How can I buy my own defaulted loan at a low price?
December 1, 2013 9:25 AM Subscribe
Back when the bank sold my Line-Of-Credit to a collection agency it was 16K, now the collection agency says it's 27K which I know is phony interest-rate bullshit. It's been five years. How can I buy it back for much less than 16K, say, 8K?
I imagine that once some unscrupulous collection agency got their hands on it, there was never any legal contract that I signed with them, so for them to infalte it to ridiculous heights via interest rate shenanigans is an illegal scare-tactic, right? I have 8K to buy it back and I just want it off my three credit scores. I know that you can negotiate with the collection agencies, but I want to know the VERY BEST WAY to do that. Do I need a lawyer?
Or, if it's been five years, should I just wait it out to seven?
I imagine that once some unscrupulous collection agency got their hands on it, there was never any legal contract that I signed with them, so for them to infalte it to ridiculous heights via interest rate shenanigans is an illegal scare-tactic, right? I have 8K to buy it back and I just want it off my three credit scores. I know that you can negotiate with the collection agencies, but I want to know the VERY BEST WAY to do that. Do I need a lawyer?
Or, if it's been five years, should I just wait it out to seven?
how much time is left on the statute of limitations clock? isn't that the most salient factor in whether you should pay/buy this debt?
posted by bruce at 9:37 AM on December 1, 2013 [1 favorite]
posted by bruce at 9:37 AM on December 1, 2013 [1 favorite]
for them to infalte it to ridiculous heights via interest rate shenanigans is an illegal scare-tactic, right?
Not necessarily. What does your contract with the bank say? I would be surprised if your contract did not specifically anticipate the sale of your debt to another party or the inclusion of interest and fees.
posted by grouse at 9:52 AM on December 1, 2013 [1 favorite]
Not necessarily. What does your contract with the bank say? I would be surprised if your contract did not specifically anticipate the sale of your debt to another party or the inclusion of interest and fees.
posted by grouse at 9:52 AM on December 1, 2013 [1 favorite]
Lawyer up.
posted by potsmokinghippieoverlord at 10:29 AM on December 1, 2013 [1 favorite]
posted by potsmokinghippieoverlord at 10:29 AM on December 1, 2013 [1 favorite]
Response by poster: Another question is whether the collection agency can be trusted to obey that statute-of-limitations clock. There's probably some super-secret hidden language deep down in the fine print that says they can sell the loan again to someone else, and then the seven-year clock starts all over again. It seems daunting and unwinnable, but I know there must be a way to win this one, other people have. Right?
posted by shipbreaker at 10:56 AM on December 1, 2013
posted by shipbreaker at 10:56 AM on December 1, 2013
I had a dispute with a credit card, they dragged their feet, and I said screw it, which was not very bright, but one day I got a call asking to settle the bill for an amount that was quite reasonable, about what I'd have paid originally. Another bill from a phone co. pissed me off so much I waited the 7 years. Patience is a virtue.
posted by theora55 at 11:20 AM on December 1, 2013 [1 favorite]
posted by theora55 at 11:20 AM on December 1, 2013 [1 favorite]
OP you are starting from an unnecessarily and unproductively combative point of view with all of the adjectives you are throwing around. $16k to $27k in five years is an 11% interest rate. Not usurious, frankly not even especially high for an unsecured line of credit's base rate, to say the least of its default rate. The note or credit agreement you signed was 99.9% likely to provide that interest would continue to accrue until principal and interest was repaid, and was owed to anyone who bought the loan just the same as if they'd made the loan to you, your consent to transfer not being required. In other words, nothing illegal, bullshit, shenanigan, etc. about the situation.
Of course, that doesn't mean you can't settle the debt out at a lower price. Do some research on who holds the loan, and you may be able to find out what they likely paid for it. Not at all unlikely they bought it for a fraction of its original principal, to say the least of accrued, and they could enjoy a very nice payday even while giving you a fat discount. HOWEVER, it can be very hard to negotiate this effectively, because the one thing that holders of charged-off debt know is that many people willing to pay some of it are in fact able to pay all of it. You are probably better off letting them negotiate against themselves: let them name a number first, and see if you can work it down. Be careful, though -- any inkling they get that you have the money to pay close to the full amount, and they will flip the debt to a law-firm-based collection shop, where they will sue you for the full amount. Those shops are efficient enough to do a full litigation for a few thousand dollars, which puts you in the danger zone.
posted by MattD at 11:34 AM on December 1, 2013 [8 favorites]
Of course, that doesn't mean you can't settle the debt out at a lower price. Do some research on who holds the loan, and you may be able to find out what they likely paid for it. Not at all unlikely they bought it for a fraction of its original principal, to say the least of accrued, and they could enjoy a very nice payday even while giving you a fat discount. HOWEVER, it can be very hard to negotiate this effectively, because the one thing that holders of charged-off debt know is that many people willing to pay some of it are in fact able to pay all of it. You are probably better off letting them negotiate against themselves: let them name a number first, and see if you can work it down. Be careful, though -- any inkling they get that you have the money to pay close to the full amount, and they will flip the debt to a law-firm-based collection shop, where they will sue you for the full amount. Those shops are efficient enough to do a full litigation for a few thousand dollars, which puts you in the danger zone.
posted by MattD at 11:34 AM on December 1, 2013 [8 favorites]
shipbreaker, that's not how statutes of limitations work generally; the clock can be extended or restarted by certain actions on the part of the debtor, but not by the creditor, which is why you need a minnesota lawyer to figure this out for you, also...
is the statute in minnesota seven years (seems long) or are you conflating this with the amount of time it takes for debt to move off a credit report? when did the clock start running (usually at default) but how is default defined in minnesota? i myself wouldn't presume to speculate in any greater depth about the law of a state i've never been to.
posted by bruce at 11:52 AM on December 1, 2013
is the statute in minnesota seven years (seems long) or are you conflating this with the amount of time it takes for debt to move off a credit report? when did the clock start running (usually at default) but how is default defined in minnesota? i myself wouldn't presume to speculate in any greater depth about the law of a state i've never been to.
posted by bruce at 11:52 AM on December 1, 2013
Best answer: Unless they take you to court and get a judgment against you, there's no reason to pay them a dime. Paying any amount towards this debt can restart the Statute of Limitations, which is six years in Minnesota.
If you seem willing or able to pay them anything, that's going to make them think hey, this guy must have some money. They'll sue you (which they would win, since you do owe the money) and pressure you further for settlement.
A paid collection is identical to an unpaid collection in terms of your credit score. It's ridiculous, but that's how it works. So your best case scenario is that the clock runs out on this one.
posted by hamsterdam at 12:23 PM on December 1, 2013 [1 favorite]
If you seem willing or able to pay them anything, that's going to make them think hey, this guy must have some money. They'll sue you (which they would win, since you do owe the money) and pressure you further for settlement.
A paid collection is identical to an unpaid collection in terms of your credit score. It's ridiculous, but that's how it works. So your best case scenario is that the clock runs out on this one.
posted by hamsterdam at 12:23 PM on December 1, 2013 [1 favorite]
Response by poster: Hamsterdam, this is news I can use!!!
So, it will make no difference to my Credit Score, whether or not I pay it off?!?
If that's true, then thank you! That was the only reason I was planning to pay it off.
=== === ===
Of course, now I can't get a mortgage. But based on what you are saying, whether or not I gave the collections agency $27K, $8K or $0, it is already too late and the damage to my credit score has been done, and it cannot be repaired.
More people should know this!
==== ==== ====
posted by shipbreaker at 12:54 PM on December 1, 2013
So, it will make no difference to my Credit Score, whether or not I pay it off?!?
If that's true, then thank you! That was the only reason I was planning to pay it off.
=== === ===
Of course, now I can't get a mortgage. But based on what you are saying, whether or not I gave the collections agency $27K, $8K or $0, it is already too late and the damage to my credit score has been done, and it cannot be repaired.
More people should know this!
==== ==== ====
posted by shipbreaker at 12:54 PM on December 1, 2013
While a paid collection may do the same damage as an unpaid collection, a deleted collection should not.
posted by ftm at 1:05 PM on December 1, 2013
posted by ftm at 1:05 PM on December 1, 2013
Yes, but I'm told by many that pay-for-delete is illegal, so they may or may not be willing to do it.
posted by corb at 2:04 PM on December 1, 2013
posted by corb at 2:04 PM on December 1, 2013
As part of your decision-making process, you may want to look into the tax ramifications of not paying off this debt (search: "1099-C cancellation of debt"), just so you know to budget for a potential tax-hit.
posted by nacho fries at 3:57 PM on December 1, 2013
posted by nacho fries at 3:57 PM on December 1, 2013
Response by poster: So, just to clarify: It should DELETE ITSELF after two more years when the Statute of Limitations runs out,
I am not allowed to PAY anyone to have it deleted,
my choice is either to pay the collection agency the entire $27,000,
or possibly pay the IRS a"cancellation of debt" fee.
And nothing I do will change my "credit score" now.
=== === ===
Over time, I paid the bank more than enough in interest fees, until the point at which they changed my rate to 29% which was when I stopped paying.
posted by shipbreaker at 4:48 PM on December 1, 2013
I am not allowed to PAY anyone to have it deleted,
my choice is either to pay the collection agency the entire $27,000,
or possibly pay the IRS a"cancellation of debt" fee.
And nothing I do will change my "credit score" now.
=== === ===
Over time, I paid the bank more than enough in interest fees, until the point at which they changed my rate to 29% which was when I stopped paying.
posted by shipbreaker at 4:48 PM on December 1, 2013
It takes seven years from the time you first went delinquent for the record to age off your credit reports. Six years is the statute of limitations for the debt in MN, the amount of time they have to collect.
In terms of damage to your score, yeah it's already done.
If they cancel the debt, you can probably avoid the tax hit by claiming you were insolvent. B/c it's $27,000 you should probably consult with an attorney or accountant who specializes in the field.
posted by hamsterdam at 1:49 PM on December 9, 2013
In terms of damage to your score, yeah it's already done.
If they cancel the debt, you can probably avoid the tax hit by claiming you were insolvent. B/c it's $27,000 you should probably consult with an attorney or accountant who specializes in the field.
posted by hamsterdam at 1:49 PM on December 9, 2013
This thread is closed to new comments.
posted by DarlingBri at 9:27 AM on December 1, 2013