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Thread: "Settling" an old debt

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    Default "Settling" an old debt

    I thought there was a previous thread pertaining to this but I can't find it...anyhow...

    I have an extremely old bill that went to collections eons ago. I've received a letter in the mail from the collection agency offering to give me a 55% discount if I pay within 30 days. After I pay this, will they automatically update my credit report to reflect it as paid? Is that something I have to initiate? Is there anything else I should know about these settlements before I pick up the phone and do a check by phone? Thanks.


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    Default Re: "Settling" an old debt

    ok, well let me provide just a tad bit more info: This is a sprint pcs bill from about 5 years ago that I know I paid. However, the radio shack where I made the payment has long gone out of business, the checking account I used has long been closed, and of course I no longer have the receipt of payment. That's why I never paid it again because I was pissed off about the prospect of paying it twice.


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    Default Re: "Settling" an old debt

    generally, 'settlements' show up on your credit report as a 'bad debt' ... so while the collection agency may be happy to accept 45% payment at this point, every other potential creditor in the world will view this as proof that you 'stiffed' a creditor for 55% of the amount of money originally due. These other potential creditors are not going to know anything about the particulars i.e. you already paid this bill but can't prove it, they're only going to see that the bill went unpaid for months and will remain unpaid via a 'settlement'.

    There is also the issue of 'resetting the clock' in regard to credit reporting.

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    Default Re: "Settling" an old debt

    Yep....it will most likely show up as a "paid charge off' or "paid settlement". It will not help your credit score much.

    You need to send them a certified letter stating this was already paid, then send notice to the 3 major credit cmopanies(Equifax,Transunion and Experian) telling them to remove it. I believe they have 30 days from reciept of your request to remove it by law. But they are so backed up...they never get around to it. In 30 days, call them and make sure it is taken off.

    This worked MANY times for clients when I was in the mortgage biz.

    Good luck!
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    Default Re: "Settling" an old debt

    What happens is that the company that you originally owed the debt to, in this case Sprint, will close their files and write it off on the P&L (profit and loss statements). Collection agencies come in and pay x amount of pennies on the dollar for all of the accounts that the original company could not collect on. So, on a $550 bill, the collection agency is still making a hefty profit because they most likely only bought it for $35 or so (thereabout...just a guesstimate). Now, you can pay the collection agency that money, but it will not remove the negative mark from the ORIGINAL company. So, you'll have Sprint still showing the account going to collections and you'll have the collection agency reporting as "paid collection".

    If you DID pay this bill, start calling the bank in which you had this account with. You NEVER know...they may still have this information on file (or at least copies of checks--images--or bank statements) for you to dig through. It may cost some money...but if you truly did pay this total, and have been sent to collections over it, then you should really clear it up with Sprint and have all collection activity on that account stopped permanently.

    Also, for every collection agency that buys your unpaid loans, it becomes a new file...so they an keep selling your file and as long as the info is not wrong...it'll forever tarnish your record.

    As for what cameronfl mentioned...you cannot just send a letter stating the debt was paid without proof. Nothing will happen. Even if the credit bureaus removed it, if it is considered a "valid" debt (meaning indisputable) it will show back up on your report. But, if you get PROOF that it was paid (bank statements, check images) THAT will get it all taken care of.

    Ask Vamp how long banks keep records. So far, my current bank has all of my "computer generated" statements for the past 2 years...so, you never know!!

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    Featured Member GnBeret's Avatar
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    Default Re: "Settling" an old debt

    Don't know where you're located but, considering amount of time that's already passed, you should probably check to see whether or not they're still within the time period allowed for collection actions - just 'cause they're still trying to get you to pay doesn't mean they are.

    Also, beware that the amount "discounted" (in this case, 55% of amount owed) will be reported as "income" to IRS by debt collector.
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    Default Re: "Settling" an old debt

    You might consider checking out the forums at for a plethora of info.

    Also please PULL YOUR OWN CREDIT REPORTS to find out what is on there.

    Does this debt show up on your credit report right now? The reason I ask is there are alot of junk buyers out there who will purchase old debts just before or after they fall off peoples credit reports and then try to trick or scare people into paying things that are either out of the 7 year reporting stage or past the state SOL for lawsuits.

    Often these junk buyers will tack on tons of so called "fees". I have heard stories of junk buyers collecting $ from people not reporting the item as paid and then sell it to another junk buyer. One company that is known for doing this sort of thing and worse is Asset Acceptance,LLC.

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    Default Re: "Settling" an old debt

    Doesn't the 7 year limit apply to old debts, even if the same debt keeps getting passed from agency to agency? Because, it's not a new debt simply because some collection agency bought it. I thought that after 7 years it had to fall off no matter what. You may have to jump through some hoops to make that happen of course, but isn't that what's supposed to happen?

    Quote Originally Posted by pheno View Post
    When you lead a nontraditional life don't try to measure it with traditional milestones.

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    Default Re: "Settling" an old debt

    Quote Originally Posted by Bridgette
    Doesn't the 7 year limit apply to old debts...,
    Assuming you haven't done anything along the way to cause time period to begin running anew,"yes," as do applicable State statutes of limitation for filing collection actions - which may well be less than the 7 year limit re reporting.
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    Default Re: "Settling" an old debt

    Settlements are really pointless to make in my opinion.

    If you want this to not effect your credit report negatively, pay the whole amount you owe and make sure it is removed from your credit report.

    Collections stay on your credit report for seven years. If it is has been on your report for almost that long you are better off just letting it drop off.

    If you made the payment (to answer Venus's question) banks keep records of your statements for up to ten years generally. There will be a fee to pull a statement that far back. I have done this for customers before. They thought they made the payment, it wasn't pulled from the account for whatever reason, and they still had to pay all the fees.

    No matter how you go about it, if you havent already, pull your credit report. You can pull the report on www.annualcreditreport.com. They have links where you can dispute information online. When you dispute it online the reporting agency will send you a letter if they need in any additional information. The collection agency has 30 to 60 days to respond to the dispute. It can take awhile to get it resolved.

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    Default Re: "Settling" an old debt

    Quote Originally Posted by GnBeret
    Assuming you haven't done anything along the way to cause time period to begin running anew,"yes," as do applicable State statutes of limitation for filing collection actions - which may well be less than the 7 year limit re reporting.
    And what would that be? Aside from charging more to the account or something...

    Quote Originally Posted by pheno View Post
    When you lead a nontraditional life don't try to measure it with traditional milestones.

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    Default Re: "Settling" an old debt

    ^yes, I'd like to know also. In any event, I'm going to pull my credit report soon. I actually requested it via snail mail six months ago and never heard jack shit back. Guess I'll try the internet option this time.


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    Default Re: "Settling" an old debt

    I have a problem. I'm trying to pull my report and am unable to view my trans union report. They say I already have an account but none of my email addresses are working. NOW wtf do I do? I'm going to try the other two...


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    Default Re: "Settling" an old debt

    oh wow, the sprint bill is showing on experian as the collection agencies name and as being opened in 2004. greeeeeaaaaaat.


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    Default Re: "Settling" an old debt

    ^^^ that's what was meant by 'resetting the clock'. Financial institutions viewing your credit report have no way of knowing at first glance that the old debt owed to Sprint and the newer debt owed to the Collection Agency are in fact the same debt with a fresh incarnation.

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    Default Re: "Settling" an old debt

    yes, that seems to be the case on the experian report. On the equifax report it states 2001.

    And how the heck am I supposed the view the one that has me locked out? Can I resolve this by phone next week or does it need to be done in writing? *sigh*


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    Default Re: "Settling" an old debt

    Bridgette, it would be considered a "new debt" when the collection agency adds their fees for collecting the amount to the total. Which in turn, will forever reset the collection clock on the amount.

    LSM, I think you may have to do it in writing. You may be able to do it by phone, though...but you'll have to check the website. There's got to be an easier way for someone to regain access.

    Are you attempting to pull a credit report from each agency or are you going for a tri-merge (all three bureaus at once)?

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    Default Re: "Settling" an old debt

    Quote Originally Posted by LoveSexMoney
    On the equifax report it states 2001.
    Quote Originally Posted by LoveSexMoney
    oh wow, the sprint bill is showing on experian as the collection agencies name and as being opened in 2004. greeeeeaaaaaat.

    It sounds like this collection agency is violating the law by "re-aging" the account. It is supposed go by the last date of account activity with the ORIGINAL creditor.

    Please check out the forums at for some serious expert advice on where to go from here.

    DO NOT PAY THIS COLLECTION AGENCY A DIME! THEY ARE NOT DOING THINGS BY THE BOOK. If you want to pay off the debt do it with the original creditor.

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    Default Re: "Settling" an old debt

    Quote Originally Posted by VenusGoddess
    ... it would be considered a "new debt" when the collection agency adds their fees for collecting the amount to the total. Which in turn, will forever reset the collection clock on the amount....
    Although I would tend to doubt it works this way in either context (i.e., "reporting" vs. "collecting"), perhaps such is the case when it comes to the rules/regs governing "reporting," as I'm not very familiar with same. On the other hand, am quite familiar with rules/regs governing application/interpretation of prescriptive periods/statutes of limitation and while I'll freely admit that just because I'm unfamiliar with it doesn't mean it doesn't exist, am all but certain such is NOT the case when it comes to rules/regs governing "collecting." In this regard, creditor can add/do/etc. whatever they want (including making assignments to other creditors/debt collectors all the way down the line to Hell and back!) but, unless and until debtor does something (like send partial payment) to reset clock, time runs from last payment made by debtor and creditor (whomever that may be at the time) loses right to collect via lawsuit if fails to file suit prior to running of time prescribed for bringing such suits.

    In sum, clock can only be "reset" by party in whose favor it's running.
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    Default Re: "Settling" an old debt

    Quote Originally Posted by LoveSexMoney
    yes, that seems to be the case on the experian report. On the equifax report it states 2001.

    And how the heck am I supposed the view the one that has me locked out? Can I resolve this by phone next week or does it need to be done in writing? *sigh*
    I would call the credit reporting agencies about the lock out and how to dispute this collection. You can also visit each website for details on disputes.

    The laws do state they can not "reset" the date of the orginal charge off. That doesn't mean they follow the law always though.

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    Default Re: "Settling" an old debt

    Hmmmm...I'll have to go back and re-read that stuff. I was told that it was not based upon the original debt incurred date (or date of last payment) but by when the new file was opened and new fees accumulated...

    I'll go do some reading now! Thanks for clearing it up!!

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    Default Re: "Settling" an old debt

    unless specifically prohibited by individual state laws, when a collection service 'buys' a bad debt from an original creditor, it's legal for the collection service to levy a lump sum late charge on top of the original bad debt. This late charge or whatever you want to call it is supposedly due and payable to the collection service not to the original creditor. Thus if unpaid promptly after the date the collection service 'bought' the bad debt, this late charge can become a separarately listed delinquent debt with a separate date of inception on credit reports.

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    Default Re: "Settling" an old debt

    ^ Proof please because according to FDCPA the above "claim" appears to be incorrect.


    My lawyer explained to me that a collection agency adding on their own fees after the debt has been "charged off" and then sold to a CA by the OC is misrepresenting the amount owed on a debt.

    This is covered in Sec. 807-2A of FDCPA and Sec 808-1

    Without this protection CA's could go around demanding any amount they wanted, even 1 million dollars in so called "late fee's" on a $100 debt.

    Some CA's do in fact try to charge thousands of dollars more than the amount of the debt owed to the original creditor and they do so because so many people are not aware of their rights. But it is illegal to do so and they can in fact be sued for each and every violation of the law.

    Some CA's are so unethical that they even try to make debt claims on every person they can find that even has a similar name( that is what happened to me and how I learned all this stuff) to an original account holder. They do this in the hopes that people will:

    A) not know their rights on how to do disputes
    B) get scared of having bad credit
    C) both

    They play the odds. Think of it like this- if even 1 in 100 people pay up on these false or misleading debt claims the CA's make a profit due the fact that they buy old debts for pennies on the dollar. They pull these illegal actions because it works for them

    KNOW YOUR RIGHTS, people.


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    Default Re: "Settling" an old debt

    Quote Originally Posted by GnBeret
    In this regard, creditor can add/do/etc. whatever they want (including making assignments to other creditors/debt collectors all the way down the line to Hell and back!) but, unless and until debtor does something (like send partial payment) to reset clock, time runs from last payment made by debtor and creditor (whomever that may be at the time) loses right to collect via lawsuit if fails to file suit prior to running of time prescribed for bringing such suits.
    That is what I thought. But further down Melonie says the exact opposite. So, which is it???

    And, I have to go with TL/Vaughn here in asking: If every agency who buys a debt can add to that debt and report it as new debt indefinitely, what good does the 7 year time limit do? Wouldn't that basically render it null and void or at least totally useless? And how does that not become abusive, putting undue stress on a debtor (can't remember the term I'm trying to express), and how is that not illegal??

    Quote Originally Posted by pheno View Post
    When you lead a nontraditional life don't try to measure it with traditional milestones.

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    Default Re: "Settling" an old debt

    ^ I was always told that what Melonie says is true. I have a few lawyer friends who deal with this exclusively and will be asking them about it.

    And to answer your question...I was told that the debt (with reasonable collection fees) was valid and would re-start the clock. But, I'll find out from the lawyers and update what they say.

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