Owes a CC account $8,000, The CC company turned it over to debt collector. The collector offered to settle for $3594.

What is the best thing to do in this situation? Can the sue if he ignores this?

I don't have a clue what to tell him.

I've known a few that got in troubles with CC, then opened new CC to transfer balance and again and again and again ... way deep over their heads finally having to file for bankruptcy ...

I don't have an answer for you though, sorry

How about this, "Pay your bills and don't be a deadbeat."

It only went to collections because he stopped paying. Deal of the day would be to pay the asked amount $3594.00 and move on no plealties or interest.

Does he have anything worth buying?

Be VERY careful. The difference between the actual amount owed and the settlement can be reported to the IRS as a form of income; taxable income.

Your friend might be better off trying to work out a payment plan with the CC Company.

Oh, this is great info. Never thought about this.

Not a lawyer or an tax accountant, but I have an Ex that has been down this path multiple times.

The best thing is open to a lot of discussion.

If he takes that offer, his credit rating will still suffer for 5 - 7 years after he pays the amount due.
He will get a 1099 of some sort showing the "forgiven" portion of the debt. He will owe taxes on that part.

He can ignore it and likely be sued. The judgement would be the full amount plus legal expense.
If he cannot pay, they will get a judgement against any assets he has...potentially leading to seizure.
His credit rating is still trashed for 7 years AFTER the legal stuff is over and the judgement is settled. He will also get to answer Yes to questions about judgments for years to come.

He could file bankruptcy and have his credit rating is trashed for 7 years.

He needs to be asking questions about how credit rating impacts his plans to buy houses and homes.

US Credit card debt has skyrocketed in last few years. People simply will. It do without.

Go to Disney, almost everyone there is financing the trip. In my opinion.

^^^ that's the best advice to give




That hard to really gauge, I guarantee if people saw me out they would think the CC debt is crazy because anything I can pay with a CC is paid with a CC...but it gets paid off twice a month. Yes, my name is Judd and I'm a points [censored]. I cannot tell you the last plane ticket I've paid out of pocket for.

What can happen if he does not pay it and does not file bankruptcy? The creditor will get a judgement against him for the amount owed plus interest, a law firm
can be appointed as a recievership over the account. They send an order to any bank he has an account with to freeze them, bank has no choice in this, they will
freeze it on the spot. The bank/s will charge a $125.00 fee, any checks that are out will not be paid. He will have no choice other than to contact the law firm.
The law firm can legally charge 25% of the amount as their fee as well so his $8k will go up to $10k plus interest.
Pay the $3594 now. If he is retired and on SS they won't touch it.

They will send him a 1099 for the amount they forgive.

Just buck up and pay off the debt. $8000 isn’t that large of an amount these day, unless you make minimum wage.

Yes. Move it to a zero introduction rate and work on it.

Just have him borrow it from his rich German neighbors

Man up to your valid obligation. Get on the phone and make a deal with the CC company. Tell them you will pay in full if they stop the interest accrual and set up a repayment plan...and stick to it. Tell the debt collectors he will only deal with the original company.

I hear radio/TV commercials all the time that offer these kinds of services. Obviously a fee involved, but likely better advice than what can be offered from all the experts on a hunting forum.

This!

Debt settlement is a double edge sword. Yes, paying the settlement ends the debt, but it damages credit for 7 years (account will usually be noted "paid for less than full amount owed"). But the credit might issue a 1099-c which could result in higher taxes.

But ignoring it? Bad idea. The past couple years I've seen more CC debt going to court for judgements. Thats much worse than the outcome of debt settlement.

Tell your buddy to call me tomorrow. I can spare 10-15 minutes to discuss the pros and cons with him.

MUCH better to pay tax on the settlement savings than paying the whole bill.

JR

Better to pay a tax for a debt forgiven than pay the debt? So true if you ain't good for your word. The guy should stop digging and realize his best avenue is to actually do what he promised to do which is to pay his debt. Scumbags bypass that which is right. This is all stuff the jackleg should've figured out prior to spending money he did not have.

Exactly right Hud.

I've been in the credit business for 24 years. Of the above advice, Uncle Zeek's is the best IMO. Yes, settling will damage credit for 7 years, but if he is already in collections, his credit is already damaged. A settled account is bad, but not as bad as an outstanding collection. If he can settle, he needs to do so. If he does not, they could go to court, and they could sue. If they do that, then his only out would be to pay it, or declare bankruptcy. If they don't seek judgement and just let it sit as a collection/chargeoff, then it will go away in 7 years. Does he want to roll the dice? Or take the safe way out? If your buddy want's advice from more than one professional, he's welcome to call me too.

I agree 100%.
When you borrow, you're obligated to pay it back. You might negotiate the interest rate but don't stiff the lender.

First off, none of us know his situation. Life happens sometimes unexpectedly and some are unprepared for it. The settlement is great. It is a mutually agreed dollar amount between 2 parties. Been going on since biblical times.

The tax; if required to pay and not eligible to use IRS form 982: Reduction of Tax Attributes Due to Discharge of Indebtedness. (This will be a question for a tax specialist); would be about 30% of the amount saved. In this case he saved $4406. Taxes would be about $1322. So he would spend $4916 to pay off $8000. Worse case scenario he still saved $3084. Settlement is a good alternative to bankruptcy in most cases.

Bad things happen to good people all the time. As Bobcat mentioned below, we don't know his situation. Maybe he was making good money, then had a medical emergency, and the income dried up. Maybe he decided to pay for an attorney for his child who is fighting to keep custody of their child? His grandchild? Maybe he lost his income during Covid because the government forced him to not work, and he has been struggling to try and catch up since. This last scenario I have seen a lot of.