bd348

Owning up to a debt before being sued

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I have read a lot and haven't found an answer close to my situation. I defaulted on a loan from lending club which has now been sold to Velocity Investments LLC. They sent me a letter in the mail saying they own the debt and will start coming after me after the initial 30-45 days from notifying me. I called them and asked them to verify with me that they own the debt before I continue to speak with them about this. They said they will mail me the information soon and we exchanged names and phone numbers. They said I owe about $11,000. They would take monthly payments of $300ish or settle for around $7,000. 

I AM NOT looking to fight this as it is my debt.

I want to own up to the debt and pay it, however,

I didn't have a job last year (less than 10k) and currently have a part time job making $10 hour while going back to college. I have about $2,500 in the bank and live with my parents. I have no other assets. 

What are my best options?

From my understanding its make a payment arraignment ($300), settle in full ($7,000), or don't pay and be sued.

Do they negotiate, will they settle for a lower amount if I paid in full?

If I pay in full what do I need from them to show the credit bureaus I paid my debt back? 

Any information would be helpful. Thank you

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2 hours ago, bd348 said:

What are my best options?

From my understanding its make a payment arraignment ($300), settle in full ($7,000), or don't pay and be sued.

You pretty much nailed it.  I think they may be willing to accept less than $7,000 with some back and forth, but I doubt you'd get them down to $2,500 without some sort of leverage. (keep reading)

2 hours ago, bd348 said:

If I pay in full what do I need from them to show the credit bureaus I paid my debt back? 

You don't need anything from them.  Once the debt is paid, you simply dispute the status with the credit reporting agencies and the info should be updated to show the correct pay status ("paid" or "paid, settled for lesser amount".)  Just an FYI, your credit score won't improve just because the debt shows that it was paid.  The collection account will remain on your report for the next 7 years.  If you want it removed, you have to negotiate this with Velocity as part of your payment terms.  And get it in writing.

I just did a quick google search and found this:
https://www.lendingclub.com/info/consolidated-borrowerLoan-agreement.action
Notice there is an Arbitration clause in that agreement.  Because Velocity is a "subsequent holder" of the original loan, they are bound by that arbitration provision.  If you "require" their claim against you be settled by arbitration, they can no longer pursue their claims against you in court.  You're probably wondering what the difference is.  The short version is they will have to pay $2,000-$5,000 to get their claim heard before an arbitrator.  Debt buyers like Velocity have reportedly walked away from $30,000 lawsuits when faced with having to arbitrate their claims.  The reason is because they have very little invested in the debt itself and it makes more economic sense for them to dump the case and move on to something they can win with little-to-no resistance.

I can appreciate your willingness to repay or settle the debt so in your case, I would suggest you approach them with the threat of arbitration as your tool of leverage.  Something like

"listen, you guys claim you own a debt of mine.  If that's true, you are bound by the private contractual arbitration clause in the agreement for that debt.  If you sue me, I will demand the case be moved into private contractual arbitration.  Your out of pocket costs for this will be upwards of $2,000 or $3,000.  I'll cut you a check today for $1,000 to settle this matter in full on the conditions that you agree to remove this debt from my credit report and never again attempt to re-report it to any credit reporting agency or re-sell it to any other party."


They may try to argue they aren't bound by the arbitration agreement, etc, but hold your ground.  With some back and forth, you might be able to settle this for less than $2,500.  Of course, if they play hardball, you can ask the court order the case into arbitration at which point they will probably dismiss their lawsuit and you walk away.

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Since the OP is in Florida he should be aware that if he is sued he'd have to file the motion to compel arbitration in lieu of an answer.  Just filing an answer is enough to waive the right to arbitration in Florida.

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32 minutes ago, hades01 said:

Since the OP is in Florida he should be aware that if he is sued he'd have to file the motion to compel arbitration in lieu of an answer.  Just filing an answer is enough to waive the right to arbitration in Florida.

If the answer to the complaint raises the defendant's right to arbitrate, then arbitration is not waived.

Florida courts have routinely held that a party's active participation in a lawsuit (including filing a lawsuit, filing an answer that does not assert the right to arbitrate, moving for summary judgment, or conducting discovery) is inconsistent with the right to compel arbitration. See Green Tree Servicing, LLC v. McLeod, 15 So. 3d 682, 687-88 (Fla. 2d DCA 2009).

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