5. When to Pay a Negative Account

Hello, and welcome everyone to this module. When you should pay a negative account. So this is a huge and common question that I get often when it comes to getting negative items removed from your credit report, and the question often is, hey, you know, if I get it removed from our credit report, do I still have to pay and all that good stuff. So what I’m going to do is break this down. So you are crystal clear in terms of when you should pay and all that good stuff. So here is what we’re going to cover. So the very first thing I’m going to break down is removal doesn’t mean gone. And I’ll get into this on that particular slide, but you just need to understand this. Then I’m going to break down when you’re forced to pay because there will be scenarios when you will be forced to pay whether you like it or not.

I’m going to get into the types of accounts to settle and, or you will have to pay. Then I’m going to break down when and why we settle and then I’m going to break down the pay-for-delete removal, which is a process that you can use in certain scenarios. So let’s go and hop right in. Removal doesn’t mean gone. So I’ve said this multiple times, and I’m going to continue to say this, but credit reporting and your legal liability to pay are different. Okay. So just because it’s removed from your credit report does not mean you no longer owe the money. So that’s the big thing you have to understand. So in this particular module, I’m going to cover the type of accounts that you absolutely must pay, but you just need to get that with the proper strategy, consistency and due diligence, eventually you can get any account removed from reporting in your credit reports.
So you already understand at this point, because I’ve shown you a really, really, really powerful, challenging technique to really ultimately just get those items that are reporting negatively removed from your credit report. But just because you get those items depend upon where they are and the type of account it is doesn’t mean you no longer have a legal liability to pay. Like I’ve said before, there’s different, there’s different types of collections and I’ll cover this really quickly on this slide. So you have those collections that go to a third-party collection agency. Typically when it goes to a third-party collection agency, it’s charged off as bad debt. And that collection agency is just essentially just buying those debts for pennies on a dollar, and it’s no longer with their original creditor.

And now they’re just trying to re-report that information on your credit report and get you to pay for settle for a lesser amount. So let’s just say I have a collection account, or I have an account that was with a creditor, ABC, we’ll call this creditor USAA. And let’s just say that USAA is no longer in the collections department with the USAA. It’s been charged off as bad debt by USAA, and then a collection agency purchased that debt from USAA for pennies on the dollar. Let’s just say that they bought that, you know, let’s just say they bought that debt for 20 cents on the dollar. Well, they bought that debt for 20 cents on the dollar. Then that means that that person or that collection agency got a really, really good deal on that debt.

So they may have purchased it. I don’t know what 20 cents on the dollar is of $5,000. I think that might be like a hundred bucks maybe. I think maybe a hundred bucks cause 10 cents on the dollar would be just 10 cents of a dollar. Then 10 cents, times 50. I believe it’s a hundred bucks. So if it’s not a hundred dollars, please don’t, you know, beat me up, but you get what I’m saying, but let’s just say that is 20 cents on a dollar, a hundred bucks so that means that that collection agency bought that debt 100 bucks. So they’ll say, and they’ll call you and say, hey, look, you can settle with this deal for 1500. Now the scenario here is that they bought the debt for a hundred bucks and they’re just paying to report to those bureaus, which is another reason why you’ll notice that with collection accounts, sometimes it will only report like one or two bureaus, but not report on all three.

Well, the story behind that is because as a collection agency, i.e data furnisher which you understand how that works. They may only be paying to those two bureaus and don’t want to pay for the other bureaus, because in their mind, they’re just trying to get you to pay them an additional 1400 bucks. That’s why, when it gets to that collection agency level, once it’s charged off as bad debt and it’s with a third-party collection agency, you know, if you get that removed, then it’s kind of like you get what’s going on with that.

However there are scenarios where in my opinion, not just, you know, when it’s at the collection agency level, like what I just explained, I would just get that removed. And then that just is what it is. And, but if it goes to the first type of collection and it’s still with the original creditor, then in certain scenarios, they can create a judgment and you will be forced to pay and, or be still with that original creditor. And it hasn’t been sent to create it as a judgment, then that means that they’re still, you know, you’re still with the financial institution. And even if you do get it removed, they’re going to still probably continue to come after you and you will have to pay. So if it’s still what the original creditor, my suggestion is making some type of arrangement with that.

So I hope that makes sense, but I really want to really clarify that because the removal doesn’t mean gone, especially if it’s not with, especially if it’s still with the original creditor. So in the next slide I’m going to cover when you absolutely must pay outside of that scenario, I just broken down. So the types of accounts that you must pay, you must pay, you must settle. So debts related to tax liens. There’s no way around this. So even if you get that tax lien removed from your credit report, you still owe the money, and the government is then want their money, the IRS and the state governments going to come after you. Child support is another one. So just because you get it removed from your credit report, you need to still make sure you make a good on your payments there. Public records. Again, typically those public records are bankruptcies and chapter 13 bankruptcy, chapter 7 obviously you just, you just do your chapter 7. It’s on your report for 10 years. But the chapter 7, I mean the chapter 13 bankruptcy is going to be that bankruptcy that you make payment arrangements, obviously, and you’re paying over a course of time. So you get that, then you have federal student loan debt. So again, student loans, especially the federal debt. They want their money, right? It’s not going away.

So when it comes student loans, we’ll go and cover this. You know? So again, just because it’s removed from your credit report, you need to understand that your wages can be garnished if they don’t get their money, right? If whatever reason you do eventually get this removed from your report, because it was a charged off or collection status, all that stuff, but the debt still out there, wages just can’t be garnished. Your bank account can be levied. Tax refunds can be levied. So that’s why this is when you’re forced to pay, right? This is a scenario where, okay, I didn’t pay, I got it removed from my credit report, but now my wages are being garnished and my employer, and that could jeopardize my employment because it’s costing the job more money to go through all the administration stuff to take the money out of your paycheck, right? Then another scenario when you’re forced to pay child support, right?

Sometimes this could be a mistake or misreported. So again, I’m not beating anybody up who has a child support, or even saying that if the child support is not reporting accurately on your credit report, that you can’t either get it removed or get the reporting updated. However, when it comes to child support, in addition to the things that they can do, like they can with student loans, they can freeze your assets. And essentially when they do that, they’re going to take away what they believe you owe regardless of what’s reporting in your credit file. So again, don’t play with this.

Just because you get that bad boy removed from your credit report with these types of scenarios, you will be forced to pay. So just because it’s not there does not mean your legal liability to pay isn’t there. Then again, if it’s child support, I mean, may make good on that. Make sure you take care of that. You get that knocked out. You get that rectified. Again., I’m not a counselor or anything like that. I’m just giving you the scenario so you understand where you are with this particular type of account. The other one is public records, so I’ve already covered bankruptcy. So again, bankruptcy, chapter 7 and chapter 13. Typically with that chapter 7 bankruptcy, you pay that attorney, they discharged the debt and it’s on there for 10 years. And that is what it is, but then that chapters 13, you’re making those ongoing payments. So again, you shouldn’t even be looking at this training or going through this process, if you’re in a chapter 13 bankruptcy, because you need to get out of the bankruptcy, but you’re still forced to pay. But then there’s those, there’s those other public records that I covered, like the child support, I just got that covered, but then you’ve got the judgment scenario that I was covering at the beginning of this.

Like, if it turns into a judgment, let’s just say USAA in that same scenario chooses not to charge it off as bad debt, and they choose to put a judgment out there. They choose to say, hey, look, man, we’re taking you to court because we really want our money. Well you’re going to be forced to pay. Because with the judgment or any type of public records, if you lost in court due to default or defense, whatever the scenario was just like student loans, wages can be garnished, your bank account can be eventually levied. And this is another scenario where you will be forced to pay. Right? so my suggestion in these scenarios is make payment arrangements. So you want to call your loan, your student loan company if that’s the scenario that you’re in, whether it’s federal or private, but you just want to call them.

Even if you have successfully gotten the item removed from your credit report and continue making payments or make payment arrangements. Call the IRS, right. Call the state or local government, reach out to them, get those payment arrangements in place. Because again, just because you get it removed does not mean, especially with these accounts that I’m covering right here, that you no longer owe the money. You still owe the money and they will come after you. Right? So what you want to do is add these monthly payments to your bills after creating your cashflow control system. So I’ll cover more in terms of how to create that cash flow control system.

But essentially what I’m saying with these accounts that I just covered is make those arrangements because removal does not remove, removal does not mean your legal liability to pay is gone, especially with these types of accounts. So go ahead and knock this out. Okay. So I know we’re at the end of week five and we’re getting into all of this stuff that we just did, but I want you to understand that you want to be proactive. Everything that I’ve covered is legal, ethical, in compliance. So, and I’ve taught you a really, really powerful strategy to get those items removed, especially the ones that you really don’t have any legal liability for, like I’ve already covered, but again, make that stuff happen, guys. Now when and why you should pay, right? So why you want to go and be proactive is I’d rather you, you know, start paying on your terms versus being forced to pay like those other scenarios. You know, how embarrassing will it be to, for you to go into work, and you have to have a managing, you have to having a meeting with your manager about, hey look or even HR saying, hey, unfortunately we’re gonna have to take 25% of your paycheck for the next however many years. I mean, that’s devastating, right? I mean, 25% after taxes is a huge amount of money until that debt is paid in full. And imagine all the other consequences that I can, that it can now

cause because now, you’re going to be forced to reduce your living expenses about 25% that may or may not be feasible, which means you can create the cycle of the bad credit again. So again, pay on your terms versus being forced to pay. And then you also want to keep your place of employment, because again, they’re going to have to, again, some jobs are, you know again, some jobs may say, hey look, you know this is costing us too much money for us to continue to facilitate this. So unfortunately we’ve made a business decision and we’re going to have to just part ways with you. Now, that’d be an extreme scenario, but again, I don’t want that to be your scenario or you to walk into work. And that happens. So pay on your terms. Another scenario could be just because you’re trying to close on a home loan, right? Just trying to close in a loan. And in order for that deal to be closed, they’re going to say, hey, look, we see this, we see this judgment, or we see this public record, or we see this deal, even though it’s not reporting on your credit file, we were able to get it. We know that it’s out there. So in order for you to close on this loan, we need you to pay and guess what? Once it gets set up point, if they find it and if you want to close on the loan, you need to pay. Okay. So these are those scenarios when, when and why you should pay, because you know, you want to make sure that sometimes, I’m not saying you’re taking a temporary financial loss, but if you’re taking that, if you’re looking about the long term, if you’re thinking about the long term, in terms, okay, if I’m going to make this decision now, long-term, how will this set me up for the future? These decisions are going to set you up for the long term. So that way you don’t get that bad deal later on down the road. Because again, we want to think today, tomorrow, right? I mean, we’re going to think tomorrow, today. We want to make sure that we understand the best way to predict the future is to bring it to the present and then understand that this is the scenario. So pay-for-delete settlement and how this can be used.

Now, again, there’s zero chances that none of this stuff would work if you don’t do anything. So the pay-for-delete settlement, I’ve already covered when and how you should pay, because at this point you would have already, you know, essentially gotten these things removed, but let’s just say, you’ve gone through the entire challenging process, you’ve gone through and you still cannot get that item removed. And let’s just say, it’s not any of the accounts that I just covered. Let’s just say it’s a collection or a charge off. Well, what you can do is attempt to do, what I call, pay-for-delete negotiation. When you say, hey, look I’ll pay this debt if you agree to remove it from reporting and that’s like at the end of the world, and that’s like, hey, look, I’m just trying to get this bad boy removed, in some scenarios, they’ll agree to get it removed. Right now, I I’m really led to believe that if you follow this challenge and sequence that I outlined here in week five, you’ll probably get that item removed. But in certain scenarios, if they just won’t budge, you can use this pay-for-delete letter negotiation template, and it’s right below this video.

So, but the reason, the whole thing about a pay-for-delete is just saying, hey, look, I’m agreeing to pay said debt, that you were reporting on my credit file with the agreement that you’re going to remove it from reporting once the debt is paid and that’s how you do that pay for delete, and typically I suggest calling at the end of the month as well, because you got to remember these collection agencies have quotas. So if you call towards the end of the month, you know, and maybe it’s like the 29th or the 30th, or it’s like the 28th, you know, they’re trying to get their deals, their quotas, and so they might be more likely for them to move forward with that pay-for-delete negotiation. If you can get them, give them the cash. Okay. But this is a really, really good thing that for you guys to understand, and I will see you in the next module.