A friend that I know was unable to pay...?

Question

Her cellphone bill and it got cut off...Well she is still unable to pay it. And a letter was sent to her from Alltel letting her know she may be eligble for a settlement and they set a court date in May, She wants to know what is going on? What is this settlement?

Answer 1

A settlement is a request for a partial payment. She has three options.

1) Pay in full. She can scrape up the money and pay to keep her credit from being bashed too much. She'll take a big ding on her FICO score. Result is that she'll have a hard time getting good rates on loans (e.g. car loans, home loans).
2) Settlement. Pay some. She'll lose even more FICO score points, making it even harder to get any credit.
3) Default. Do nothing. She'll lose even more FICO score points. Now it will be very difficult to get credit.

This will stay on her credit for seven years. She screwed, but it's a matter of how badly she wants to be screwed. If she ever wants to own a car, home or business - this bill will end up costing her multiple times what it cost to just pay the bill. But that's life.