Sequencing Debt Settlement

[sterankofan18]

How important is it to sequence debt settlement?

I just negotiated 2 debts and dont have any money for my 3rd.

I am worried that this 3rd creditor will see I settled the other 2 and no that Bk isnt really an option.

Anyone with thoughts on how this plays out ? ? ?

[willingtocope]

Unfortuneatly, that's the way it can happen. You settle with some, and they mark your credit reports "settled for less than the full amount" and they others notice and get more agressive. Not much you can do except wait to hear from them.

(Hopefully, you settled the others with the original creditors and have something in writing to the effect that it closes the account and they won't sell the balance)

[sterankofan18]

The language I have received reads: "This letter is to confirm the arrangments you have made to repay your delinquent account which was purchased from XXXXXXX on /1/01/2006. We have agreed to settle your account for payment of $xx,000 received in good funds in our office no later than 8/24/08"

I presume this is sufficient. If they did sell the remaining balance I think I would have a VERY strong case of unconscionability in any court as the language seems pretty 'tight' to me. Is it what I would have written,...no. But it is good enough for me and I didnt want to dicker over language. I was happy I was able to get them to take .22 cents on the dollar.

[willingtocope]

The language I have received reads: "This letter is to confirm the arrangments you have made to repay your delinquent account which was purchased from XXXXXXX on /1/01/2006. We have agreed to settle your account for payment of $xx,000 received in good funds in our office no later than 8/24/08"

Ouch. This implies that what you're settling with is a collection agency working on behalf of a junk debt buyer (someone other than the original creditor). Hopefully, it will be okay...but...do realize that CAs and JDBs lie just for practice. I'm not trying to scare you, and I hope I'm wrong, but keep a close eye on your credit reports and be sure to open all mail. You may not have heard the end of this.

[sterankofan18]

Ouch. This implies that what you're settling with is a collection agency working on behalf of a junk debt buyer (someone other than the original creditor). Hopefully, it will be okay...but...do realize that CAs and JDBs lie just for practice. I'm not trying to scare you, and I hope I'm wrong, but keep a close eye on your credit reports and be sure to open all mail. You may not have heard the end of this.

I am not worried. I am an attorney. If anyone tries to collect on these debts I am comfortable with the language and would feel comfortable arguing the facts before any judicial body.

[Flyingifr]

Besides, your 22 cents on the dollar still gives them a good profit - they paid less than 5 cents on teh dollar.

[willingtocope]

And, of course, you do get to pay taxes on the other 78%.

[sterankofan18]

And, of course, you do get to pay taxes on the other 78%.

Yuh, thanks for reminding me.

Can I ask for a 1099 now or do I wait until tax time? If I do not ask - will they send me one anyways?

My experience was with Portfolio Recovery Services & Cavalry Portfolio Services.

All in all,...I thought they were professional and honestly was impressed with their customer service.

Are they considered reputable?

[sterankofan18]

Also went on-line to each CA's website and was able to download and print that my account has OUTSTANDING BALANCE - $0.00

Will save for my records.

[willingtocope]

...Portfolio Recovery Services & Cavalry Portfolio Services.....Are they considered reputable?

Ahhhhh, no. But if a). they knew you were a lawyer, or 2). knew you were going to cough up omoney without too much hassle...then they probably didn't need their normal hard ass attitidue.

You should probably call and ask for your 1099c's. They may not send them to you (according to the IRS, they have 3 years after the "event" that stops their collection efforts) but, they'll at the very least wait until 1S next year. Also, realsize that whether or not you can be considered "insolvent" and therefore not have to pay taxes does depend on you financial situation at the time the 1099c is issued...NOT at the time you settled.

[Debt Guy]

They may not send them to you (according to the IRS, they have 3 years after the "event" that stops their collection efforts) but, they'll at the very least wait until 1S next year. Also, realsize that whether or not you can be considered "insolvent" and therefore not have to pay taxes does depend on you financial situation at the time the 1099c is issued...NOT at the time you settled.

I do not think that is correct.

The settlement itself is one of the stated "trigger events" and would supersede the "3 year with no activity" trigger.

And, I think the insolvency test is at the instant before the settlement. The IRS is quite clear about that.

Besides, every taxpayer knows they are legally obligated to declare the income whether or not they receive the 1099. Right.

I refer the OP to this thread for more discussion and background on 1099c

http://www.debt-consolidation-credit-repair-service.com/forums/showthread.php?p=959377#post959377

[willingtocope]

And, I think the insolvency test is at the instant before the settlement. The IRS is quite clear about that.

Perhaps, but the 1099c will be dated for the tax year in which it is issued. While it may be possible to go back and restate your 1040 for the year in which you were insolvent, you'll still have to confince the IRS that is when the income occured...not for the year listed on the 1040.

As usual, the IRS's stand is going to be "pay us now, and we'll decide later if there are corrections to be made".

[Debt Guy]

Perhaps, but the 1099c will be dated for the tax year in which it is issued. While it may be possible to go back and restate your 1040 for the year in which you were insolvent, you'll still have to confince the IRS that is when the income occured...not for the year listed on the 1040.

OK. We are talking about a settlement and this particular taxpayer who just completed his settlement. The odds are 99.5% that his 1099 will be dated this year which is the same year of the insolvency test. The test is the instant before the settlement.

If for some reason, he did not get his 1099 until some later year, yes, he will have to dance with the IRS. Sorry, that is the way it is. But, I think his argument would be oh so much easier if he had voluntarily declared the income on this year's return. Even the IRS does not expect you to pay twice.

I think we are making this all too hard.

The hard ones will be the scofflaws who receive 1099s as a result of the "3 year no activity trigger" or one of the other trigger events. I agree in that case that the income will have to be declared during the year the 1099 was issued -- after all, that was the year of the trigger event. How one handles the insolvency test -- well, it is awfully murky right now. I don't think anyone has figured out the answer for that yet.