Dave Says: Try negotiating a settlement on old debt

Dear Dave,

I’ve had a judgment filed against me for an old, unpaid medical bill. The original amount was $2,500, but now it has increased to $3,200. Can I negotiate this with the lawyer? I’ve asked him for a detailed statement of the account several times, but all I’ve gotten is a payment booklet.

Bill

Dear Bill,

When it comes to paying off bills or debt, you should always pay what’s owed if you have the money. There’s a moral, as well as legal, responsibility involved. That being said, if you don’t have $3,200, offer him whatever you’ve got — $2,000 or the original $2,500 as a settlement. Make sure he understands that you’re not offering to pay the amount you have on the debt, but that it’s being offered as settlement in full if the debt is cleared.

The reason you haven’t gotten what you’ve asked for so far is you may have been talking to some low-level staffer or paralegal. If you have been talking directly to the lawyer, then he’s probably running a small debt collections or debt lawsuit machine. That means you’re just one of dozens of widgets coming down the line. To you, this is very personal. But to him, you’re just another account. You might have to do something to get his attention and wake him up.

If this is the case, he probably gets a piece of whatever he collects. So, if he gets a third of $2,000 or $2,500 it might make his house payment this month. You could also talk to the hospital administrator, too, and let them know you’ll bring a couple thousand down there today if they’ll accept it as payment in full. At this point, you’ve just got to do something to get off the conveyor belt!

—Dave

Annuities for long-term retirement?

Dear Dave,

Are annuities good for long-term retirement?

Quincy

Dear Quincy,

The short answer is no. There might be a rare exception when I’d use a variable annuity — which is a mutual fund inside of an annuity — but as a rule I don’t use annuities. And I certainly don’t use fixed annuities for anything, because they’re just crap. Basically, they’re a CD with a huge set of fees. It’s just an insurance agent’s product, really.

The place for variable annuities might be when you’ve got everything else maxed out and your house is paid off. If you’ve reached that point, you can talk to your advisor about some of the possible benefits of a variable annuity. You can leave a beneficiary on it, so that it passes outside of probate, and you’ve got some principle guarantees and return guarantees that are decent. The returns are a little lower, though, because you’ll get hit with both the annuity fee and the mutual fund fee.

So, by and large the answer is no for most people, because they don’t have their house paid off and aren’t maxing out all other retirement options. If you’re doing all that, and you want to do something in this area, then I might think about it.

— Dave

Dave Ramsey is America’s trusted voice on money and business, and CEO of Ramsey Solutions. He has authored seven best-selling books. The Dave Ramsey Show is heard by more than 11 million listeners each week on more than 550 radio stations and digital outlets. Dave’s latest project, EveryDollar, provides a free online budget tool. Follow Dave on Twitter at @DaveRamsey and on the web at daveramsey.com.

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