|   Dear
Steve,
Here are a few questions that I am unclear
about: 1.) When an old debt is settled or paid off, can the creditor or collector
have the past negative marks (lates, charge-offs, etc.) removed from the credit
reports? 2.) When a bad debt is sold off to a collection company and the collection
company is able to collect on the debt, does the original creditor get any of
the money? 3.) When a debt is charged off, does this mean it has been written
off by the creditor? And if so, why do they still try to collect on the debt?
Thanks. -- John
 Dear
John,
I am happy to help clear things up for you. To
help you and my other readers understand what is happening without putting you
to sleep, let me illustrate my answer with an example. Say you loan a girlfriend
$5,000 and she promises to pay you back monthly over two years.
After
four months without a payment, it is likely two things will happen. She will no
longer be your sweetie and you will have mentally written off any chance of collecting
the debt (and if you are smart, you will be skeptical of any future relationship).
You might even mention the negative experience, omitting the now seemingly stupid
romantic part, to your friends, especially if they were thinking of floating her
a loan. However, if you were to run into her sometime
later, it is just as likely that you would mention the $5,000, because you want
it back and she still owes you! Whether you'd ask for a date or not is another
matter and might depend on her showing you some good faith gesture! In
business, as in love, trust and faithful performance are keys to success. 1.
A creditor can tell your future and current creditors any repayment information
that is correct and accurate through your credit report, in the same way that
you would warn your pals. That information or warning may be modified at any time
as long as the new information is correct and accurate. When
paying an old debt, whether through settlement or other means, negotiate with
the creditor to list your account favorably. Any accounts that are marked as 30,
60 or 90 days late can be modified to show the account current and in good standing.
Ask the creditor to give you something in writing stating how they will list your
accounts on your report before you send them any money (the money is your good-faith
gesture). Once you have made the payment, you have no negotiation power and the
creditor is much less likely to say nice things about you (on your credit report)
that may or may not be indicative of future behavior. 2. A
debt that is sold to a third-party collection agency can be handled in different
ways. Many creditors sell the debt in whole for a percentage of what is owed so
whatever is collected stays with the collector. Other creditors have agreements
where the collector receives a percentage of the debt collected and the account
remains owned by the original creditor. Still others have their own internal collections
departments. 3. Yes and no. A charge-off means that the creditor's
accountant, as part of its accounting procedures, has written off the debt as
a loss. That fact, however, does not mean that the debt goes away. Even when charged
off, the debtor (as in the case of my example of a misplaced love interest) still
owes the debt. John, I hope things are a little clearer at
this point, and let me add that one of my employees would not agree to an engagement
without first seeing a credit report on her intended. As I love to say and my
wife longs not to hear, "act in haste, repent at leisure!" The
Debt Adviser, Steve Bucci, is the president of Consumer Credit Counseling Service
of Southern New England. Visit CCCS
for additional debt
advice or click
here to ask a debt question. | 
