Charged Off Accounts Now with Collection Agencies

[Anonymous]

We have 95% of our unsecured accounts that have charged off and are now with collection agencies.  The balances range from $1,800 - $14,000.  Which accounts should be dealt with first? We will negotiate a settlement amount for all of them before any payment or payments will be sent and of course get the agreement in writing.

Thanks 

[RobertEG]

I will limit my comments to the FICO impact.

I would first find out which of the OCs may still legally own the debt.  An OC can ether sell the debt to a CA, or they can contract with a CA to collect the debt, yet retain legal title to the debt.

If the OC stills owns the debt, and you can reach an agreement with them, preferably for a PFD, then payment to the OC will necessitate them terminating the CA account.  That is the ideal. 

But if the OC has sold the debt to the CA, then even if you reach an agreement with the CA, they cannot delete any of the prior account delinquencies or the CO made by the OC, and they will remain in your CR.

So, my advice is to first find out who owns each debt, and deal with them on that basis.

[Anonymous]

Thanks RobertEG,

At this point we're not concerned with the FICO impact, we just want to pay off the debt and get this behind us.

[RobertEG]

If your are not concerned with any FICO impact (and, IMHO, I think you should be), then legal action will most probably come from those accounts with the higher balances.  The creditor holding the $14K debt is probably more likely to sue you than the $2K debt. And they can bring legal action at any time while still within the SOL statutes for your state.

So that rolls out your legal rug.  What is the SOL on each account?  Start with the DOFD on each account, then know whether any actions you have taken have reset account SOL.  Some states have short SOL periods and no provision for reset of the SOL by later account payments or offers to pay after the initial DOFD (e.g. Texas), while other states have longer SOLs and provision for their reset even upon an offer to pay.

Again, if credit scoring is not a concern, then the liklihood of legal action would be paramount.  And that is up to the creditor to fire the first salvo.

Message Edited by RobertEG on 04-25-2009 09:22 PM

[Anonymous]

Just out of curiousity...if you can pay off the debt, and get an increased fico score (which will save you $$$ for postage, and years of time) why wouldn't you do that?

[RobertEG]

Paying the debt will not increase your FICO score.  The CO or CA still remains, paid or unpaid, in your CR for 7 1/2 years  from the DOFD of the original OC account.

Paying the account has two benefits.  First, it removes the threat of any legal action against you.  And second, it will show anyone doing a manual review of your CR that you paid the debt.

But those concerned primarily with credit scores may choose not to PIF, and try to negotiate PFD offers.  An attempt, as a pre-condition for payment of the debt, for an agreement by the creditor to disregard the reporting rules, and delete prior reporting that was properly made.

A risky process, but some go to Vegas and gamble, and some dont.