After my original debtor wrote off my debt due to job loss in 2008, the account has gone through 3 debt collectors. Is it in my favor to negotiate with them and try to settle the account? Can the third party sue me for the debt?
According to my sources, it doesn't appear that the statute of limitations has expired on your debt. That means you could potentially be sued by the collection agency. (This is not legal advice of course, as Mary and I are not attorneys.) Whether or not they would be successful is another matter. However, most debtors do not show up in court when they are sued by collectors and so the collectors end up getting default judgments.
Yu don't say how much you owe, and I don't know the likelihood of your being sued. Avoiding a lawsuit is one reason to settle. (Settling won't improve your credit scores, however.) But our basic philosophy is that if you incurred the debt, and you owe it, you should try to pay as much as you can.
If you can't pay the full debt, then you should try to negotiate a settlement that will allow you to pay what you can afford. Keep in mind that if the collector does agree to settle, you should make sure you have that agreement in writing before you pay them, and you should make sure the letter clearly states that you will not owe anything more on the debt.
In addition, the IRS considers forgiven debt taxable income, so you will want to talk to a tax advisor to find out whether you will have to pay taxes on the amount they forgive.
In our e-book, we discuss negotiating with debt collectors in more detail. At a minimum, I would encourage you to at least read the first chapter of Debt Collection Answers online for free so you have an understanding of your rights when you are dealing with these debt collectors.
Please let us know how this turns out for you. If you are able to reach a settlement, we would be interested in hearing what you end up negotiating.
