Jump to content

Can collectors charge interest on debts & Is this settlement agreement authorized?


confuseddebtor
 Share

Recommended Posts

Please don't buy into any stigmas or stereotypes about filing BK. You want to enter into an agreement when you can pay off a debt over 12 years. Who knows what can happen between now and then? You'd be creating a new point of departure for SOL on a debt that is already or may be passed SOL (depends on how that Rawson v Credigy suit ends up). Don't do it to yourself.

Hi Ihatecas!! Merry Christmas to everyone as well. My decision is not based on a stigma. Believe it or not, I feel that if I've accrued the debt, even if bankruptcy is an option, I'd rather pay it off completely, or at least make an effort to pay on the principle rather than completely sweep my responsibility under the rug with BK(if at all possible).

Don't get me wrong, if I were $100,000 or more in debt, it would be a different story. Sometimes bankruptcy simply can not be avoided. Although, I'll be given 12 years to pay off the debt, I hope to pay it off much sooner if my health improves, and I return to work. If not, I'll take the 12 years.

NOTE: in two years this debt will pass SOL and disappear on my report, even if I am still making monthly payments.

In terms of SOL in a lawsuit, I signed papers on the loan in 2002, and with a 10 year SOL, the collectors still have six years left to sue me. So it's not a matter of hoping the SOL will end in the next month or year. God willing, I can pay off the settlement long before then.

Even on my low income(SSI), IF this arrangement is legitimate, and will allow me to settle for $7300, I just don't feel $11,000 is enough for me to file bankruptcy. It might be inconvenient, and take working extra hours to pay if off(in the future), but that's what happens when you get behind in debt.

Also, I'm done with credit. If I can't save for it, put it in layaway, or pay cash, I don't need it. So I'm past worry of what my credit report looks like, and though I was ashamed in the beginning, I'm also past the point of humiliation of what others will think about my bad credit.

I'm just a debtor who honestly wants to make an effort to pay debt I've accrued. May sound silly to some, but it's a personal thing with me. That's why I only need answers to the questions in my first message, before making a final decision. :)

I do agree, that if one must file bankruptcy, there should be no stigma involved at all. Billion dollar companies do it all the time.

Link to comment
Share on other sites

We all would rather pay our bills.

Honestly, though, if you feel that badly about it, why not file BK and then contribute in some meaningful way when you get back on your feet?

I considered that, but then I thought about things from all angles. If this agreement is legal and binding....these would be 3 of the advantages:

1. It would cost more money upfront to file bankruptcy, rather than simply paying $50 per month on the debt. I'm not comfortable filing on my own.

2. The SOL for this debt ends in 2 years, and will be removed from my credit report 2009. If I file bankruptcy next month, it will remain until 2017.

NOTE: Yes this will increase the SOL for being sued...but the collectors have six years left to do that any way under my current contract, and I hope to pay off the settlement debt of $7300 before then.

3. $50 per month is reasonable. If I could pay that much for the luxury of cable, I can pay the same on my debt. Thus I will cancel cable next month.

If everything is legitimate, I can't think of any reason I would choose not to accept this offer, other than simply not wanting to pay the debt at all, or to keep the luxury of cable(my only luxury, other than the internet). :)

Sometimes it's just not possible to pay off debt when it has become extremely high. However, if possible to do so, even it's just the principle amount, I feel an obligation. It's an individual decision, and it depends on the situation of each debtor.

Link to comment
Share on other sites

I hope with the Democrats in charge, maybe some changes in the consumer credit laws can be made to protect consumers.

Folks, it does not make sense for debt collectors to be able to charge interest on a "CLOSED or CHARGED OFF ACCOUNT"!. Closed, means that the consumer no longer benefits from the account, and is likely suffering credit damage costs from the negative listing on the CRA account. If the consumer no longer benefits or has activity with the account, interest should not accrue...PERIOD, especially by a third party!

My other beef is with the concept of selling or transfering a debt to a third party. Closed accounts should remain with the original creditor and not be transferrable, or we should be able to transfer our debts as well. For example, if Target can sell my account to Asset Acceptance, I should be able to sell or transfer my indebtedness to another person, fair, right? What is good for the goose, should be good for the gander!

We need more consumer friendly legislation that includes a 5 instead of 7 year limit for listing negative tradelines and the removal of restrictions concerning student loan debt to allow for discharge in bankruptcy and removal of negative tradelines after the 7 (or 5 year) limit.

Link to comment
Share on other sites

I hope with the Democrats in charge, maybe some changes in the consumer credit laws can be made to protect consumers.

Folks, it does not make sense for debt collectors to be able to charge interest on a "CLOSED or CHARGED OFF ACCOUNT"!. Closed, means that the consumer no longer benefits from the account, and is likely suffering credit damage costs from the negative listing on the CRA account. If the consumer no longer benefits or has activity with the account, interest should not accrue...PERIOD, especially by a third party!

My other beef is with the concept of selling or transfering a debt to a third party. Closed accounts should remain with the original creditor and not be transferrable, or we should be able to transfer our debts as well. For example, if Target can sell my account to Asset Acceptance, I should be able to sell or transfer my indebtedness to another person, fair, right? What is good for the goose, should be good for the gander!

We need more consumer friendly legislation that includes a 5 instead of 7 year limit for listing negative tradelines and the removal of restrictions concerning student loan debt to allow for discharge in bankruptcy and removal of negative tradelines after the 7 (or 5 year) limit.

Amen Orgaknight!! Amen!! It does NOT make any sense. We really need to find out who consumers would contact to change these laws, and debtors should COMMIT in LARGE numbers to be heard. I would invest energy in that. However, simply complaining and stressing over the current laws, is wasted energy.

The people make the laws, but only if they are persistent. If anyone knows who would be contacted can you post the information here? I'd bet people who never vote, would vote to help push these type of laws to protect consumers. It would have to be an aggressive stance, because the big companies would be against it completely.

I also think when someone falls behind in their bills due to illness, natural disasters, and a number of other reasons beyond their control, they should have special provisions, over those who are in debt simply because they're living above their means, and wait with crossed fingers for SOL's to end, or bankruptcy papers to finalize. There are just as many consumers playing the loop hole game when it comes to laws and deb, as there are collectors and JDB's. Great points you've made!!!

Link to comment
Share on other sites

Normis does this mean when you stated written agreements by collectors are "false thereby making it a FDCPA violation", were you not being honest? This is all very confusing to me , and offering comments as "fact" then later admitting they were only your opinions, only adds to the confusion. *sigh*

NOTE: I don't mind opinions, but it's very misleading to imply you've verified the legal basis of something with FDCPA, when you really have not. As consumers we have to work together on this board. We have enough to worry about when it comes to implications and misleading information with collectors.

Confused - I realize you're quite frustrated, but Normis is one of the most knowledgeable and helpful posters here. He was saying that the CA was not being honest or was ignorant when they told you that the 1099c was only required for lump sum settlements. If a creditor or CA writes off even $1 of your debt, the IRS requires you to report it as income, regardless of whether the creditor/CA files the form or not.

As for BK -- I understand your other reasons for not wanting to file, but the timing issue has me confused. If you file for BK, it would be wiped from your CR in 10 years. If you go ahead with the settlement agreement, it would take 12 years (plus payment of all the money, which is more than the BK would cost to file)...

Anyway, I'll leave this to the pros for more info. Good luck to you, I know it's lousy when life throws these curve balls.

Link to comment
Share on other sites

Confused - I realize you're quite frustrated, but Normis is one of the most knowledgeable and helpful posters here. He was saying that the CA was not being honest or was ignorant when they told you that the 1099c was only required for lump sum settlements. If a creditor writes off even $1 of your debt, the IRS requires you to report it as income, regardless of whether the creditor files the form or not.

As for BK -- I understand your other reasons for not wanting to file, but the timing issue has me confused. If you file for BK, it would be wiped from your CR in 10 years. If you go ahead with the settlement agreement, it would take 12 years (plus payment of all the money, which is more than the BK would cost to file)...

Anyway, I'll leave this to the pros for more info. Good luck to you, I know it's lousy when life throws these curve balls.

This was posted in my previous post. Although I've been given 12 years to pay off the debt(which I hope to pay off sooner), the reporting period for this debt ends in two years. Thus, it will be deleted from my credit report in 2009. The FIRST delinquency date was in 2002.

Also, concerning the 1099 form. That is incorrect. Only amounts forgiven over $600 must be reported to the IRS using a 1099 form. I recently spoke with legal aid and was told, that forgiven interest does NOT have to be reported by the collection office.

I also learned, that even if it were reported, if I were insolvent at the time the amount was forgiven, there is a form I could complete so that it would not affect me in terms of past due taxes. I will retrieve the links from the IRS website, and post them here to support my above statements. Also, I will be making monthly payments on the principle debt, not the interest added by the collection office.

The information Normis posted, stating that settlement agreements in writing are "lies" was not accurate information. To my knowledge, if the agreement is in writing, and signed by an authorized representative, it is a legal contract, which is why I asked who would be "authorized" to sign.

Link to comment
Share on other sites

This was posted in my previous post. Although I've been given 12 years to pay off the debt(which I hope to pay off sooner), the reporting period for this debt ends in two years. Thus, it will be deleted from my credit report in 2009. The FIRST delinquency date was in 2002.

Also, concerning the 1099 form. That is incorrect. Only amounts forgiven over $600 must be reported to the IRS using a 1099 form. I recently spoke with legal aid and was told, that forgiven interest does NOT have to be reported by the collection office.

I also learned, that even if it were reported, if I were insolvent at the time the amount was forgiven, there is a form I could complete so that it would not affect me in terms of past due taxes. I will retrieve the links from the IRS website, and post them here to support my above statements. Also, I will be making monthly payments on the principle debt, not the interest added by the collection office.

The information Normis posted, stating that settlement agreements in writing are "lies" was not accurate information. To my knowledge, if the agreement is in writing, and signed by an authorized representative, it is a legal contract, which is why I asked who would be "authorized" to sign.

OK, sorry you had to repeat info from prior posts. I think there is some confusion here about the creditor's obligations regarding forgiven debt vis-a-vis your obligations. But you are correct that there may be an exemption if you are insolvent. Maybe the Legal Aid office you went to can help you file.

From the IRS Form 1099c at http://www.irs.gov/pub/irs-pdf/f1099c.pdf:

Instructions for Debtor

If a federal government agency, certain agencies connected with the

Federal Government, financial institution, credit union, or an

organization having a significant trade or business of lending money

(such as a finance or credit card company) cancels or forgives a

debt you owe of $600 or more, this form must be provided to you.

Generally, if you are an individual, you must include all canceled

amounts, even if less than $600, on the “Other income” line of Form

1040. ...

However, some canceled debts are not includible, or fully

includible, in your income, such as ... debts canceled in bankruptcy (see

Pub. 908). Do not report a canceled debt as income if you did not

deduct it but would have been able to do so on your tax return if

you had paid it. Also, do not include canceled debts in your income

to the extent you were insolvent. If you exclude a canceled debt

from your income because it was canceled in a bankruptcy case or

during insolvency, or because the debt is qualified farm debt or

qualified real property business debt, file Form 982, Reduction of Tax

Attributes Due to Discharge of Indebtedness (and Section 1082

Basis Adjustment).

Link to comment
Share on other sites

Ok...here are the website links below:

http://www.irs.gov/instructions/i1099ac/ar02.html (read #2 under exceptions bottom of page)

http://www.irs.gov/pub/irs-pdf/f982.pdf (read #4 under when to file. this form is for someone who is insolvent and later asked to pay taxes on forgiven debt)

http://www.irs.gov/pub/irs-pdf/f1099c.pdf (read instructions for debtor, paragraph 2)

http://www.carreonandassociates.com/articles/bewareirs.htm (read form 1099c, exceptions, and exclusion sections)

I came across a website yesterday which had legal information concerning settlement agreements with collectors, and how to insure they are legal and binding. Unfortunately, my computer froze and I had to reboot. I'll try googling to find it again. I believe the name was Consumer Advocates, National CAA, or something like that. Sorry I can't remember offhand, but I will post if I find it.

I wanted to add, that I've learned the hard way to verify EVERYTHING I'm told, especially if legal or government laws are not provided to support a posted opinion. One can be helpful, and still in error "sometimes".

Link to comment
Share on other sites

The information Normis posted, stating that settlement agreements in writing are "lies"

Nowhere did I state that. If you need help interpreting what was stated, I'm sure others here will be happy to assist you.

if I were insolvent at the time the amount was forgiven, there is a form I could complete so that it would not affect me in terms of past due taxes

Again, re-read what has already been posted.

I recently spoke with legal aid and was told, that forgiven interest does NOT have to be reported by the collection office.

The legal aid office is wrong. Only that portion of interest attributed to cash advances is excluded as income because they qualify as a lending transaction. The IRS does not consider a credit card charge to be a lending transaction, therefore the interest accrued for such is taxable if it's forgiven.

(Scott v. IRS US Tax Court 8110-04S Jan 30,2006)

I will retrieve the links from the IRS website, and post them here to support my above statements.

Be sure you're linking to either the applicable statute or case law. A person in a similar situtation as yours relied on the actual instruction booklet for forms 1099-c issued by the IRS for failing to declare discharged credit card interest. The U.S Tax Court and a Federal Appeals Court didn't accept that as an excuse:

the authoritative sources of Federal tax law are in the statutes, regulations, and judicial decisions, and not in informal publications provided by the IRS. Zimmerman v. Commissioner, 71 T.C. 367, 371 (1978), affd. without published opinion 614 F.2d 1294 (2d Cir. 1979)

Link to comment
Share on other sites

If a creditor or CA writes off even $1 of your debt, the IRS requires you to report it as income, regardless of whether the creditor/CA files the form or not.

Correct. There is ample case law to indicate that failure of a consumer to receive a 1099 does not convert a taxable event into a non-taxable event.

Though I don't really report the free Coke's that I win at McDonalds. Unless there are any IRS agent reading, I really do.

Link to comment
Share on other sites

Normis, this thread has went in three or four different directions. I only asked three questions:

1. Can collectors charge interest on a debt?

2. How can I be sure a settlement agreement letter is authorized?

3. Does it matter that the letter "c" was left off in the letter, when the company wrote they would not submit a 1099 form?

That's it!! Those were the questions I asked. You then replied by saying and I quote:

"The fact the collector has already lied to you should be a fair indication of their future intentions." You didn't elaborate or provide details. You just stated they had lied by offering me a settlement agreement. When I asked why you assumed they were lieing to me you stated, and again I quote, "Perhaps it's not a lie, merely ignorance. Anyway it's false thereby making it a FDCPA violation. What makes you so sure the collector has the authority to bind the corporation to the agreement? Just because I install lug nuts at GM doesn't give me the authority to give you a free car every year. The collector won't be there a year from now. How do you plan on enforcing any agreement?"

I understood your point, and gave it the benefit of the doubt, because collectors can be sneaky. So I asked if you could provide proof that their settlement offer was a FDCPA violation and not just your opinion. You then said, and again I quote: "You're right. Please disregard." That implied it was opinion, as you still did not refer me to legal written proof. An FDCA violation should be available for reading shouldn't it? I honestly would LOVE for you to be correct? But I can't challenge a collector by saying Normis from the internet said this and that.

Well, I don't want to argue or debate this anymore. We all have issues with bill collectors because we're in debt. However, I don't want my personal feelings about collectors, to cloud the facts. I just want answers to the three questions I've asked, with legal or government proof, not just opinion. This debt is also a written agreement for a personal loan from a financial institution, as mentioned in my other messages, not a credit card. Can we please just move on peacefully?

Link to comment
Share on other sites

Just in case they didn't get answered...

1. Can collectors charge interest on a debt?

Yes. The amount may depend upone your original credit agreement and/or your state laws.

2. How can I be sure a settlement agreement letter is authorized?

You can't. Ultimately, you may wind up suing to get it to stick...and even then, you might lose.

3. Does it matter that the letter "c" was left off in the letter, when the company wrote they would not submit a 1099 form?

Probably not. It goes to show how careless CAs are in pursuit of your money, and also demonstrates that they probably don't know the law either.

Link to comment
Share on other sites

willingtocope Wrote: "You can't. Ultimately, you may wind up suing to get it to stick...and even then, you might lose."

Thanks for this answer Willing. If there is no way to be sure a settlement agreement obtained from a collecter in writing is authorized, why are people constantly urged to "get it in writing"? If the letter means nothing, I'd rather not enter into the agreement. There has to be something, somewhere, online that states point blank the pros and cons with legal support. Lord knows I've googled everywhere, but have yet to find anything.

Link to comment
Share on other sites

I guess the point I'm trying to make is that there just aren't any absolutes. But, you do need to do everything you can to at least stack the deck in your favor. There are some basic tenets...

1. CAs and JDBs lie just for practice. You cannot beleive anything they tell you.

2. If it isn't in writing, it didnt' happen. (Yes...sometimes even having it in writing isn't enough. But, at least its something you can take to court).

3. One thing that works in our favor is that the FDCPA is written with "the least sophisicated consumer" in mind. If the LSC might have been fooled by what the CA or JDB said, then they've violated the law. Again, doesn't mean its a slam dunk case, but its something to take to court.

4. Be aware of what you sign. You need to understand what you're doing. That's why this web site is here. You need to educate yourself. (And, you'll need to wade through the piles of words to get at the facts and then decide whats right for you).

Link to comment
Share on other sites

I guess the point I'm trying to make is that there just aren't any absolutes. But, you do need to do everything you can to at least stack the deck in your favor. There are some basic tenets...

1. CAs and JDBs lie just for practice. You cannot beleive anything they tell you.

2. If it isn't in writing, it didnt' happen. (Yes...sometimes even having it in writing isn't enough. But, at least its something you can take to court).

3. One thing that works in our favor is that the FDCPA is written with "the least sophisicated consumer" in mind. If the LSC might have been fooled by what the CA or JDB said, then they've violated the law. Again, doesn't mean its a slam dunk case, but its something to take to court.

4. Be aware of what you sign. You need to understand what you're doing. That's why this web site is here. You need to educate yourself. (And, you'll need to wade through the piles of words to get at the facts and then decide whats right for you).

Hi Again Willing. Each time you've shared these points I've understood them, and I agree completely that being informed is of the utmost importance. As mentioned a few days ago, I was not required to sign anything. However, I received a signed letter stating the agreement terms from the JDB. Yes, the FDCPA is layman friendly. Thank goodness for that.

Link to comment
Share on other sites

Hi everyone!! Thanks for the replies. Although, I'm still not sure of the correct answers to my questions. :)

My goal is not to file bankruptcy for debt under $12,000, especially if the agreement is legitimate and I can settle the debt for $7300 by paying it off at $50 per month over the next 12 years.

The collector has also mentioned, that further settlement offers will be offered in the future if my situation improves and/or after I've made at least one year of timely payments. That means, I may be able to pay less than $7300 if I return to work.

Also, the first day of delinquency on my report is Summer 2002(when I made my last payment), so I'm hoping the history from the original creditor and this collector will be removed in 2009. I have not signed anything, but the collector has sent me a signed letter concerning the agreement as mentioned in my previous message.

If anyone has further answers, or has been in this situation, I'd love to hear from you. I'm especially interested in answers concerning the interest, and whether or not the letter I received signed by the collector I spoke with is enough, or if I should request someone else in the office sign the letter. Thanks

IMHO, by signing the agreement then you are coming under a new contract and the old OC contract is a thing of the past. Also, in your $50 payment plan over a period of 12 years, does that include the addition of interest added monthly? Seems like it would have the same effect as a minimum Credit Card payment. The 12 years would become 30 or so years and the JDB will love his new contract with you! Have you ever heard the phrase:" Just Say NO!" BTW, Normie has called me several things on various discussion groups on the Web, but I do respect his opinion and I do feel that he would not try to lead you astray in his replies to you on this thread. The Collector world does know him quite well and his answers to threads on Collection discussion groups are well received and respected. I believe he has also dabbled in Debt purchasing and undoutedbly knows the angles from a JDB point of view including the income tax thing. Make sure you get a Certified copy of the Assignment and Chain of Title of the alleged debt before proceeding any further with the 3rd Party Intervener!

Link to comment
Share on other sites

Signed or not, I find it VERY unlikely that ANY collection agency will wait a whopping 12 years to get paid !

WHO signed this supposed 'agreement' ??

Does this signer have the AUTHORITY to actually MAKE such an agreement for the company ?? Is this person a supervisor with authority, an exec for the company ? If he/she is merely a desk jockey collector, the likelihood of their authority is very small.

Once the debt is reduced to judgment, they cannot sue you again on the same debt. If you falter on the agreement, they will merely resort to OTHER enforcement methods to collect.

Link to comment
Share on other sites

Thank you to everyone for offering advice, suggestions, and opinions. A special thanks to those who have sent private prayers, encouragment, and support. I've appreciated tham all, and I'm wishing smooth transitions, and successful financial decisions to everyone. I've made a firm and final decision concerning this matter, and will begin payments. To avoid repeating all the details concerning interest, who signed the agreement, ect, an update can be found at the link below. That's it for me!! Happy New Year to all!! xangelx

http://www.debt-consolidation-credit-repair-service.com/forums/showthread.php?p=724513&posted=1#post724513

Link to comment
Share on other sites

Hey confused... I wanted to let you know that I have purchased your account now and I would like to enter into a payment plan.

The previous company sold this debt to me and I will take payments of $50 a month for the next 12 years.

It's all legal and I won't issue a 1099c for the debt.

This is what they did... and what I just did.. do you believe me? Where is my proof? What do I have to prove I bought the debt? What do I have to prove the OC kept accurate records?

Paying this company without getting all the documentation is a HUGE HUGE mistake.

I know you want to pay your debts but you are likely getting yourself into a mess you are going to regret later. You are resetting the SOL that will expire in 6 years and extending it NOW.. another 10 with this company. You are entering into a payment agreement with a new company. That makes it a new agreement.

What happens if this company sells it to someone who is A LOT more agressive? Now you have 10 years to deal with them.

PLEASE PLEASE don't send them any money and request validation and verification. Get all the facts and call a BK attorney who KNOWS FDCPA.

please....

Link to comment
Share on other sites

Guest
This topic is now closed to further replies.
 Share

×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.. For more information, please see our Privacy Policy and Terms of Use.