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Lump Sum Settlement Offer Letter


Flippy
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I received a letter from a CA for a credit card. It states....

"The creditor has agreed to accept 29 percent of the balance listed above or $xxxx.xx as a lump sum settlement of the account."

Am I being naive that if I send them a certified check for the amount specified that this will actually settle this account in full and be done with it?

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Probably, but they'll also send you a 1099 for the balance. And/or if they're really slimy, they'll sell the balance to a JDB. If you have the money, can afford the tax hit and want to go this route, I would highly recommend that you first get it in writing that the check will be considered "payment in full."

Depending on the CA, the age of the debt, any previous communications you've had with them, and your ultimate goal it might be better to try to negotiate a PFD. If you are in a tight financial spot and are more concerned about just settling this, taking the settlement would be the way to go. If you have some extra cash to spare and you're more interested in rebuilding your credit ASAP, I'd recommend you attempt a PFD; but that's likely to cost you a lot more than 29% (if they agree to it at all).

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