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Will a Settled For Less Than Agreed Hurt My Credit Report?


Bambee
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Hello all. I am in the process of settling an account for a personal loan. The bank has already agreed to indemnify me or pay me back the settlement amount if another lender demands payment on this account in the future. The bank agreed to do this because it cannot find my original promissory note for this account.

However, the bank refuses to report this account as anything but "Settled For Less Than Agreed" to the CRAs. I've read the "Good Credit is Sexy" book and I've suggested all the tips printed under the "Negotiate Your Credit Rating" section on page 157 (i.e. agreeing to change a listing based on a new settlement agreement, etc.) but to no avail. My attorney refuses to counter by suggesting other options for the account such as "Paid" only with all other negative notations deleted, "Settled" only with all other negative notations deleted, etc. and the bank claims that they are legally required to report "Settled For Less Than Agreed" only. Hogwash.

Will this "Settled For Less Than Agreed" hurt my credit report? The bank claims that this status is better for my credit report but, at the same time and according to my lawyer, the bank will not put this assurance in writing in the settlement agreement.

What are my alternatives? The CRAs have already deleted this account from my credit reports.

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Yes, and they can always sell the portion that you did not pay to another debt collect who can then sue you for the balance. Also they will most likely report the balance, that is the amount you did not pay, to the IRS and you will have to pay tax on it as if it is income. By stating that it was paid for less than full amount, they get a tax write off, and you get a tax bill. Stick to your guns. Do not settle unless they agree to your terms. Otherwise just sit and wait out the SOL or when they sue, go to court and tell the judge that they offered a settlement, you had agreed if they would meet your counter terms, and they refused. In some cases the judge might consider the settlement offer as the amount they get, and will in rare cases allow your terms to be added. Although they get the judgement, and can report that, they might have to remove all other derogatory comments.

Last night there was a really good episode of Boston Legal on that dealt with Credit Card firms and their tactics. They made a nice point that most CC companies don't want to be sued because then their dirty little tricks become public domain via discovery. Who knows, if you counter sue them on the grounds that they did not provide adiquite notice of their terms of use, you just might be able to force them into settling under your terms. Depends upon how aggressive your lawyer is. Good luck.

I wrote a nice response for those who might have this question but have not read much of the forum or the book mentioned.

You have already taken the hit on your credit and it will remain on your credit file for seven years from the POINT OF FIRST DELIQUENCY. By paying them any amount what so ever, you restart the Statute of Limititations clock again.

SOL - in most states is between 3 to 10 years for Credit Cards. After the SOL has ran out, they have lost their window to sue.

In most case credit card companies will only sue if you have assests like a house or other real property such as land. You can always challenge the validity of the debt, the contract, their actions, and other. However in the end if you do owe the money, most courts, unless you can prove the creditor violated the law or the agreement, will win and obtain a judgement. But before they can do this, they will have to sue you. And when they do you can challenge the lawsuit in court.

In the mean time they will most likely keep the account in collections and you just need to notify each collection company, via First Class Return Receipt mail not to contact you, and that you dispute the debt in full.

Make them prove that this is your debt. DO NOT TALK TO THEM ON THE PHONE, they will lie to you and make all kinds of promises.

HOWEVER, if you do choose to settle, BE SURE to negociate, and get this in writing, that if you pay, they will stipulate that the debt is paid in full and will NOT report the account negativly to any CRA. That they will remove any negative trade lines from your CR and never re-insert them. That they will delete all negative remarks from all the CRA's and simply report the account as PAID IN FULL, ON TIME, IN GOOD STANDING.

Good luck. Also consider having an attorney draft the settlement offer.

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Thanks Sarris for the info. Actually, the bank has already sued me but the attorney suggested that we first try to settle because I sued him under the FDCPA.

With respect to your suggestion to tell the judge that we have a settlement but the bank won't accept my terms, the last thing I need is a judgement on my credit report especially since the CRAs have already deleted this account from my credit reports. Assuming that I settle this outside of court, could the bank re-insert this account on my report and report "Settled For Less Than Agreed"?

I'm now considering just paying the entire balance to the bank. If I do that, do you (or anyone else reading this post) think that I can get a more favorable credit status for this account? If I pay the entire balance in full, the bank cannot say that I "Settled For Less Than Agreed" or that I settled at all for that matter, right?

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Please refrain from posting multiple copies of the same question in different forums. It causes a lot of confusion and breaks the answers you get into multiple locations. It's easier on everyone, yourself included, to just post one copy in the most appropriate forum thread.

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If you get stonewalled on a response, you can PM me to have a look. I cannot promise to respond quickly as I'm sometimes off-board for a couple days if busy, but I will try to get back on it when I see it.

This isn't a license to PM before asking in the forums, just so that is understood. Just for if you have gotten 0 response on something.

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