Other people's (lack of) money
November 28, 2005 6:14 PM   Subscribe

Help me with my pseudo-sister-in-law, and the debt that keeps her living here...

My (long time, live-in) girlfriend's sister has made some exceptionally bad choices in the past, and is a single mother of two children. After she hit an especially bad patch, we let her come and live with us until she can "get back on her feet". She has a low-paying part-time job, and is going to school now. She gets food stamps and state-provided daycare, and is still a long way from independence.

The main problem right now is that she owes $2600 from a previous eviction - she skipped out on her lease a while back - which keeps her from getting an apartment. It would be years before she can save up that kind of money. It's really getting hard for the five of us to live together, and we want to help her get a place of her own - and regain ours!

I know that debt collectors will sometimes negotiate debts down to as much as half the original debt or even less, especially if you can pay it all at once. I've talked with my girlfriend and her parents about making a Christmas gift of negotiating this bill down and paying off some of it. Let's say they cut it in half - $1300... In that case we might be able to pay $350 per couple and get half of it taken care of.

First of all, is this doable? Can we negotiate on her behalf with a bill collector and then pay some of the amount? Even if she gets this debt completely paid off her credit is basically shot and I'm wondering how hard it will be to get a place even after this point...

Am I barking up the wrong tree? Is there a better way to find a win-win in this situation?
posted by tkolstee to Work & Money (9 answers total)
Yes, you can often settle with creditors (or their agents) to clear a debt. This is often better if you've got cash in hand, so to speak--if you can call a creditor and say "Hi, I owe you $800. I have $400 that I can send you right now (Western Union or credit card, for immediate reciept) if you would be willing to accept that as settlement in full and close my account".

You will need some room to negotiate--you will not get everyone down to half. But you can probably get a good quarter to a third knocked off, and larger sums are the ones you'd be likely to get the highest percentage knocked off.

When you get a settlement agreement with a creditor, make sure you request a letter upon closure of the account--you can have them fax you one right on the spot the second the payment appears on their side. Those letters are pretty much gold when you have a shitty credit report, as it takes some time to get everything updated and processed with the bureaus.

I worked for Ford Motor Credit for some time in their recovery unit, and we were happy just to close an account and get it off our desk. We shot for payment in full, but settled for half as often as we could get it.
posted by padraigin at 6:46 PM on November 28, 2005

Many landlords do not do credit checks. Many who do credit checks are willing to consider a tenant whose eviction is (a) not recent, and/or (b) can put down a larger security deposit. Probably will take less than $1300. That doesn't solve her indebtedness, but it deals more directly with her immediate problem of housing.

Be aware that neither approach removes the blight from her credit. At best, it takes a couple months for the payoff to start showing on her credit report, but it will take 2 years for the 24 month string of negatives to finish rolling off her report.

In her shoes, I'd care most about hold together as much resources as possible for first dealing with basic necessities like food/shelter/kids/jobhunt, and leave the credit rehab until things are bit more stable. A good nonprofit credit counseling service can help her with that second part. In the meantime, $1300 can buy a lot of groceries and school supplies.

She should apply for Section 8 housing if there's any chance she's eligible. Her rent would be govt subsidized, so some landlords consider Section 8 applicants low risk; the check is coming, period. And since her portion of the rent is scaled based on her income, it should be more affordable than market rate.

How old is the debt? If it's several years old already, she should keep in mind a couple things:

1. old negatives are less credit-damaging than recent
2. old debts and evictions* eventually fall of the credit report (7 yrs)
3. if the debt is already past its statute of limitations without a court judgement, then negotiating with the creditor now risks making things worse for her. Tread carefully.

* Is it definitely an eviction? A lot of people misunderstand what an eviction is, and assume that anytime they're kicked out or leave owing money, that they've been "evicted". But if there was never a court judgement entered against her, her record may not look too awful.

Also does she know for sure that the past landlord is giving a negative reference? Because many mananagement companies just give neutral references (confirming factual info like dates of tenancy, volunteering little or nothing) regardless of how good/bad their former tenant was. They may see nothing to gain by giving personal reviews, and saying too much carries a risk of being threatened with slander or defamation suits. So they just say nothing. Which is why many, many true deadbeats have no trouble finding new landlords.
posted by nakedcodemonkey at 7:25 PM on November 28, 2005

Contact people who specialize in this kind of thing: Look up "Credit Counseling Services" in your phone book, or try this clearinghouse link.
posted by rob511 at 7:27 PM on November 28, 2005

She should apply for housing assistance. There will be a listing in the City section of the white pages. Or call City Hall and ask for help. They'll have a process for dealing with the credit issue. Many people in subsidized housing get additional help with jobs and day care. If she is concerned about living in a project/slum, there are vouchers for rentals. Waiting lists are often very long but housing assistance is well worth getting on the waiting list. With children, and the prospect of losing her temporary housing at your house, she may be able to get expedited assistance.

Some of the credit counseling companies are not very helpful, so she should interview them carefully.
posted by theora55 at 8:19 PM on November 28, 2005

Leasing agents always run rental history checks some also run credit checks. These are two very different things.
My experience with leaving a apartment in a not to smart way was that they jacked the total cost up with all the cleaning and repair fees plus the remainder of the lease. Unlike a credit card debt where you can exist without a credit card by proper spending habits with check and cash (while slowly reparing your cedit) a bad rental history will keep you from being a lease.
With credit debt (again this is my experience) after the original company has sold off your marker to a collection agency you might be able to negotiate down the price. If it is with the original lender they want to "reinstate" you to get interest building again.
I do not know of an equivalent for rental history. They will hire a collection agency to get their money. The Apartment has no reason to let "skippers" off easy. They want their money and until you pay they know you will have a hell of a time finding new dwellings.
posted by sailormouth at 8:48 PM on November 28, 2005

With credit debt (again this is my experience) after the original company has sold off your marker to a collection agency you might be able to negotiate down the price. If it is with the original lender they want to "reinstate" you to get interest building again.

The original creditor will often be willing to settle as well--it is more lucrative for them to settle with you directly than to pass your account on to a third party, who will then get to keep a portion of the amount they recover, which most likely will not be the full amount charged off.

This was the case during my tenure at Ford Credit--most debtors were offered numerous settlements before their accounts were sent to collections, and it was the case when I got myself into a little kerfluffle with MBNA (why yes, it was my Gateway computer loan!). MBNA settled with me for half my balance and never even threatened to send the account to a third party agent.
posted by padraigin at 8:16 AM on November 29, 2005

Keep in mind that a settlement is a major black mark on your credit report, almost as bad as an actual write-off. If a landlord does run a credit check, having the debt settled probably will not help her credit score much compared to the late pays she's probably got on that account already.
posted by kindall at 12:01 PM on November 29, 2005

I have no experience bargaining with debt collectors, but I have a lot of experience with apartments.

Any apartment complex that you would want to live in runs a credit check and a rental history check. They will charge you a non-refundable application fee for their time and trouble. They also call your boss to make sure you really work there and can actually afford rent and groceries. Some even run a criminal history. Such apartment complexes consider owing money to another apartment complex to be "automaticly declined." This is not necessarily true of people who own a small number of rental units (rent houses, duplex, 8 unit building, etc.). These landlords often don't have access to fancy databases of credit reports and whatnot. Some of them even rely on such vague things as "She seems like a nice lady and her kids were polite." If you can find a landlord like this, she might be able to plead extenuating circumstances about the previous skiip-out. But be aware that the relaxed standards come with relaxed management; it may be difficult to get problems taken care of.

Another possibility, and one I don't particularly recommend, is that you can offer to co-sign a lease with her. This means that you will all have to sign the lease, and if she has a financial problem with the landlord, the landlord will come to you for the money. How desperate/nice are you?

In any event, good luck getting her back on her feet and out of your home.
posted by ilsa at 12:19 PM on November 29, 2005 [1 favorite]

Speaking as a landlord, ilsa is correct -- usually at least a third of the apartments in a given area are everything from half of a 2-flat to small 4/8 unit buildings, all owner-run, because they don't know any better, want to save money on an agent, etc. The procedures with mom-&-pop landlords are much less stringent. They are not all in bad neighborhoods, either. Many of these landlords do not accept Section 8 tenants, a tempting policy by my own bitter experience, but many of them do (or are obliged to, by virtue of e.g. accepting city development loans).

You can find such apartments not in the main newspaper classifieds or display ads, but buried in the weekly shopper papers and through referrals and window signs. It might take more hoofing, but they can be found. I would also suggest asking around at your church. In more casual situations you can also negotiate doing some maintenance or repair work in lieu of rent.

My community also has a sort of "renter education" program actually called here "Win-Win". People who are on public assistance and have been turned down for an apartment or evicted qualify to attend a Saturday seminar on renting basics outlining what landlords expect from them and what they should expect from landlords. Then a sympathetic list of landlords is handed out for them to contact; the Win-Win "graduation" certificate is supposed to give them a chance to be considered where they otherwise would have been dismissed. During their first year of tenancy the program also provides mediation services so that minor disagreements or miscommunications don't become new blots on the renter's record. There are links to other programs such as the money-management education program run by the banks (which offers a similar get-out-of-jail card to let them qualify for a checking account), and a local church-run charity that gives out security-deposit grants (full or partial).

If your SIL starts approaching the aid agencies as a customer instead of a victim, she may be surprised how many options open up to her.

I would caution against the co-sign route, unless you're very sure it won't come back to haunt you. If so make sure that the landlord knows he should contact you long before there's an issue of you covering for her and that you're willing to serve as a mentor. Your SIL should be determined to work toward independence sooner rather than later and this will be too easy to abuse. Just something to consider.

So anyway, I'd focus on solving the problem of getting into an apartment, which can be done now, rather than the debt. Settling won't make the eviction go away, for example -- an eviction stays on a credit report for 7 years (most states), and the court action will never be expunged.
posted by dhartung at 3:39 PM on November 29, 2005

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