5 ms·

The problem that I see with this is that once your debt is sent to collections, that mark is already on your credit report for 7 years, even if you pay off the

The problem that I see with this is that once your debt is sent to collections, that mark is already on your credit report for 7 years, even if you pay off the debt. So, "forgiving" the debt is pretty meaningless. People still have their credit report tarnished, which leads to higher interest rates, higher car insurance, and is basically another way to oppress people who are already poor. The only advantage to the debtors in this case is that they won't get phone calls from collection agencies. It's a nice idea though.

HeyLaughingBoy 14y ago
Seven years goes by in the blink of an eye once you're old enough ;-) Forgiving the debt is not meaningless: it's a big chunk of money you don't have to pay off. Granted, it's better to work with the creditor and get them to settle for a smaller amount, but a $15k debt removed from your record is not likely to cause you $15k of increased expenses over 7 years.
- malandrew 14y ago
  I'm actually interested in knowing if I bought the debt of someone else, could I write whatever I wanted on their credit report? For example, could I purchase $15k worth of debt for $500 and then forgive the debt and report to the credit agency that it was paid in full?
  - heyrhett 14y ago
    You can't erase the statement that the debt was 180+ days late and sent to collections. The original debt holder could erase that statement, but they have absolutely no incentive to, since they took a 97% loss on your debt. A single late payment like that will probably drop your FICO score 150-200 points.
    - toomuchtodo 14y ago
      Not true. I walked away from my primary residence because it lost over $100K in value. My credit score only dropped from ~705 to 655 (per Creditkarma.com). Also, only one of my creditors lowered my credit limit (Citibank). American Express didn't even blink, and I've got a Platinum card with them with a $75K+ limit. To date, I've missed over 22 payments on my mortgage, and my credit score still remains fairly usable (I may complete a short sale, or may let it forclose. Depends on how amiable the noteholder is to both scenarios). You've been lied to. The risks of walking away from most debt is highly overrated.
- njharman 14y ago
  In US, most debt, you never have to pay off regardless of whether its forgiven or not. It's not a crime, and its not hard to avoid collectors.
MattGrommes 14y ago
This is "a" problem, not "the" problem. For a large number of people, getting $5k or $10k of debt erased would at the very least a large weight off their back, at the most a life changer. Living paycheck to paycheck means cherishing every extra dollar you get to keep. Getting to keep $50 or $100 a month in your pocket instead of sending off to some credit card or debt collection agency is a big deal sometimes. Most people who would probably take advantage of this don't even keep track of their credit because they're so behind anyway.
- deleted 14y ago
  [deleted]
- rdtsc 14y ago
  But I guess this is only for government and legally mandated wage garnishment. Otherwise if they already have the black mark on their credit, will paying back anything matter or change that? Is that true?
- justindocanto 14y ago
  But if theyre making payments on the debt, the debt collector won't sell it because theyre actually getting their money. The only debts OWS is going to be able to buy are the ones not making payments and the ones that havent made payments in a very long time. So, as cool as not having to pay 50/100 a month sounds, that wont happen to anybody because the ones paying are not the kind of people that would be getting relieved of their debt. Also, the people who havent paid their debt in years hardly benefit from this too (this might even make it worse in a way) because not only have they had an unpaid debt sitting there, they now have a new mark on their credit saying somebody gave up on collecting on them and that they sold their debt to somebody else. This is even worse, from my understanding of credit, for your credit score then it is to just let the debt sit there. The person in debt obviously isnt making any payments if it's up for sale, so it's not like it saves them any money. All this does is modify their credit score. This all sounded awesome skin deep, but as you look into it more... it doesnt really do much for anybody affected by Sandy or anybody in financial crisis in general. They're saving just a few people a few hundred bucks that wouldn't be coming out of their bank account for years to come... if at all, ever. They would be more productive just giving money to people affected by sandy then paying off debt that people have ignored for years anyway. People need food, shelter, clothes, toiletries, warmth... not a 'hey we paid off a debt you havent cared about for years and you dont get to see any of the money we just spent on you, but sorry your cold and good luck'.
olatief 14y ago
Keep in mind that you can always try to negotiate with the collections for a "pay for delete". Where you basically promise to pay the debt as long as the collection agency will delete it from your credit report. It works for some people.
downandout 14y ago
That isn't entirely true...if the owner of the debt (whether or not it is the original owner) decides to delete it from the credit record, then they can. In fact, many debt buyers act this way - they buy the debt for pennies on the dollar, and then offer to delete it if the person pays, for example, 25% of the amount owed. As mentioned elsewhere, this is know as PFD or "Pay for Delete". Most of the major credit bureaus require that you own the debt of 5,000 or more people before they will accept payment history records and/or delete requests from the debt owner. That's the only restriction.
- malandrew 14y ago
  Will that delete the history of that debt from the original creditor or only the creditor currently holding that debt?
  - downandout 14y ago
    My understanding is that it erases the debt completely.

HeyLaughingBoy 14y ago

Seven years goes by in the blink of an eye once you're old enough ;-) Forgiving the debt is not meaningless: it's a big chunk of money you don't have to pay off. Granted, it's better to work with the creditor and get them to settle for a smaller amount, but a $15k debt removed from your record is not likely to cause you $15k of increased expenses over 7 years.

malandrew 14y ago
I'm actually interested in knowing if I bought the debt of someone else, could I write whatever I wanted on their credit report? For example, could I purchase $15k worth of debt for $500 and then forgive the debt and report to the credit agency that it was paid in full?
- heyrhett 14y ago
  You can't erase the statement that the debt was 180+ days late and sent to collections. The original debt holder could erase that statement, but they have absolutely no incentive to, since they took a 97% loss on your debt. A single late payment like that will probably drop your FICO score 150-200 points.
  - toomuchtodo 14y ago
    Not true. I walked away from my primary residence because it lost over $100K in value. My credit score only dropped from ~705 to 655 (per Creditkarma.com). Also, only one of my creditors lowered my credit limit (Citibank). American Express didn't even blink, and I've got a Platinum card with them with a $75K+ limit. To date, I've missed over 22 payments on my mortgage, and my credit score still remains fairly usable (I may complete a short sale, or may let it forclose. Depends on how amiable the noteholder is to both scenarios). You've been lied to. The risks of walking away from most debt is highly overrated.
njharman 14y ago
In US, most debt, you never have to pay off regardless of whether its forgiven or not. It's not a crime, and its not hard to avoid collectors.

MattGrommes 14y ago

This is "a" problem, not "the" problem. For a large number of people, getting $5k or $10k of debt erased would at the very least a large weight off their back, at the most a life changer. Living paycheck to paycheck means cherishing every extra dollar you get to keep. Getting to keep $50 or $100 a month in your pocket instead of sending off to some credit card or debt collection agency is a big deal sometimes. Most people who would probably take advantage of this don't even keep track of their credit because they're so behind anyway.

deleted 14y ago
[deleted]
rdtsc 14y ago
But I guess this is only for government and legally mandated wage garnishment. Otherwise if they already have the black mark on their credit, will paying back anything matter or change that? Is that true?
justindocanto 14y ago
But if theyre making payments on the debt, the debt collector won't sell it because theyre actually getting their money. The only debts OWS is going to be able to buy are the ones not making payments and the ones that havent made payments in a very long time. So, as cool as not having to pay 50/100 a month sounds, that wont happen to anybody because the ones paying are not the kind of people that would be getting relieved of their debt. Also, the people who havent paid their debt in years hardly benefit from this too (this might even make it worse in a way) because not only have they had an unpaid debt sitting there, they now have a new mark on their credit saying somebody gave up on collecting on them and that they sold their debt to somebody else. This is even worse, from my understanding of credit, for your credit score then it is to just let the debt sit there. The person in debt obviously isnt making any payments if it's up for sale, so it's not like it saves them any money. All this does is modify their credit score. This all sounded awesome skin deep, but as you look into it more... it doesnt really do much for anybody affected by Sandy or anybody in financial crisis in general. They're saving just a few people a few hundred bucks that wouldn't be coming out of their bank account for years to come... if at all, ever. They would be more productive just giving money to people affected by sandy then paying off debt that people have ignored for years anyway. People need food, shelter, clothes, toiletries, warmth... not a 'hey we paid off a debt you havent cared about for years and you dont get to see any of the money we just spent on you, but sorry your cold and good luck'.

olatief 14y ago

Keep in mind that you can always try to negotiate with the collections for a "pay for delete". Where you basically promise to pay the debt as long as the collection agency will delete it from your credit report. It works for some people.

downandout 14y ago

That isn't entirely true...if the owner of the debt (whether or not it is the original owner) decides to delete it from the credit record, then they can. In fact, many debt buyers act this way - they buy the debt for pennies on the dollar, and then offer to delete it if the person pays, for example, 25% of the amount owed. As mentioned elsewhere, this is know as PFD or "Pay for Delete". Most of the major credit bureaus require that you own the debt of 5,000 or more people before they will accept payment history records and/or delete requests from the debt owner. That's the only restriction.

malandrew 14y ago
Will that delete the history of that debt from the original creditor or only the creditor currently holding that debt?
- downandout 14y ago
  My understanding is that it erases the debt completely.