignored it until recently. The account has been bought various times by different creditors since then and as of now it’s with Asset Acceptance. I want to settle my debt but clearly not at the price they are asking for ($995.16). After looking through your website, I decided to send them a debt validation letter and they responded back with a computer print out of the information they have on record. I’m not sure what my next step should be. Would the Pay for Delete method with an offer of 25% be a good option to go with?
A. First of all, I’m glad your financial situation is improving enough that you can go ahead and start taking care of your past due debt.
I need to know a few more things about the debt:
Are you Outside the Statute of Limitations?
Depending on your state, the debt could be past the statute of limitations (SOL), meaning that you could not be sued for any amounts owing. The statute of limitations begins to run from the date of last payment. Some states have a statute of limitation as short as 3 years. Being outside the SOL would be a strong position to be in as far as negotiations and you could indeed get a settlement agreement as low as 25%.
If you are not outside the statute of limitations on the debt, you might have to go higher than 25% of the amount owed. In addition, you will need to be aware that offering a settlement could put you on the radar screen and could possibly bring on a lawsuit. In general, though, Asset Acceptance (recently purchased by Encore Group, a.k.a. Midland Credit Management) is a junk debt buyer and typically, junk debts do not have substantial documentation held by the debt buyer. This means Asset is very beatable in court should they bring suit against you. Read the story by someone who just beat Asset Acceptance in court.
Are You Prepared to Push for the Agreement in Writing?
The most important things to keep in mind when doing debt settlement is that any settlement agreement needs to be in writing and needs to be considered payment in full. If you don’t get the agreement in writing, it might as well never occurred. Other readers who verbally agreed to a settlement but did not get the agreement in writing, have found the “forgiven” amount of the settlement sold to other collections firms. Payment should also be made via money order, and a copy of the money order should be carefully saved as proof of payment.
Do You Have Cash to Make a Lump Sum Settlement?
It is always a bad idea to set up a payment plan when paying a collection agency. I’ve heard too many stories of people who find themselves the target of unannounced additional fees and interest after agreeing to making payments. It’s better to wait to make a settlement offer until you have the entire lump sum ready to pay out. This way, the settlement is over and done at one time.
Is Asset is reporting this debt on your credit report?
If Asset is reporting on your credit report, you should make it a goal as part of your settlement agreement that the collection be removed from your credit report. This is one of the key strategies of the Pay for Delete techniques. If they are not reporting, you should negotiate as part of your agreement that they not report any time in the future.
If you cannot get Asset to agree to remove the listing, you could dispute it with the credit bureaus post-settlement to get it removed in the future.
To read more on how to settle a debt with a collection agency, read our complete debt settlement guide.