Trying to reduce debt

[bee0011]

Hello, I have create a situation for my self that my monthly expenses exceed my monthly income so I been missing payments to my credit cards. I was thinking of cashing out one of my mutual funds and pay off two of my cards to reduce my monthly overhead, Best buy has offered me a settlement offer where I would pay them half of my total statement within 90 days and they would charge off the rest, but they would still show on my credit that this was paid but not all of it. And I still have to reach out to chase to see what options I have with them. My question is, is this a good idea right now I am way behind on the payments and killing my credit but not sure what is my best options. Any suggestions or recommendation? Also I own my home so I didn't want to so a bankruptcy.

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[adjusterjack]

Before you go making any deals you have to understand that a "charge off" is an accounting thing that gets the creditor a tax write-off for a bad debt. You still owe the money. And putting on your credit report that there is still a balance doesn't help you either.

You need a written settlement agreement signed by someone in authority that says your lump sum discounted payment retires the debt as paid in full.

As for your credit score, that will come up gradually after a year or two if your debts are shown as paid in full.

 

[bee0011]

Thanks for your help, Best buy is telling me that I will be paying a settlement cost and will report to the Credit Bureau that the balance is zero but account was settled. Is this ok to do? Right now I haven't made a payment to this account in a few months and best buy next step is to sell the account then they will have another company come after the money. Right now my balance is 5999.00 and this settlement amount is 2999.00 ... What are you thoughts and then I still have to deal with Chase and after that I can handle all my money expenses and will not charge anything else.



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[adjusterjack]

Best buy is telling me that I will be paying a settlement cost and will report to the Credit Bureau that the balance is zero but account was settled. Is this ok to do?

Yes. But get the agreement in writing.

Right now I haven't made a payment to this account in a few months and best buy next step is to sell the account then they will have another company come after the money. Right now my balance is 5999.00 and this settlement amount is 2999.00. What are you thoughts

That's a good offer - 50% off. Take it. It's a good deal even if you have to sell some of your mutual funds. You want to avoid having it sent to collections because a collection agency will add interest and potential attorney fees and the debt will be $8000 in no time.

Get this out of the way and deal with Chase afterwards. How much do you owe Chase?

 

[Disabled Vet]

Then.... They could send you a 1099 on that difference. So you end up paying taxes on the difference. They show it as income for you. Reason you get taxed on that amount.

 

[adjusterjack]

Then.... They could send you a 1099 on that difference. So you end up paying taxes on the difference. They show it as income for you. Reason you get taxed on that amount.

The forgiven amount would be about $3000. Tax on that is maybe $300 to $500 depending on tax bracket.

OP still comes out ahead.

 

[mightymoose]

Expect the 1099. It will come if there is a write off.

If you own your home and have mutual funds it seems you should be able to secure a consolidation loan. Roll all these accounts together into one loan and have a single payment.

 

[adjusterjack]

If you own your home and have mutual funds it seems you should be able to secure a consolidation loan. Roll all these accounts together into one loan and have a single payment.

You forget, OP's already in default, credit score probably depressed. Any new loan, if he could qualify at all, would probably carry a very high interest rate, certainly a lot more than he could make with his mutual funds.

Nope, I'd go with paying off the debts at half price.