Creditor agrees to stop interest, waive $5000 of interest that was added & I'll only pay on principle????

Question

I contacted one of my creditors, explained my situation, and they've agreed to waive the $5000 extra in interest fees, and will accept a montly payment on the principle amount without adding additional interest. So every penny I send will go to the amount owed. Is there anything I should know before signing the papers agreeing to this arrangement? Can the collector later require that I pay the $5000 of extra interest fees and more? According to the collector, as long as I make monthly payments as scheduled on the principle amount, they will not take me to court for a judgement, or interest fees? Has anyone else been offered this type of arrangement? According to the collector, since I don't have any assets and I'm on a fixed income, they'd rather work with me, than take this to court. Thanks

Ooops, I almost forgot. I asked if the waived $5000 in interest would be considered as forgiven, and if I'd be sent a 1099 form. I was told that only applies when an arrangement has been made to pay a large lump sum at once, such as $5000 on a $10000 loan, but that the monthly payment arrangment I've made to pay on the principal over the next few years, with my income bracket is different. Thus, I won't be receiving a 1099 form.

NOTE: What is a principal amount? I'm assuming that was the amount of
the loan when the collector received it(with late fees ect), or is that supposed to be
the original amount with the creditor? I had limited time to speak
with the collector, so I forgot to ask this question, but will call
later this week for more details. Thanks

Everyone I've spoken with, assured me a creditor would not agree to waive the interest fees, so I was pleasantly surprised.

Answer 1

If you've had to go this direction, make sure that you have EVERYTHING in a statement from the company. Everything including how much is the total debt you're going to pay off, how much you're paying every month and especially that the interest and that will cease immediatly. Without it in writing, if anyone on the other side drops the ball, you have no proof of the original agreement.

Answer 2

The only thing you need to be aware of is this, after you have paid them the agreed amount, you will receive a form 1099-C from the creditor at the end of the year. The amount that they forgive, the interest and finance charges you did not pay, will count as income for income tax purposes when you file your income taxes for that year. That's what happened to us.

Answer 3

All the terms you discussed sounds standard. These arrangements are done all the time. The creditor would rather get something instead of writing the whole loan off. In my experience, if you are not late the deal will be completed as agreed.

Answer 4

Just make sure all your concerns are addressed in the agreement that you sign. Ask the creditor the questions you just asked us. They will surely address them and explain the paperwork.

This seems like a good deal, but make sure this is adirect dea; with the original creditor, and not a collection agency. If it is indeed with the original creditor, you should be good to go.

Paying no interest on that balance is a blessing really, and if they don't report any lates, any even bigger blessing.

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http://www.thetruthaboutmortgage.com

Answer 5

I'm assuming you have gone into default at this point, but not quite to the collection agency.

This is the same kind of deals that the credit counseling services will work out on your behalf, generally you can do it yourself, obviously from your story. As long as you have read that agreement carefully, and as long as you pay your payments on time, then you should be good to go.

If you don't pay, and didn't make this deal, they would sell your debt to a collection agency and they would only get pennies per dollar of debt you have, which is what's in it for them.

Answer 6

Yes I did this yrs back with a credit card company what a relief, paid them off in no time. One question u say they will take off the 5000.00 but will they still be adding late fees on that? make sure the answer is no. If u do this dont be late paying I believe that can void the agreement and u r back to square 1.

Answer 7

You can pretty much bet if you are late or short on a payment then the interest will become due again, along with any other late fees added to it......this is a common practice among creditors, I work for one.........