How does a CCD settlement work?

[stdreb27]

So a while back (like I'm still in the 6 month 0% interest period) we opened a credit card account. We put an emergency car repair on it. However today I got in the mail a letter saying bla bla they want to settle the account for a x% of the balance. If I do that it says. "The remaining balance will reflect as settled on your credit bureau file." This is unsolicited. Is that going to negatively impact my credit score?
Second it says the "IRS requires financial institutions to annually report all debts in excess of x discharged by mutual agreement between the institution and their customers. If the settlement amount that you agree to pay results in a discharge of more than x of the principal balance due on your account, we will report the settlement to the IRS. "
What are the tax implications?

 

[reefraff]

I seem to remember reading that if a finance company forgives part of principle on a debt you have to claim that as income but not interest.

 

[acrylics]

Originally Posted by reefraff
http:///forum/post/2993285
I seem to remember reading that if a finance company forgives part of principle on a debt you have to claim that as income but not interest.
I believe you're correct, they should send a 1099 at the end of the year.
Call your CC company to verify how it will affect your credit score and get that in writing prior to doing anything of the sort. You don't want them to put a "charge off" on there, bad juju.
OTOH, as a matter of principle, I would not take the offer unless I was already near destitute. You made the bill, you received the product, you pay (I mean that in the kindest possible way.) It's kind of an honor thing with me.
I have little doubt this is being used by the CC company to justify them getting stimulus money. Something I simply don't support.

 

[stdreb27]

Originally Posted by acrylics
http:///forum/post/2993325
I believe you're correct, they should send a 1099 at the end of the year.
Call your CC company to verify how it will affect your credit score and get that in writing prior to doing anything of the sort. You don't want them to put a "charge off" on there, bad juju.
OTOH, as a matter of principle, I would not take the offer unless I was already near destitute. You made the bill, you received the product, you pay (I mean that in the kindest possible way.) It's kind of an honor thing with me.
I have little doubt this is being used by the CC company to justify them getting stimulus money. Something I simply don't support.
Don't get me wrong, I agree with that principal to a point. However, it was unsolicited. I'm paying much muck more than the minimum payment, we've been planning on lump sum paying it off before the 6 mo period. Then I get this thing in the mail, that says settle the debt. If they offer and I didn't ask. Then I really don't have the problem eithically than I would with those "if you owe 10,000 dollars or more you have the right to settle your debt for less than you owe" debt places.
The letter is repeated word for word what they said would be on my wife's credit score which was "settled". (this is literally her first revolving account) So I'm wondering effect that has on a credit score... We're trying to buy our first house soon.

 

[acrylics]

Originally Posted by stdreb27
http:///forum/post/2993351
The letter is repeated word for word what they said would be on my wife's credit score which was "settled". (this is literally her first revolving account) So I'm wondering effect that has on a credit score... We're trying to buy our first house soon.
Principle aside. If I were a lender and I saw that on an applicant's credit report, I'd be more than a bit hesitant.
I was curious so did a little search, don't do it. From what I read, FICO interprets it as "settled less than full balance" and in the same class as a "charge off"

 

[reefraff]

If you are making payments why would the company offer to settle for less? Something doesn't sound right.
I wonder if this is some kind of a scam to score some benefit from the toxic asset funds from the feds.
I am not sure what the deal is but it might be worth calling your congressional rep's local office and telling them the story.

 

[meowzer]

Originally Posted by acrylics
http:///forum/post/2993356
Principle aside. If I were a lender and I saw that on an applicant's credit report, I'd be more than a bit hesitant.
I was curious so did a little search, don't do it. From what I read, FICO interprets it as "settled less than full balance" and in the same class as a "charge off"
+1....don't do it...just continue to pay like you are and pay off before the 6 months...
It's not worth the blip it will put on your cred.
Altho you may not listen to me since I am from Oklahoma

 

[stdreb27]

Originally Posted by reefraff
http:///forum/post/2993450
If you are making payments why would the company offer to settle for less? Something doesn't sound right.
I wonder if this is some kind of a scam to score some benefit from the toxic asset funds from the feds.
I am not sure what the deal is but it might be worth calling your congressional rep's local office and telling them the story.
Great go to the government for answers. I'm sure she is a high risk borrower. This literally the only entry on her credit report.
Originally Posted by meowzer
http:///forum/post/2993469
+1....don't do it...just continue to pay like you are and pay off before the 6 months...
It's not worth the blip it will put on your cred.
Altho you may not listen to me since I am from Oklahoma

Well I did some research and an account notated as settled has the same fica implications as a uncollected account. So it isn't going to happen.

 

[tangman99]

I'm curious about them contacting you also. Are you sure it was legit? I can't imagine them doing that. Now I know American Express was offering people like $300.00 to buy their card back as they wanted to reel in what cards from people that would not qualify under their revised approval system. I don't think they were forgiving any debt though.

 

[stdreb27]

Originally Posted by TangMan99
http:///forum/post/2993952
I'm curious about them contacting you also. Are you sure it was legit? I can't imagine them doing that. Now I know American Express was offering people like $300.00 to buy their card back as they wanted to reel in what cards from people that would not qualify under their revised approval system. I don't think they were forgiving any debt though.
It looks legit. She'd fit the profile of who they wouldn't want... Same font, and location that the typical stuff comes from. They are accurate down the the penny on how much is on the card.

 

[jackri]

I'm not sure why they would take less either if everything is being paid on time. If the deal goes through make sure you get in writing something to the effect of TAKEN AS SETTLEMENT IN FULL and keep that SIGNED copy from them FOREVER AND EVER AND EVER AND EVER AND EVER as you can tell they are lying if their lips are moving.
Otherwise -- I would pay what I honestly owe not to be back doored by something.