Pay off credit card debt that has been sold

Here’s a simple fact: Debt, unlike good wine and my wife, doesn’t get better with age. Unpaid debts do not go away. Until the debt is paid or canceled, you still owe the money. This is true even though it is credit card debt that is sold to a collection agency. Even if you think it’s unfair.

Why do you still owe the full amount if the original creditor sold it and made money on the sale? Let’s take a closer look at this question.

Why is credit card debt bought and sold?

It’s a big deal, that’s why! Original creditors usually pursue debt as long as they believe there is a good chance that you will pay the bill. The right customers are hard (and expensive) to find, and you are your creditor’s customer. So they want to keep you if they can. They will go through their own internal collection process with you to try to find a solution. But there comes a time (usually 90-180 days later) when it’s no longer profitable to carry the debt, and they decide you’re the wrong customer they thought you were.

This is when the creditor will sell the debt. These old debts are then bought back by other companies for a lower price (most of the time much lower) than the amount owed. Professional debt collectors are confident in their ability to get you paid so that they can recoup their investment and do something for themselves. And once an outside collector is involved, your value as a customer disappears.

Debt can be sold and redeemed over and over again as the debt ages. Each time it is sold it is sold for less due to the increasing risk of not being able to collect older debt when others have tried and failed. Each time, the original debt documentation is supposed to change hands with the sale of the debt. Often this is not the case. This becomes important as you will see below.

Do we still have to pay?

As I said at the beginning, as long as the debt is not paid or canceled, it is still owed. But other factors can come into play, limiting the collector’s ability to collect from you. Here are two of the bigger ones:

Limitation period

If the debt gets too old (we’re talking about years here), your state’s debt statute of limitations may actually make the debt uncollectible. Again, bad doesn’t mean you still don’t owe. You do. But reaching the statute of limitations means you can’t be sued and forced to pay with a judgment.

For this reason, if a debt comes close to the law, the collection activity is often accelerated because collectors know it too and will be eager to close the file before it gets there.

Let me caution you here: State limitation periods vary widely and can kick in from three years to 15 years. You should also know that the debt will remain on your credit report for seven years, even if your state has a statute of limitations of less than seven years. It will likely be a drag on your credit score and your attractiveness to lending and hiring until it goes down.

Prove it’s really your debt

The second thing that might prevent the collector from charging you is if they can’t prove the debt is yours. So your first question if you are contacted by a collector is to ask them to prove that the debt they are collecting is yours. Mistakes happen and in order to pursue debt collection, the collector must be able to validate that the debt is yours. This involves producing a lead that shows that the debt was yours and was not already paid. As I mentioned above, as debts age and are resold, this data may get deleted or lost. No proof, no salary!

Can overdue credit card debt be canceled?

Yes, you can offer to settle the account for less than you owe. However, the collector may not agree to your terms and is under no obligation to do so. However, if the collector accepts your offer, you should be aware that any amount remitted above $ 600 is considered taxable income for you, which means that you will have to pay tax on that amount on the next tax day. .

A word of warning: Anytime you agree to the terms with a collector, make sure you get all the terms in writing before sending any money. Otherwise, the collector may keep your money, continue to sue you for more, and to add insult to injury, restart your statute of limitations clock just because you made a payment.

Complete forgiveness, outside of the confessional, is another story, and that story is called “bankruptcy”. Bankruptcy exists in the United States for good reasons, but it is also in my opinion an option of last resort. This is because of the damage that bankruptcy will do to your credit score and how long it will affect you.

While a collector’s item will disappear after seven years, Chapter 7 bankruptcies stay there for up to 10. This is a high price to pay when there are other options for dealing with overdue debts that don’t. are not as damaging to your credit score or your self-image.

What to do if you are struggling with credit card debt

Ask your transmitter for help

The sooner you call saying you’re having trouble paying a bill, the better. Early requests for help are easier to grant, and there are usually more options for a good client in a difficult situation, as opposed to someone who needs to be sued to pay. Remember, you are still a valued customer and the lender wants to keep your business. Reduced payments, fee waivers, or lower interest rates are available for a short time to help you get through a tough time.

Cut spending and sell items you don’t need

You can also make some modifications at home to free up some money. Some great ways to help pay off debt are to stay on a budget and only spend what you owe until you catch up. Consider having a garage sale or selling non-essential items online to generate income that you can use to pay off your debt. You might consider a second temporary job or a part-time job to do the same.

Contact a credit counselor

But if you just can’t seem to find a way to pay off your debts on your own and you have no hope, bankruptcy might be an option. You will need to get credit counseling from a qualified agency.

The good news is that you can contact a credit counselor without having made a decision about bankruptcy. I would suggest, however, that you choose a licensed bankruptcy counseling agency even if that is not what you end up doing (which I hope will). the National Foundation for Credit Counseling is a great place to find a qualified local non-profit agency that can help you with your questions. I call these agencies “the good guys” because they will work with you to find a way to solve your debt problem for free or with very little money.

On your first contact, you will be put in touch with a credit counselor who will examine your situation in detail and help you find the solution that is best for you. These options can include some sort of debt settlement (where you will pay less than what you owe, as mentioned above) as well as your bankruptcy options. But you can also benefit from a debt management plan through the agency.

At the end of the line

The point in all of this is that there are options available so you don’t have to dread phone calls and letters demanding payment. Instead, you can settle the debt to everyone’s satisfaction and move on. I wish you good luck!

Have a credit question for Steve? Send him a message on the Ask Bankrate Experts page.

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