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Ask Dave

Splitting Them Up

Who gets paid, and how much, among the creditors with whom Lori wants to do a settlement?

QUESTION: Lori wants to pay off creditors that are way overdue. A friend loaned her some money, and she wants to use it as well as possible. She has $20,000 cash and $26,000 in debt. Some of that, though, is to the IRS. How should she break this up?

ANSWER: Divide 20 by 26 and you get 77 percent. Everyone will get about 3 quarters on the dollar. Just pay the IRS straight out to settle this. Take each debt and multiply it by 0.75 to get the amount that each will get. Then call them and offer them less than that so that you have some room to negotiate and come up.

It will be a process, though, because you are not dealing with intelligent life when you deal with a collector. Argue with them until they accept 75 cents on the dollar. There is no magic wand that makes them take a deal. This isn’t going to be a pleasant process because they lie, yell and call you names. But you’ll get through it.