Question

How does settlements work?  My husband was offered to settle on a card he got behind on.How does settlements work? My husband was offered to settle on a card he got behind on. The balance is $460. 56 They offered to settle for $184. 26 I know 460 isn't a lot but right now his hours are fluctuating due to the coronavirus and I'm a stay at home mom. Thoughts?  

Answer 1

Get it in writing that you want any derogatory marks removed from his credit report. And be aware that often when you settle, the difference is considered income and you may be taxed on it.  

Answer 2

Sounds pretty good to me!  

Answer 3

A settlement is where you settle a debt for part of the amount owed. You just need to pay the whole thing at once, I believe. I would most definitely take the settlement and pay that.  

Answer 4

Ask creditor to remove from report before you pay, or mark it Paid in Full. It’s how they ‘describe’ the pay off that effects your score. So ‘settled as agreed’ not the best

Answer 5

From what I read on here, you have to pay taxes on the difference because it is considered income.  

Comments

In the US if the write off (part you are not paying) is $600 or more you will get a 1099c. Her balance is low enough it would not apply.  

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@lattimer Byers-Denton gotcha! That makes sense!  

Answer 6

@ken939 is correct you will pay tax on that difference because the IRS sees it as you getting income. Its a small amount but just keep in mind for future settlements

Answer 7

You can ask them to take it off your credit report. I've never seen that happen. What I have seen is account closed/settled debt. Which indicates you borrowed and did not pay in full. You do have to claim any unpaid on your income taxes. If you the money I suggest you make $100 payments until it's paid. YOU CAN DO IT

Answer 8

When we did this, they refused to take it off our report completely but marked it "paid as agreed"

Answer 9

It won’t be removed from your report, it will show that you settled for less

Answer 10

Thank you ladies! I will have him ask them about removing it. He has been making payments on another card he had that he used for his dental bill but because he couldn't make the full pmt this month they lowered it and said that its now closed and it can't be reopened but that its now at a 0% interest rate. I hate credit cards. I can't wait to get them all pd off!  

Answer 11

You will be taxed on the income

Answer 12

Sounds good especially if you don't have the money