Should Settled Debt Still Report a Balance?

kayla027 · ‎03-11-2015

Any insight on this is greatly appreciated.

My fiance recently settled on some debt from an old apartment landlord from 3 years ago. He owed $1500 but settled on paying $1000.

On his credit report, it's still reporting a balance of $500. When he called to talk to the collection agency about this, they said it will also report a balance, but the account will be marked as 'closed' instead of in collections or an open account. Is this correct? I though the whole idea of settling was that it would report $0, but it would state the account is 'settled'.

We are trying to move into a new apartment soon and we are afraid we won't be approved if it shows we still have monies owed to a previous landlord. Has anyone had any previous experience in this situation?

Thank you!

Anonymous · ‎03-11-2015

Yes, it should be reporting a $0 balance. The status should have been changed to Settled/Less than full amount .. or a variation of that message stating that you settled for less than the full amount owed.

But.. a settlement is just that.. you can't settle for like 50% of the payment. That would be an agreement to a payment arrangement or something like that.

If you settled and they agreed, then yes, it should report a balance of $0, not a cent more.

RobertEG · ‎03-11-2015

+1

Settled means the debt is satisfied, and requires update to $0 both as to the remaining debt and to the amount remaining under collectino by any non-owner debt collector.

The $500 difference is the amount of the debt that was cancelled by their acceptance of less than the full amount.

If it had been $600 or more, they would have been required to send a form 1099c to both you and the IRS, reporting the cancelled debt.

However, that issue is irrelevant to credit reporting.

I would send a dispute to the CRA accompanied by proof of payment, and if you have written agreement, that is was accepted as satisfaction of the debt.

kayla027 · ‎03-12-2015

Thanks, RobertEG. That is exactly what I thought, but we got tired of arguing with the guy at the collection agency.

I'm going to scan a copy of the letter we received stating that the debit is satisfied in full and we are no longer obligated to this debt. Hopefully this will work and we can get that reported as $0 owed.

Thanks for your response!

gdale6 · ‎03-12-2015

@kayla027 wrote:
Thanks, RobertEG. That is exactly what I thought, but we got tired of arguing with the guy at the collection agency.

I'm going to scan a copy of the letter we received stating that the debit is satisfied in full and we are no longer obligated to this debt. Hopefully this will work and we can get that reported as $0 owed.

Thanks for your response!

If you dont get satisfaction this way then your next step would be a CFPB complaint against the CA.