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cmathis315 · Dec 10, 2006, 09:59 AM

My husband and I are preparing our finances to be eligible for a mortgage. I was approved for a loan to settle our outstanding, very old (five years, no action) credit card debts. I had 6100 with Discover, that was still held by the creditor, and my husband at 6800 with MBNA which had been sold to Asset Acceptance when they merged with Bank of America.

I settled with Discover for 40%. Great relief.

When my husband finally tracked down who had his debt, he negotiated a settlement for 32%. Great. He had to call them back with his fax number at work so they could send an agreement letter.

When he did call them back, about forty minutes later, he got the run-around. He had to call back four times to finally get transferred to someone high enough in the totem pole. Eventually he got a gentleman from upper management on the line. He said that the original lady who my husband had talked to had made a mistake. They were sorry for the error, and they would be cancelling his account and letting the credit bureaus know.

What the hell? We're flabbergasted. Since we are working with a mortgage counselor, I called her to ask her what that meant. She said, "Merry Christmas," and that she had heard about that happening before, especially when the original creditors had gone through a merger and the balance had been transferred.

I'm still unsure about the whole thing. It certainly puts a crinkle in our mortgage process, since it will take a lot of effort to show that the debt has been satisfied. There must be a catch.

Our mortgage lady said that they will set up a conference call between a third party who does credit restoration, my husband, and Asset Acceptance, and get somebody there to state that the debt has been cancelled. Then the restoration company will make sure it gets removed from his credit reports, and we'll be able to get the mortgage.

My questions are. Does this actually happen in real life? Will they be able to come back later and say we owe this money?

We were so excited to be growing up and taking care of the mistakes we made in our early college years, and now we feel unsure and wobbly again.

ScottGem · Dec 10, 2006, 10:10 AM

What I suspect happened is that they couldn't find the paperwork documenting the debt. So they decided to just let it go. And yes that does happened. Most likely the debt has been written off for tax purposes so anything they collect is just gravy.

What I would do id go back to the creditor thank them for absolving you but explain that, since you are in the midst of a mortgage application you would appreciate a letter to that effect that you can sow the mortgage lender.

mr.yet · Dec 10, 2006, 12:41 PM

JUst make sure you get it in writing.

cmathis315 · Dec 11, 2006, 07:03 AM

Originally Posted by mr.yet

JUst make sure you get it in writing.

Do they have to give me something in writing? As my husband tells it, once they said that they would cancel, they said they wouldn't say anything more to him. They didn't stay on the line long enough for him to ask for it in writing.

mr.yet · Dec 11, 2006, 07:07 AM

Send them a letter certified mail, request ask per conversation that they would cancel the debt.

By asking in writing they have to response in some way to verify the debt status.

cmathis315 · Feb 7, 2007, 02:53 PM

As an update to this situation... We're now home owners and Wells Fargo's credit resolution people weren't able to get very far with collection agency.

These professionals were unable to get anybody from Asset Acceptance on the phone. They'd reach somebody who would "transfer" them to somebody else, and hang up instead. This went on for a couple of weeks. My husband gave our mortgage counselor the secret series of phone numbers and extensions to reach somebody who would actually talk about the account.

The final say from Asset Acceptance? "We've returned your debt to the original creditor."

That would be MBNA, who, as of today, say they never received the account back. According to them, we don't owe them anything.

So nobody has our debt, and nobody will claim that it was cancelled or forgiven. It's simply somewhere in limbo. We were going to claim the "cancellation" on our taxes for 2006, but it seems silly since we don't have any proof of it, and nobody will give us any.

We haven't re-checked our credit report yet and don't plan to for another few months. If Asset Acceptance is still on there, we'll simply write a letter to the credit bureaus asking them to validate the debt. We know they can't, so that will be the end of it, we hope.

bretb · Feb 8, 2007, 12:01 AM

You raise a good point... If you don't have proof, I sure wouldn't pay the IRS for a cancelled debt that you're not sure you won't have to deal with later. Let the IRS let you know if it comes up as cancelled later. Trust me. They'll let YOU know if you owe them money. Found out last year when I got a bill for back taxes on a portion of a debt that was written off.

However, that's OK with me, because I would not have surrendered the info to the IRS up front (especially if I didn't have the required documention showing such).

If the creditor doesn't file the needed paperwork to take the write off, then as far as the IRS is concerned it doesn't exist. I wouldn't offer them the free money. The worst you risk is perhaps a little interest (usually no penalty for such back tax bills), at least not with mine. The interest they charged was close to 6%