Questiong....What If???

[karihager1982]

Okay - here is a 'scenerio':

Say that you have a debt through a CA.

You make an agreement with the CA in writing that they will accept a lesser amount than what you owe, and the account will be paid in full.

Once the account is paid in full, you receive a release letter, stating that the account has been settled.

Now assume years down the road, they sell the balance that you didn't pay to another CA.

What do you do???

If you have the proof that you paid it off - what happens?

What happens if you don't have proof?

I was reading 'imjustagoyle's' post about his/her situation, and thought this would probably be a good question to ask, since I'm sure it happens often.

Anyone???

Thanks!

- Kari

[luna]

This actually happens quite often. I'm going to leave the total explanation to someone who knows more info though.

[karihager1982]

Bump........anyone?

Thanks,

- Kari

[willingtocope]

Yep, this does happen a lot. And there are several answers to your question.

1. If the debt is still owned by the OC, and you settle with the OC for less than the full amount (you'll get a 1099 for anything over $600 that's forgiven), and you get an agreement in writing that the debt is settled, and the agreement says that the balance will not be resold, then that letter is proof that you have an agreement and you can sue the OC for breach if they would sell the balance. If you've missed any of these steps, then its your word against their's and its hard to tell what a court would decide.

2. If the debt is owned by the OC, and you settle with a CA on their behalf, then all of the above still applies...the only complication is that you need something from the OC saying the CA has the power to settle on their behalf and such settlements are binding.

3. If the debt has been sold to a JDB, then the agreements still should be in writing, but most of these people are not trustworthy and will resell the debt anyway. They assume that most debtors won't keep records, or if they do, won't know what to do with them.

Bottom line...always DV a CA...make them prove they have the right person, the right account, the right amount, the right to collect in your state, and the right to negotiate on behalf of the OC...and get it in writing. Anything less leaves you open to having even a settled debt resold.

[karihager1982]

Thanks for the reply

So far - I have settled 3 debts for less than half of what I originally owed - all of which I did get settlement letters stating the the account is paid in full, and satisfied.

However - I do not have anything in writing stating that they cannot sell the debt to another JDB.

So even though I have proof that the account is PIF - they can still sell the remaining balance to someone else?

Thanks!

- Kari

[Ahntara]

"...I have settled 3 debts...even though I have proof that the account is PIF..."

When you start getting technical (and legal), you gotta get technical and legal...

Settled debts are not PIF. That is a contradiction.

If the remaining amount after your payment was "forgiven", you would have received a 1099 tax form. This makes the balance "go away". Without this form, the remaining amount owed (the deficiency balance) can be re-sold to a JDB and collected on/reported, cuz you Settled it.

If you can produce the settlement agreement and the 1099, then you could argue that the deficiency balance account is not legal. Without both, you may be up the proverbial creek...

[karihager1982]

If the remaining amount after your payment was "forgiven", you would have received a 1099 tax form. This makes the balance "go away". Without this form, the remaining amount owed (the deficiency balance) can be re-sold to a JDB and collected on/reported, cuz you Settled it.

If you can produce the settlement agreement and the 1099, then you could argue that the deficiency balance account is not legal. Without both, you may be up the proverbial creek...

I'm not sure that I quite understand. So basically - if you don't get a 1099 form - they can re-sell the remaining balance of your debt???

And if another CA comes after you for the remaining balance - and I don't have the 1099 form or statement showing that the account was settled, then I would technically owe them???

What if I don't have a 1099 form, but I have the settlement agreement stating that the account is satisfied.

Then what?

I'm sorry to be asking such silly questions, I just want to be prepared if something like this happens in the future. I want to be informed and make the right decisions.

Thanks again for taking the time to respond.

- Kari

[willingtocope]

Its my understanding that the "theory" and the "practice" gets a little confused.

Yes, if you're issued a 1099c, then the balance of the debt is charged off / written off and "forgiven" its therefore treated as income to you. Theoretically, that should be then end of it, except that you have to pay taxes on the income.

In practice, since OCs sell debt to JDB's in bulk, and there's no gurantee that your debt won't be included along with it. You may at some point in the future have a JDB trying to collect on a forgiven debt.

Can they? I don't know if there's a legal precedence one way or the other. I do know that people some people just roll over and hand them money because they don't know their rights, and it is this that keeps JDB's doing what they do.

[karihager1982]

Thanks again for the reply. I really appreciate all the help you have all give me in answering my questions.

I will continue doing what I am doing - and hope that they do not sell the remaining balance to a JDB. If they do - I guess I will have to deal with it down the road.

Thanks again!

- Kari