Negotiating a Debt Settlement

Q: My husband was divorced from his first wife approximately eight years ago. They have three accounts in collection, which is hindering our chances of purchasing a home. Is it possible to write a letter to the creditors to settle his half of the debt or is he responsible for it all?

San Francisco, CA

A: You certainly can offer to settle the debts with the creditors. And your best chances to get the creditor(s) to accept a deal are to have what you want to offer in a lump-sum cash offer. If, for example, one of the accounts had a balance of $5,000, and you had the cash, you might offer $2,500 to settle in full. To many creditors, cash today is better than a promise of monthly payments in the future. How much they are willing to accept on the delinquent debt often depends on how old the debt is.

If the creditors accept your offers, don't send a penny without getting the offer(s) in writing. Once you have the letter, then send a check or cashier's check. After that, keep a copy of the proof that the debt was paid in full. You will need to keep the proof forever, because often this type of consumer debt is sold and resold, and sometimes the paperwork proving you paid it off is lost.

Finally, I was waiting to tell you the bad news. If both your husband and his first wife co-signed for the accounts, there is no such thing as "his half" of the debt. They are both 100% liable for the jointly-held debt. If the creditors can't get the ex to pay, then they will try to make your husband pay up. You should know that your husband might have to pay even if his divorce decree says he and his ex were supposed to split debts. For example, credit card companies aren't bound by divorce decrees. That means they can come after your husband for all the debt owed.Image may be NSFW.
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