Expert: Gina Boykin - 4/25/2009

Question
I recently received a warrant for $4500+ from what I know the account started at $3000 the rest is interest and fees. Through loans and pulling money from my 401K I am able to raise the $3000, do you think the creditor would settle with me and we wouldn't have to show up to court. If he does, do I still have to show up for court? If he doesn't what are the chances of the judge determining the settlement?

Answer
I don't think I can give you the odds, but it is always better to try and settle out of court to avoid a judgment, which will go on your credit report.  You should contact the creditor (or the lawyer representing the creditor) directly and ask to settle for the amount you have.  It will cost them more to go to court and still not possibly get the entire amount than it would to settle now, so it's in the creditor's best interest as much as it is in yours.  Make sure that if they do agree, that you request for this IN WRITING.  This letter must state that they are accepting the $3K for payment in full (otherwise, they can just come after you later for the other $1,500).  You should also request that they agree to state the same with your credit bureaus (the payment in full).

Tell them that once you have the letter, you will provide them with the money.  Don't give anyone access to your bank account - they will wipe it out.  Do a certified check or money order(a regular check still has your bank account information...remember, these are not usually people of high integrity) and keep all receipts and documentation.  In fact, you should document every conversation you have with this creditor from now on (dates, person you spoke with, etc), and if they play hardball, I would send a certified letter requesting settlement. You can use all of this information at court.

If you get the letter and pay before the court date, then the case should be dismissed.  However, if you are not able to settle, you MUST show up for court if you want any kind of favor with the judge.  If you don't, there is 100 percent chance of a judgment for the entire amount and you may have to pay additional court and legal fees.  If you do go to court, you can show the judge that you attempted to settle for $3K and this may work in your favor to reduce the amount or provide a better payment arrangement.

You can try this website below for an example of a letter you can send to the creditor requesting settlement. (Go to "debt collection dispute letters", then to "debt settlement ltr").

http://www.debt-n-credit-letters.com/