10

Few years ago I attended this college in NH, USA. I owed them about $5,000 for courses and housing. Since I couldn't afford to pay for the next semester, I stopped going to that school.

About 4 months ago, I got a call from a collection agency asking me to start making payments that I owe to the school to them. I agreed and promised them that I will call them back when I have the money.

Few days ago, I got all the money and wanted to call the school directly to completely pay the money but there is a problem. The school closed and was completely shut down about few months ago. Their website is down too. When you call them, their phone beeps and disconnects.

My only option is to call the collection agency that called me few months ago and make the payment through them.

Is this a good idea?

Do I still need to pay this money even when the school is shutdown?

I am so confused at this moment and don't want to waste this money if it is not required.

PassetCronUs
  • 203
  • 2
  • 5

1 Answers1

7

If it was me, I'd wait until/if you get contacted again by the collection agency. Once you do, I'd offer to settle for less. Perhaps 1000-1250 to start, and I would not go any higher than 2K. Get it in writing that this settles your debt in full, and do not give them direct access to your checking account.

You can pay them by certified check or with a prepaid credit card or something. If you do the latter, throw that prepaid card away, and never use it again.

You may also try to get them to agree that you do not owe the full 5K, and again get that in writing. Otherwise, you will be 1099'd for the difference between it and the amount you settle and therefore it will be treated as income.

I'd stick 2k in a bank account for a while, perhaps two years, and you are free to use the remaining 3K to meet other goals. After two years, I would check my credit and see if it is still in the report. You might also choose to dispute the collection and see what happens there. If it is successful it will come off your report.

Prior to a big credit decision (aka buying a home), I would check on the status of this collection. Only at that time would I contact that collection agency and again try to settle. If I contacted them, I would start the negotiations around 500 or so.

Pete B.
  • 80,097
  • 16
  • 174
  • 245