Credit Question

[Master Capper]

Have a question on credit cards. Here is the scenerio: My sister is in the middle of a nasty divorce and has been seperated from her husband for nearly 9 months. During those nine months, both parties elected to not pay any of their individual or joint credit card accounts. Some of these cards reached the point that they were charged off by the creditor and sold to a collection agency. My sister will come out in a good financial position once the divorce is final, as her husband owns a steel company that is quite profitable and they have numerous assets that are frozen. My sister has asked me to help her pay off the credit cards that were turned over to collection and will reimburse me once the divorce is final. I bought a book to read on the plane ride that basically stated that once an account is sold off then your credit is trashed and it makes no sense to pay the collection agency since it will not improve ones FICO score. My question is, would she be better off paying the collection agencies or would it make no difference for her near future credit score if she just didnt pay them?

 

[safrank99]

I'm sure someone will come in here and respond with a better answer then me but...

About 3 years ago I was in a similar situation, had some financial problems (not her case) and there were a few credit cards and other bills that went to collection. I was in graduate school and just took on more then I could pay. About a year after they went to collections I had the money to pay all of them off and did.

Didn't open a single credit card or inquiry since and my credit report (FICO score) has increased by nearly 130 points.

My advice is if these charges are newer which they seem they are have her pay them. For me it was a conscience thing but it did end up benefiting my score.

If these were closer to 6 or 7 years old and were going to fall off the report then I wouldn't pay them.

I check my score and report every six months and it feels go to not having anyone calling you, peace of mind, and seeing that report that says they are paid and all my accounts are in good standing.

 

[Woodson]

:shrug: Sorry to hear about the divorce and I understand helping out a sibling. However,the damage has been done. Her credit is wrecked for a considerable number of years, make no mistake about it.

There are a couple questions to consider. First, if she is employed, she will certainly have a judgement filed against her by ALL creditors that she is libel. Secondly, if you DO decide to assist her in clearing up a rather unnecessary circumstance (it's hind sight so I'll not comment) you could easily pay pennies on the dollar to those accounts that have defaulted.

IF YOU DECIDE TO PAY OFF THE DEBT
The key here is to remain calm through the Collection Agencies bull shit and negotiate a PAID IN FULL settlement. You could probably negotiate anywhere from 25 cents on the dollar or lower. START very low w/ amounts! The issuing creditor wrote this off and CA paid very little (10 cents maybe) to take ownership of this debt. However please note that doing this however will result in a NEW DATE of the account for all creidt reporting agencies and will take 7 years to drop off in most states. Payment in full will assist her down the road with future lenders see the amount remaining in 0 and then date of the account will not be renewed when this collection agency send it off to the next CA for even less money.

IF YOU DON'T PAY IT OFF
Tell her to get ready for countless calls and voicemails (Search for Ceased and Desist Letters to send to collection agencies and send via certified mail. Next, search for Validation of Debt letter to send out to all collection agencies) They must prove that the debt is in fact hers. You wouldn't believe how many times this will result in a drop in a collection. Keep all copies of letters sent for use in court if need be. Organization is key. She needs to get a folder for each account and keep EVERYTHING from the CA including the sending ENVELOPE to prove time stamp.

I could go on this topic for days as I had to deal with a Chevron card I never owned being suppsoedly in my name.

After sending a validation ciertfied request and a cease and desist they removed it from my report.

This could take 6 months to a year but what does she have to lose.

Here is a couple sample website.

credit card validation letter
http://www.creditinfocenter.com/forms/

Credit collections forum with a step by step guideline

http://www.cardratings.com/forum/viewtopic.php?f=1&t=14990

It's a slippery slope and moral dilemma. Her mistake was ignoring the creditors and not just paying the minimums on only her cards...

 

[Woodson]

Also, put togther a contract. I'm not sure of her situation but a contract is a DEFINITE requirement if you DO WISH TO RECOLLECT the debt.

I say this because obviously she hasn't made great financial decisions and isn't someone you would loan money on her track record.

I let a friend borrow a while back and it stated that after a year (to get back on his feet) he must pay a minimum monthly ($100) until it was paid off.

Most times with family it ends badly. Go in thinking IF you give her a loan, that you may NEVER get repaid and is that worth hurting your relationship...

Lending money to family is tough and you could lose a family member if you force the issue.

Slippery slope my friend.

PS

For the love of all yours DO NOT cosign on ANYTHING! EVER excluding kids I guess. This could ruin you as well... You are libel.

 

[gardenweasel]

woody...you`re going on my "people to ask list" here ....really put forth an effort there,dude...:hail

 

[dawgball]

y sister will come out in a good financial position once the divorce is final, as her husband owns a steel company that is quite profitable and they have numerous assets

My first question is why they had credit cards in the first place then.

I wouldn't put my money on the table until the divorce was final and you know exactly what portion she is responsible for.

Even then, use Woody's advice above and confront it directly with your friendly negotiating hat on.

"I want to help my sister, but I can only afford $XX"

Good luck.

 

[Master Capper]

Really appreciate all the good info that was shared in this thread, as it probably saved me from getting screwed. My lawyer is drawing up papers to give my sister a loan without interest to pay off bad debts, but it will have installment payments, so that everything is in black and white. Thanks again for sharing your knowledge.

 

[ageecee]

is her ex hubby going to help her pay off the joint credit cards too?

Tell me shes not going to pay it off without him helping her.

 

[saint]

I'm amazed that multiple people gave the advice to just not pay. And we wonder why our society is the way it is.

 

[Master Capper]

I really have no idea if her soon to be ex-husband is going to help her pay the joint accounts, but I would assume that the court would more than likely order them to split the debt based on their income. I could be way off since I have never been through a divorce, or practiced law.

 

[luvmy$$$]

I'm amazed that multiple people gave the advice to just not pay. And we wonder why our society is the way it is.

I was thinking the same thing, but was wondering if the subject could be explained further. So your saying, if you owe lets say 10,000 on a credit card. You can just stop payment, dodge the phone calls, get off scott free, if you can handle a decreased credit score for 7 yrs? It can't be that easy can it?

 

[Master Capper]

The creditors told my sister that her credit would be ruined for seven years and that they would seek to garnish any future wages that she would earn. So, I am not sure if you could get off scotch free, but maybe if you filed bankruptcy then you could

 

[luvmy$$$]

You would think they could go after wages?

 

[ageecee]

Heres what Dave Ramsey would do:

1-He would take the lowest credit card, call them and make them an offer. If they take the offer, get it in writing that the debt will be paid in full for this amount. Then you pay them that amount.

2-If they dont want to settle then you move on to the next lowest credit card.

3-Cut up every credit card and use a debit card from now on.

 

[Master Capper]

Ageecee,

Would Ramsey close the accounts once they are paid off or would he keep it open?

 

[ageecee]

Ageecee,

Would Ramsey close the accounts once they are paid off or would he keep it open?

Close them. He doesnt own any credit cards only a debit card and he pays cash for everything.