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Ask Dave

Cleaning Up The Old Debts

Joe received a call from a creditor asking to negotiate a debt with Joe. None of the debt shows up on his credit report. Should he pay this debt anyway and how does he negotiate it?

QUESTION: Joe in San Antonio received a call from a creditor a few days ago asking to negotiate a debt with Joe. None of his previous debt is showing up on his credit report. Should he pay this debt anyway and how does he negotiate it? Dave thinks there are three ways to approach this.

ANSWER: Look at it three ways. How will it affect your credit bureau report, and can they actually sue you, and the moral obligation of you actually owing the money. They are a little bit in conflict with each other.

Legally they can still come after you in most states, and at some point they may. What’s happened is they’ve sold this debt to a debt buyer for pennies on the dollar, and they range all the way from fairly reputable to back-alley scum. It probably won’t show up on your credit bureau report, but the bad news is that if you pay it, it might show up then as a bad debt that was paid and is now good.

The good news is that it probably won’t affect the report much or stay on there very long. Having put all that together, I would say to pay it. You owe the money and they could come after you, but whether my credit is good is one of my lowest motivators. My main motivator is doing the right thing.

I would deal with these people and ask them for proof of the debt. Then you should be able to settle this for anywhere from 10 to 30 cents on the dollar. You should be able to negotiate from the original debt plus the interest. That is now the actual legal balance on the account. If you had a $2,000 debt at 10% interest, that’s $200 a year. Over 10 years, a $2,000 debt would become $4,000 plus any fees they tack on there.

If your $13,000 debt was originally a $3,000 debt, settling it for that $3,000 is a pretty good deal. Get in writing what they will take for the debt and that it settles the debt in full. Do not give them a dime until you get it in writing. Also, don’t give them electronic access to your checking account, because they will clean you out. When you get it in writing, overnight them a cashier’s check or a money order.

Once you settle this one, then make a list of the others smallest to largest, wake one of them up at a time and settle it. Don’t wake them all up at once or you’ll have a zoo on your hands.