Help a Reader: Debt Obligation & Cleaning Up Credit Report

Question from a Reader

A few weeks ago I had a Google chat with a friend and reader. He shared his story of a debt that’s been forgiven by the creditor (after bankruptcy), but that is still on his credit report. I tried answering his question the best I could but I’m not an expert. I thought I’d share our chat and see if you, the reader, and provide some suggestions for further resolution.

Chat Transcript – Question

Charles: got time for a money question?
me: sure…whatcha got?
Charles: it’s a long story, you sure?
me: Sure…
Charles: A few years ago, I took chapter 13
I had about $20K in Stafford loans
on the advice of my lawyer, I called all my creditors and told them I wasn’t paying any more bills until the case was heard
student loans were not included in the bankruptcy
but I stopped getting notices from either my Stafford or my Perkins loans holders
I ended up paying the Perkins loans off myself
here’s where it gets wierd
follow me so far?
me: yes
Charles: cool
I’ve called the company that holds the Stafford loans repeatedly, for years, and they’ve always told me they charged off the loan
me: ok
Charles: The gaurantor (sp?) paid it
problem is, I called the company who supposedly paid it, and they say they didn’t
I’ve actually had a problem where everyone refuses to take my money
me: weird for sure
Charles: Now, I look at my credit report, and it’s sown that the original company is still owner of the loans
and they count toward my available credit
I’m told they did this:
One part of the company paid the loan and killed my account, for the purpose of not contacting me while in chap 13
but with the intention of having me resume payments when I emrged
yet, every time I contact them, they tell me the account is paid off
it’s a case of the left hand not knowing what the right hand is doing
and I’m in the middle
me: hmmm
Charles: What do I do?!

Chat Transcript – My Answer

me: have you checked all three credit reports?
Charles:all three, yes
freecreditreport.com
it’s been 4 years
surely there’s a statute of limitations or something
If I can get off without paying, fine, but even if I start paying again, that’d be fine with me
but now, there’s $20K on my credit report taking up space
me: to be honest, I don’t have a quick answer for you.
is the 20K a debt?
Charles: I didn’t think you would
me: or avail?
Charles: considered part of my available credit
in other words, if I could afford $22K in credit, $20K iof it is used
meaning all they could loan me would be $2K
me: ok..so it’s showing up as a debt
Charles: someone else, that is
yes
yet, they won’t take my money
freaky, huh?
me: let me take this transcript and digest it for a moment…my initial response is you need to follow the steps to correct your credit report…get this removed.
Charles: you see, I don’t even know who to ask about this!
No one has an answer
I’ve fallen through the financial cracks!
me: Sounds to me like you need to take the steps to get your report cleaned up.
Charles: ?
me: http://ptmoney.com/how-to-fix-your-credit-report-and-identity-theft/
me: With a clean report you’d be able to move forward with a clean slate.
Charles: so basically dispute the loans?
me: email the lender
and ask for a letter stating
Charles: part of my problem is I don’t really dispute that I owe the loans
me: well, that’s a conscience thing
Charles: heh, their own company disputes I owe the loans
me: that fact is, the lender doens’t say you owe them
i find quarters on the ground all the time
and i pick them up
take what they are giving you
just get it in writing and then pass that along to the credit agencies
Charles: so, email them and ask them you write me a letter saying my account has been closed and the loans have been paid off?
me: yes
then take that letter and jump through the credit reporting agencies hoops
Charles: okay
another thing is that it shows up as several loans
but I do the same dispute for all of them, right?
me: one for each year?
Charles: I dunno
me: yes, each loan should have a unique acct no
use that when you ask fo rthe clean letter
Charles: I can send you my report in PDF if you’d like
I highly doubt you’ll steal my identity
nor want to
me: lol
i’d love to see how it all works out
me: great talking with you Charles
Charles: thanks for letting me bend your ear

Side note: Charles could have gone to AnnualCreditReport.com for free reports.

Question for You

Did I give Charles good advice? Will he be able to get the debt removed from his credit report?

Photo: by Seansie

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Last Edited: February 17, 2012 @ 6:52 pm

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Thanks for reading through that one, ladies. I talked to Charles and it sound like he's close to getting the release letter. I'm hoping to do a follow up.

Thanks for your comments. :)

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Mrs. Micah

I think that was good advice. If the company doesn't think he owes it, they can put it in writing. If they admit it, perhaps he can work it out with them.

And he should NOT admit to the collections people that he owes the debt. It's important for him to never let on even that he feels that way in his conscience. He should just say something like "the debt has been cleared."

Otherwise they can use it against him.

Shanti @ Antishay

Hooha! Don't know about that one. It seems crazy that it would still count as debt, even after not reaffirming it in a bankruptcy...

I think your advice was solid. If the creditor refuses to take his payment, they obviously have closed it as bad debt and don't intend to collect. So he needs to get that from them in writing, and then run around with the credit score companies to get it taken off his report (which is inaccurate).

I hope he gets it cleaned up! I'd love to hear a follow-up in a couple of months and see if anything's happened as you predicted or advised.