4 ms·

In addition to the credit issues the other commenters noted, there is the issue of taxes in the case of "chargeoffs." One will get an income statement from the

In addition to the credit issues the other commenters noted, there is the issue of taxes in the case of "chargeoffs." One will get an income statement from the credit issuer for the fraction of the debt they write off. Odds are if one is in the position of having debt collectors come after them they'll be unlikely to afford the taxes on the "income."

pavel_lishin 12y ago
Sometimes the debt is bullshit, but it might be easier to buy it for a small percentage than to pay it off. We get letters for a medical debt that's factually wrong, but by the time we convince Debt Agency N that we don't actually owe it, they've sold it off to Debt Agency N+1 for 1/10th of what they claim we owe them (which is already 1/10th of what was originally 'owed'.) It would be well worth paying 1/100th of the original bill to not have to check the mail anymore, and throw that garbage away, but if we were to actually PAY the 1/10th settlement amount, it would open us to liability for the WHOLE amount. tldr, I'm willing to be extorted, but not ludicrously so.
- encoderer 12y ago
  I'll tell you, you're playing that game wrong. It's not your job to convince them of anything. The next time they sell, and you get the initial dunning letter, you should write back a simple letter with your name and address stating that you refute this debt, and demand that they validate the debt as they are required to do under § 809 of the FDCPA [15 USC 1692g]. The burden of proof is on them. You only have 30 days to do a so-called "timely" validation, but you can force past CA's to validate as well -- the only hitch is that they can continue to collect on you while they validate, something they cannot do if you demand timely validation. One more tip: Don't sign your name on letters to CAs, and don't ever give them ANY information they don't already own. Ever. Especially your bank account information. If you do decide to pay them (hopefully strategically as part of a pay-for-deletion-from-credit-report arrangement), don't pay them on a bank draft. And send it certified mail return receipt requested.
  - dllthomas 12y ago
    "don't ever give them ANY information they don't already own." When I called the State Of Michigan treasury to pay a bill I'd hadn't known about (having not lived in the state for years), they forwarded me to a collection agency without telling me up front. I was confronted with "we have to ask you some questions for verification" and answered them until they asked something I knew they couldn't already know. I felt seriously taken advantage of, at all levels.
  - matwood 12y ago
    Everyone should understand the FDCPA. Once invoked, any legitimate debt collection company will get in line. The problem ones are the fly by night places being run out of a strip mall.
fred_durst 12y ago
Exactly. Buying your debt off for a penny on the dollar is probably the stupidest thing you could do financially. You would be trading $10,000 in credit card debt, with a fair amount of legal protections, for $4,000 in IRS debt with very few legal protections.
- derefr 12y ago
  If you purchased a liquid asset with the $10,000 (and your creditors never found out about it in time to sue you for it), couldn't you just reliquidate it at that point and use it to pay off the IRS debt, leaving you with pure profit (and a horrible credit score)? Actually, wait, maybe not even that: given that you purchased the debt, you could legally mark it (as the creditor) as having been repaid and then petition (as the debtor) to have your credit score corrected, no? This is what the http://rollingjubilee.org http://rollingjubilee.org people are doing, at least.
  - patio11 12y ago
    Repaying negative status debts does not necessarily improve one's credit score. You can ask the credit reporting agencies to reflect the fact that you've paid it, but this is a no-op for virtually everything except mortgage applications.
- dragonwriter 12y ago
  > You would be trading $10,000 in credit card debt, with a fair amount of legal protections, for $4,000 in IRS debt with very few legal protections. Forgiven debt is taxed as normal income, so you'd have to have a 40% marginal federal income tax rate to end up with $4,000 in IRS debt on $10,000 of forgiven consumer debt, which is an approximation of the maximum marginal rate being 39.6% (which kicks in at $400K income for a single taxpayer.) I would hazard to guess that people that would be paying anywhere close to a 40% marginal federal tax rate aren't really sweating $10K credit card balances.

pavel_lishin 12y ago

Sometimes the debt is bullshit, but it might be easier to buy it for a small percentage than to pay it off. We get letters for a medical debt that's factually wrong, but by the time we convince Debt Agency N that we don't actually owe it, they've sold it off to Debt Agency N+1 for 1/10th of what they claim we owe them (which is already 1/10th of what was originally 'owed'.) It would be well worth paying 1/100th of the original bill to not have to check the mail anymore, and throw that garbage away, but if we were to actually PAY the 1/10th settlement amount, it would open us to liability for the WHOLE amount. tldr, I'm willing to be extorted, but not ludicrously so.

encoderer 12y ago
I'll tell you, you're playing that game wrong. It's not your job to convince them of anything. The next time they sell, and you get the initial dunning letter, you should write back a simple letter with your name and address stating that you refute this debt, and demand that they validate the debt as they are required to do under § 809 of the FDCPA [15 USC 1692g]. The burden of proof is on them. You only have 30 days to do a so-called "timely" validation, but you can force past CA's to validate as well -- the only hitch is that they can continue to collect on you while they validate, something they cannot do if you demand timely validation. One more tip: Don't sign your name on letters to CAs, and don't ever give them ANY information they don't already own. Ever. Especially your bank account information. If you do decide to pay them (hopefully strategically as part of a pay-for-deletion-from-credit-report arrangement), don't pay them on a bank draft. And send it certified mail return receipt requested.
- dllthomas 12y ago
  "don't ever give them ANY information they don't already own." When I called the State Of Michigan treasury to pay a bill I'd hadn't known about (having not lived in the state for years), they forwarded me to a collection agency without telling me up front. I was confronted with "we have to ask you some questions for verification" and answered them until they asked something I knew they couldn't already know. I felt seriously taken advantage of, at all levels.
- matwood 12y ago
  Everyone should understand the FDCPA. Once invoked, any legitimate debt collection company will get in line. The problem ones are the fly by night places being run out of a strip mall.

fred_durst 12y ago

Exactly. Buying your debt off for a penny on the dollar is probably the stupidest thing you could do financially. You would be trading $10,000 in credit card debt, with a fair amount of legal protections, for $4,000 in IRS debt with very few legal protections.

derefr 12y ago
If you purchased a liquid asset with the $10,000 (and your creditors never found out about it in time to sue you for it), couldn't you just reliquidate it at that point and use it to pay off the IRS debt, leaving you with pure profit (and a horrible credit score)? Actually, wait, maybe not even that: given that you purchased the debt, you could legally mark it (as the creditor) as having been repaid and then petition (as the debtor) to have your credit score corrected, no? This is what the http://rollingjubilee.org http://rollingjubilee.org people are doing, at least.
- patio11 12y ago
  Repaying negative status debts does not necessarily improve one's credit score. You can ask the credit reporting agencies to reflect the fact that you've paid it, but this is a no-op for virtually everything except mortgage applications.
dragonwriter 12y ago
> You would be trading $10,000 in credit card debt, with a fair amount of legal protections, for $4,000 in IRS debt with very few legal protections. Forgiven debt is taxed as normal income, so you'd have to have a 40% marginal federal income tax rate to end up with $4,000 in IRS debt on $10,000 of forgiven consumer debt, which is an approximation of the maximum marginal rate being 39.6% (which kicks in at $400K income for a single taxpayer.) I would hazard to guess that people that would be paying anywhere close to a 40% marginal federal tax rate aren't really sweating $10K credit card balances.