Debts with PRA

[Anonymous]

I hope this is within guidlines. I'm looking for some guidance on how to proceed with debts owned by PRA. Ideally I'd like to PFD, but from what I read they don't seem to go for that. These are legitimate debts, so I don't feel comfortable disputing as inaccurate, etc,  what actually is mine. The two accounts total roughly $1000. I can save up for a few months and have that ready for negotiation.

My question is: What can I do to mimimize any negative effects on my credit report when I pay them off? It would stink to have the SOL start over if I pay these. I have a number of other good things going in my credit repair process. With the exceptions of these two with PRA and a medical with RMP, I have a 100% payment history and a few new credit card accounts and a new car loan, so I'm moving in the right direction. We'd like to buy a house in the next couple years, so I want to get this going quickly. PIF? Settle?

I'm in TX. The debts are from credit card charge-offs in Mid-2015. Same time period for the medical debt. I'm willing to pay in full if necessary. Just want to minimize negative effects as much as possible.

[RobertEG]

Their are two relevant, and unrelated, limitation periods.

SOL refers to the period within which they must initiate civil action if they seek a judgment.  If you pay the debt, then SOL becomes moot, as there would no longer be any issue of a judgment on delinquent debt.

Thus, I assume by SOL you are referring to the credit report exclusion period of their reported collection.

Payment or non-payment of the debt has no effect on credit report exclusion.  Credit report exclusion of a collection is required no later than 7 years plus 180 days from the reported DOFD.  No, payments of any kind will not result in extension of the period the collection will remain in your credit report.

As a resident of Texas, you have an enhanced debt collection practices statute that permits you to still send a DV after 30 days from dunning notice, and then requires that the debt collector temporarily delete their collection if they dont provide validation within 30 days of your DV request.

You thus might consider sending a DV under the TX Finance Code, which could get the collection temporarily removed if they lack ability to validate immediately.

[Anonymous]

Thanks for the terminology clarification. I'm still trying to put together some of the pieces of the puzzle.

PRA originally had these reported incorrectly several months ago. I disputed these through Credit Karma and they disappeared long enough for me to get a new car loan at a decent interest rate, but they are back now and correct, so I suspect that if I sent a DV, it'll be for nothing in the long run. They probably have that info ready and waiting.

Looking a year or two down the road towards buying a home, is there much difference in credit score or how a lender might view these if I pay in full vs settle for say 50%? Just trying to make intelligent moves from here, thinking long-term. I realize they'll affect my score for a while, just not sure to what degree.

[RobertEG]

The difference between paying in full and settling for less is primarily one of later perception by a creditor if they do a manual review.

Obviously, settling for less discharges the debt the same as paying in full.

While a tax obligation may arise with IRS on the difference between the full debt and the settlement amount, for which you will  receive a form 1099c from the creditor, that is a separate issue unrelated to credit reporting.

As for credit reporting, the creditor has the option, if they agree to a settlement for less, to also report a special comment recording the fact that the debt was discharged, but settled for less than the full amount.  That means the creditor took a loss in having extended credit to you.  That is never a favorable comment to any future creditor, as repetition of that pattern would mean lending to you would result in a loss.

I would advise that, as part of any settlement offer, you include a provisiion that they agree not to report any reference to a CRA that the debt was settled for less than the full amount.  It is optional reporting.  Absent that special comment, the account will then appear in any manual review the same as if you had paid in full.

[Anonymous]

Beautiful! I think this will help get things moving in the right direction. Thanks!