Settle or not? Hire a credit card debt specialist ?

[Anonymous]

I have 10 credit cards with a balance of $30,000. I haven't been making payment for about 4 months now. 2 cards were already turned to collection. My credit score was dropping from 750 to below 500 in a year. My mother is offering to give me a personal loan to pay all my debts. Since my credit is already below 500, should I settle? I called the bank and they said they are willing to settle for 80% but they will report "paid but not in full".
What should I do ? Settle with the bank on my own then paid with my mom's money? Or should I hire a third party company to negotiate for me to get a better settlement ? I'm only 26 (yes young and stupid). I haven't graduated yet and haven't owned a home.

[rmduhon]

If your mom will loan you the money pay the accounts. The chances of settling with most of them is small since it's well within any SOL and the amounts are high. Concentrate on the cards that aren't in collections first to avoid more damage to your scores.

[RobertEG]

Paying, regardless of whether in full or a settlement for less, discharges the debt and requires the creditor or debt collector to update the debt or collection balance to $0.

The OC account or collection thereafter will no longer report a delinquency status, and thus the derogs will remain, but will no longer "update" and extend the negative effect of the reporting.

The primary distinctions between a settlement for less and paying in full are twofold.

First, the difference between the full debt and the accepted settlement amount is cancelled, and is thus considered by IRS to become taxable income.

If $600 or more, the debt owner must send a form 1099c to you and to the IRS, and it may become taxable income.

However, if you show insolvency at time of your payment, the cancelled debt may be exempted.  You should consult a tax specialist if you receive a 1099c.

Second, the owner can choose to report "settled/paid for less" as an additional special comment.  That informs others that you have a prior history of not paying the entire debt that you assume, and could be a factor in any future creditor decision making.

You can, as part of your settlement negotiation, add the condition that they agree not to report any comment related to paid/settled for less.  Absent that comment, your credit report will appear the same as if the debt had been paid in full.

[CreditInspired]

Are you presently employed? Will you really be able to repay your mom in full? In what length of time? This is an extremely large debtload for a 26-year old and one that could put a mom-adult child relationship in peril if you fail to repay the personal loan and she needs the funds. Agree with @rmduhon, if you go this route, concentrate on debts not in collection. On another note, sometimes one may have to consider bankruptcy, of course, as a last resort. Review all your alternatives. GL on whatever you decide.