The creditor will take your $500 and still report the debt anyway - so long as the information reported is factually correct, it can be reported. So, your $500 payment would reset the clock on reporting the debt and on suing you for the unpaid balance. Unpaid debt can be reported for up to 7 years from the last date of activity on the account.
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Assuming There IS aJudgment, a A Judgment In Florida Is Good For 20 Years. A Judgment Creditor Has No Reason To Accept 2.5% Of A Debt As Satisfaction In Full.
Disclaimer: The foregoing answer does not create an attorney-client relationship with Attorney Cannella or her firm. This answer does not constitute legal advice, is provided for informational and educational purposes only for persons interested in the subject matter, is not legal opinion, nor confidential in nature. Each situation is fact specific and may be subject to state specific laws. Without a comprehensive consultation and review of all the facts and documents at issue it is impossible to evaluate a legal problem fully.
An unpaid debt will be reported 7.5 years from the date of first delinquency (DOFD) and 7 years from the date of last activity (DOLA), assuming both are calculated properly.
Even if you were to pay 100% of this debt to the collector, the collector is obligated by its deals with the credit reporting agencies to merely mark the debt as paid, not delete the negative tradeline. Nonetheless, consumers do sometimes obtain "Pay for Delete" from their creditors (which is improper in the context of the creditors' relationships with the CRAs, but that's not your problem).
What *is* your problem is that the creditor can of course sue for the $20k. And in many cases, the creditor will win the case and obtain a judgment. However, that isn't always the case, and there are techniques to mitigate the damage or even obtain a complete victory.
Your $500 will be gladly accepted by the collector, then the time limitations are restarted and the account is reported anyway. Information that is valid, will be reported by the collector.
Disclaimer - The information provided in this answer is not legal advice to any person or persons, and does not establish an attorney-client relationship. This information is provided as general non-specific information. You should consult an attorney for specific information about your particular situation. Richard A. Lee, Attorney 404-288-4444 DeKalb & Rockdale/Newton