Trying to settle and wants our checking account number..need help ASAP

[MKG122001]

We're trying to close on our refi loan this Tuesday, and are settling on a few old debts of my husbands before doing so. My husband got the CA to settle on $570, from $2283, however, they are asking for our checking account number "to secure the verbal agreement they made by phone". My husband said that there is no money in our account (we have two checking accounts, one that we use, and one that we dont..obviously, we would give him the number of the acct we dont use..). What is the purpose of this- are they going to try to withdraw funds? What do we do?!?! Can someone please advise ASAP. Thanks!

[SugarNspice]

I have always been advised never to pay a CA through your checking account especially since u settled for less on the account. I have learned never to trust a CA. Make sure you get everything in writing for a PFD and that the account will be settled in full for the payment you give. Sometimes a CA will try to start a new collection for the remaining balance. so make sure get it in writing

[AISLE4]

Always a bad idea to give a CA your banking info. They are all addicted to these phone checks. Instant gratification. I wouldn't do it. Pay with a money order. BUT if you have an account that you don't use for anything else, you can put the exact amount of the settlement into that account and let them take it with a check by phone, and then close the account.

If you don't have the settlement terms in writing you can count on the CA screwing you in some way. If you give them your banking info and don't have the settlement in writing, count on them stealing from you. It's not hard to say no. I'd tell them that I don't have a bank account. Their practice is to panic you into taking action NOW or else you'll have to deal with a dire consequence. It's hogwash. Tell them you'll send a money order when you get the settlement terms in writing. If they won't do it say, "oh well, we tried" and hang up. And be sure the settlement includes language forgiving the portion of the debt not paid.

[Recovering Attorney]

Would they get paid from the loan proceeds? If so, let them know who is closing the loan and hoe to contact them if they need confirmation. Otherwise, tell them you will be happy to give them a money order or cashier's check but you do not agree to them doing an electronic draft.

[MKG122001]

Yes, the loan proceeds are paying the collections off. I had thought that originally when trying to settle during a refi that we weren't supposed to give this info out, so I am unsure what to do.

We do not want an electronic transfer, so I have no idea what my husband should say to them at this point.

[CantCU]

I would never give my account information to a CA. If you need the money to them before closing, you could do a Western Union or a Money Gram but that costs money to send. They'd have to wait for my money order or cashier's check if it were me.

[thomassl]

I agree with Recovering Attorney. Also, if your husband settles for $570, the balance will be sent to you in a 1099 for tax purposes for you to file.

[MKG122001]

Thomas, can you elaborate on the 1099 statement or link to me something regarding it. We have never actually paid a collection before- only disputed- so I'm not at all familiar with this...Thanks!

[MissSilence]

Creditors are required to report canceled debts to the IRS on Form 1099 when the canceled balance is $600 or greater. Some will issue one for lesser amounts but are not required to do so. The amount on the form 1099 is the money you saved by settling your debt for less than the amount owed and this savings is considered income for tax purposes. So if you had $10,000 in debt to a creditor and they settled for $5,000 as payment in full they would report to the irs on form 1099 $5,000 and would also send you that form which you would then have to include it in your gross income on your tax return.

There are some people who would not have to do this due to an Insolvency rule which can be found in the irs publication 908 which is the bankruptcy tax guide. On page 21 of this publication starts the section for debt cancellation. You do not have to have filed a formal bankruptcy to take advantage of this insolvency rule. Being insolvent means that you have negative worth basically you owe more than you own. There are some requirements on reduction of tax attributes which requires one that uses the insolvency rule to reduce thier basis in things like rental properties, loss carryovers etc etc You would need to consult a tax professional for all the specifics if you think this rule might apply to you, they would be able to see if this pertains to your situation and would be able to help fill out form 982 if needed.

[nascar]

There are some people who would not have to do this

A couple other exemptions are for co-signors and joint obligors when only one of them is released from the debt (great way to get back at the ex!)