Thank you! This is music to my ears. Every little bit counts.
Update: I called Chase at 8:30AM this morning and verified that Chase owns the debt and ARS is the collection agency. I called ARS and discussed the terms of settling my biggest 2 debts. Next step is the Debt Verification letter, which is being sent to me overnight (but they said it will actually take 2-3 business days).
-I was not able to negotiate with them to write "Paid in Full" on credit report (it will say "Settled in Full" - will not mention for how much). They were adament that is against the law to represent it as "Paid in Full", when it is not.
-I was not able to negotiate lower than offer I got in mail - 25% of total debt owed (but I think this is pretty good all things considering, paying $8k to settle $31k - which I never would have been able to afford lump sum)
-They are going to send me a letter 14 days after receiving payment to give me a record of the transaction that I can use for my records (update credit score if Chase doesn't, record for future collections, etc.)
I'm going to pay via Bank of America Bill Pay (found this recommended as one of the safest ways online), rather than:
-paying on the phone (won't have a record)
-online with debit card (they could overcharge my account, or repeatedly bill me)
-or with a check (same as debit card because they'll have acct/routing #)
I don't know if I'm being too cautious in terms of payment, but this is a lot of money (to me). The other options are cashier's check or money order both which seem inconvenient (can't just pay online).
QUESTION/Major concern: my girlfriend brought up to me that I might owe taxes on the money that is being settled (ex. $31k owed - $8k settled = $23k taxable income.. could be a lot of money). Does anyone have insight on this (has anyone dealt with this in the past)? Is there anyway I can avoid an exorbitant tax bill? It seems like owing money to the IRS is even worse than owing money to collections agencies! I may create a separate thread (after doing more research) on this topic, if I don't get any replies here.
1. pay ARS after receiving Debt Verification letter
2. call next Collection Agency (United Collection Bureau representing Citibank for debt of $2200)
Thanks for the response. Seeing some articles online that are definitely getting me concerned about the tax implications. Such as: https://www.creditcards.com/credit-card-news/forgiven-debt-1099C-income-tax-3513.php
They're recommending to "Consult a tax adviser before finalizing a debt settlement, and ask for a tax preparer who is knowledgeable about 1099-Cs."
From what I've read online, need to prove I'm insolvent for the entire amount that is being forgiven ($20k+). Apparently this is something the collections agencies intentionally avoid telling you. Then you settled the debt, and you get a big bill come tax time.
The cynical part of me wonders if this was conveniently left out of the conversation I had when settling this debt. Maybe that's why they send you a letter 14 days after debt is settled (probably includes a 1099-C?). Also, probably why to quote the manager at ARS "it's illegal" to mark a debt as "paid in full" if it isn't.
Feeling kind of frustrated, because I just want to settle this debt and move on with my life, but I'm hesistant not to take this seriously as this bill could be thousands of dollars (maybe close to the same amount I'm settling). Not sure what to do (I guess I have to contact a tax adviser) - but this is going to cost more $$ and more time.
Weighing my options:
1. Settle this debt before contacting tax advisor
2. Wait to settle debt and contact tax advisor first
I'm tempted to go with #1 because:
-I need to get my credit cleaned up ASAP, so I can start looking for apartments.
-Maybe if I pay all my debts at once my savings will go to $0 and I will actually be insolvent, and I'll have the bank statements to prove it
But I'm slightly terrified because:
- A miscalculation could result in something like a $6600 tax bill from the IRS that I won't be able to afford. :/
- Not sure how my paycheck factors into this?
You will receive a 1099 for any amount over $600 written off or whatever... it is what it is.
Thanks for the response. I contacted my accountant and I feel a lot better about the situation.