How to Settle Old Debts
Not paying your debts results in negative marks on your credit report. Old debts don't just go away. They may stay on your credit report for years. A debt which is charged off or left unpaid makes getting a loan difficult. Settling old debts may not erase bad marks off your credit report, but settling will stop creditors from calling and will also stop new late payments from being reported to credit bureaus.
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Instructions
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Liquidate assets to pay your outstanding debt. Sell off investments, recreational vehicles and other property that you no longer need or want. You must raise money to make a one-time payment offer to your creditors.
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Contact the debt collection agency handling your account. You'll be negotiating a one-time payment which will settle the debt for less than the full amount you owe. The debt collection agency may or may not agree to mark your credit report so that it looks favorable for you, though it should mark that the debt is at least settled.
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Get the payment settlement amount in writing and then pay the debt. Never pay the debt without getting a settlement amount in writing. This gives you proof that the settlement exists and that your payment will satisfy the debt in question. Then, get written confirmation from your creditor that the debt has been paid.
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Tips & Warnings
Don't be rushed. A debt collector will push for you to send money immediately. Don't do anything until you have confirmation of a payment agreement in writing.
File all collection letters and keep detailed notes of collection calls.
Debt collectors may not use any false or misleading statements when collecting a debt.
The debt can remain on your credit report for seven years.
References
- Federal Trade Commission: Knee Deep in Debt
- USAToday: Thinking Of Debt Settlement? New FTC Rule Can Help; Sandra Block; August 2010
- "Ernst & Young's Personal Financial Planning Guide, 5th Edition"; Martin Nissenbaum et. al; 2004
