US Bank Settlement Offer

[Anonymous]

DH has a charged off account with US Bank in the amount of $4700. The account was charged off in September 2014. We didn't find out about it until earlier this year and really wanted to get it paid before it went to collections, but life got in the way. Truck needed new transmission, CC debt with high interest rate, and now I'm unexpectedly expecting (right after I purchased a new car of course.) Taking care of the CC debt first was the strategy I suggested and I think it was best since he was paying quite a bit of interest and had high UTIL. He got that down to zero. Transmission was paid off last month. Now, unfortunately, he doesn't have enough to pay the charge off in full w/o making payments. Our plan was offer to pay the whole thing if they'd delete the charge off. Any experience with US Bank being this ameniable?

So this week US Bank sent a settlement offer of $700. The letter seems to say they will not delete the charge off notation and will note it wasn't paid in full.

Upon successful completion of your settlement agreement, we will no longer attempt to collect on this debt. In addition the status of your account and the amount of the cancelled balance that will rmain chargd off will be reported to the credit bureaus. The amount cancelled will be reported to the IRS and issue you a form 1099C.

With a baby coming in a couple months the $700 gives relief. We're not out a lot of cash and the debt doesn't go to collections. The serious negative is already there and only time is going to heal it. (They've been updating the status monthly for over two years with FP Failed to Pay.) However, the mortgage loan is his name alone and we were trying for a LOC for home repairs when we found this charge off. The charge off is preventing us from doing this anyway. How bad is it really if we settle and then try for the LOC in another year or two? How long do the banks hold it against you?

In a perfect world we would like this charge off removed from his credit report. Is this a realistic option? He is a current US Bank customer with a checking/savings account, CC, and LOC. I'm wondering if that will give him some slack. What would be the second best scenario?

[Anonymous]

Well if you don't settle they'll send it to an outside agency for collections then you'll have 2 derogatory marks (one from US and one from Collection Agency) as opposed to just the one showing Charge Off from US Bank.

Honestly that's a great offer that's about 15% of the original amount I guarantee you if you don't take the offer soon it will be gone and you'll end up paying over $1,000 to settle it.

So here's how I see it paying it now you'd have 1 mark instead of 2 you'd get a really great settlement by only paying $700 and for future lenders it at least shows as paid even if it's settled for less it's better than unpaid.

Unless you have no money and don't plan on applying for anything major until 2021 (after the 7 year expiration) I'd recommend taking the offer.

[Anonymous]

Congrats btw

[Anonymous]

Hey thank you.

Agreed the settlement amount is way less than we would have offered had we tried to negotiate so it's extremely tempting. The long term ramifications make us nervous. We plan to buy a new house in 4 years or so when little one starts school. My scores are in the 780s right now, but who knows what life will bring. I keep reading that this settlement will look really bad in a manual review which I'm pretty much thinking revolves around mortgage things. Like I said we want to do an equity loan or LOC to upgrade the house so we can sell it which I'm assuming would be a manual review. I'm trying to assess how much settling will count against us and if it will completely prevent us from getting access to our equity.

[Anonymous]

Okay so you said,

"We plan to buy a new house in 4 years or so when little one starts school."

This account will be removed at the 7 year mark from the credit report regardless of if you settle it or PIF which according to what you said earlier will be in 2020 or 2021 depending on the date of first delinquency. So 4 years from now will be 2020/2021 and the account will be removed from all reports (you can get it removed a few months earlier to using Early Exclusion).

[Anonymous]

I did say that. However, sooner than 4 years (like in the next 1 year) we need to do some home updates and need access to the equity that we have in the home to do so. This means DH's credit report will need to be in a good place with this charge off.

I think my burning questions are:
How long is a settlement held against you in a manual review (typically)?
Does US Bank typically accept a pay for delete offer?

[Anonymous]

US Bank does not do Pay for Delete and even if they did it would be the full $4,700 not a dollar less.

A settlement isn't necessarily "held against you", also if they do update the account to paid there's no guarantee they're actually entering in the comment "settled for less than full amount". It will remain on the report the 7 years or 6.5 with EE and available for manual review if that comes up.

But say you decline their settlement it goes to a Collection Agency which is a 2nd derogatory mark and they definitely aren't settling the account for 15% of the value.

[Anonymous]

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@Anonymous wrote:
US Bank does not do Pay for Delete and even if they did it would be the full $4,700 not a dollar less.

A settlement isn't necessarily "held against you", also if they do update the account to paid there's no guarantee they're actually entering in the comment "settled for less than full amount". It will remain on the report the 7 years or 6.5 with EE and available for manual review if that comes up.

But say you decline their settlement it goes to a Collection Agency which is a 2nd derogatory mark and they definitely aren't settling the account for 15% of the value.

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Personally, I would take a 15% settlement on a two year old account that size without a second thought.

[Anonymous]

+1 Norman I'd only take time to think about it if it were 5+ years old but this won't expire until 2021.