Charge Offs vs Chapter 13

[BKINAZ]

I'm sorry for starting a third (or fourth) thread in as many days. But I am desparate in trying to figure out if we can avoid bankruptcy. The credit card companies won't deal with me in getting our debt down to managable level.

If we can pay 30% of our $70k ($54k credit card/$16k card) unsecured debt we can hold out and not file...since they won't take it, I thought maybe a charge off is an option?

How agreesive are CC companies towards Charge Offs? From what I read it's probably 50/50 that they will sue you. (not good odds for me) Am I right? I assume wage garnishment is a real possibility too?

Stay away from charge offs too big of risk or worth exploring? I assume with a $54k card (vs a $5,000 card) they will be a bit more motivated?

[d0wn0t0ut]

just depends on the debt, the state and the creditor. It is a toss up and not worth the risk. Your credit will be screwed anyway.

[mindy0795]

I personally had a credit charged off for about 4,000, haven't paid on it since September of 2007 (due to losing job of 11 years) in December of 2008 I received a civil complaint that they are trying to get a judgement against me. The credit card companies are getting more agressive now then in the past. I am personally filing bankruptcy to stop this judgement. Even though I am married and the debt is in my name only they can still put a levy on our bank accounts and I don't want that mess. Everything else we own is joint so they can' touch that but it doesn't matter for joint checking or savings accounts.

[Trixie007]

It really depends on the OC and how delinquent you are. As for the 50/50 that they will sue, from what I've read on here your odds are much much much lower than 50% that they will sue! If that were true, with my 10 accounts, the odds say 5 will sue me!

Some OC's will give pretty aggressive offers, others are a joke. You typically wouldn't get anything reasonable til close to 6 mos delinquent from an OC, from others you may never get an offer. For a cc of that size, it seems you are likely to be given to the higher up agents, too, who are very good at scaring and manipulating you. (This is my experience at BofA - once we were about 3 mos delinquent we were assigned to a particular team, the regular delinquency dept agents weren't allowed to talk to us about our account). Plus, don't forget there are possible tax ramifications to a settlement. You can read my experience with BofA on this issue, as well as the response of others on this forum, in my blog.

[BKINAZ]

Thanks for confirming what I suspected...check this off the possible to do lists. Next.

Moving out of the country.

[BigJohn]

A charge off is still colletable. Just because an account gets charged off, it doesn't mean you don't owe the debt.

[BKINAZ]

Yeah i understand that...the question is moreso what lengths they would go through. Is it the endless phone calls, or legal means...obviously...legal means are more likely to happen.

[Trixie007]

Well, eventually I would think so. It depends on what time frame you are looking at. Some people go years and years without actually being sued, some never are, others get sued right away. If you can't pay the debts, then filing BK is the answer, wipe those buggers out and get on with life!

[BigJohn]

I stopped paying credit cards last March. Some of the accounts got charged off. It wasn't till recently, anybody did anything and that is when I filed CH13 about 2 weeks ago. I don't know if I helped you any.

[BKINAZ]

You're right TRIX it's a roll of the dice and like vegas we probably aren't the winners.

Actually BIG personal stories like that help us all see the light sooner rather than later...and it is becoming clear there really is no other way out (other than 13). Although it still puzzles me why the CC companies wouldn't settle with me .30 on the dollar vs a lot under what they will probably get.

[MJJ3767]

One thing you need to keep in mind if you get any company to accept your offer of less than 100% pay off, they will send you a 1099 at the end of the year. Big surprise....you get a pay taxes on the dollar amount the company wrote off.

[BKINAZ]

actually...that is no longer true from what I am finding. Anyone else know one way or the other?

[BKINAZ]

That was easy enough...from the IRS

http://www.irs.gov/individuals/article/0,,id=179414,00.html

Is Cancellation of Debt income always taxable?Not always. There are some exceptions. The most common situations when cancellation of debt income is not taxable involve:

--Qualified principal residence indebtedness: This is the exception created by the Mortgage Debt Relief Act of 2007 and applies to most homeowners.
-- Bankruptcy: Debts discharged through bankruptcy are not considered taxable income.
--Insolvency: If you are insolvent when the debt is cancelled, some or all of the cancelled debt may not be taxable to you. You are insolvent when your total debts are more than the fair market value of your total assets.
-- Certain farm debts: If you incurred the debt directly in operation of a farm, more than half your income from the prior three years was from farming, and the loan was owed to a person or agency regularly engaged in lending, your cancelled debt is generally not considered taxable income.

and...

"If you receive a 1099 from a creditor after you file bankruptcy, IRS Form 982 will help you out. Forgiven debt is considered income to a borrower, since it is money that (theoretically) was given to the borrower but not returned. If someone files for bankruptcy and the debt was included and discharged, it should not be taxed.

IRS Form 982 “Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment)” advises the Internal Revenue Service that the debt that was included in a bankruptcy."

[MJJ3767]

actually...that is no longer true from what I am finding. Anyone else know one way or the other?

Okay, I was referring to making offers on credit card debt in an attempt to avoid BK. One company that has become very aggressive is Capital One. If you have their card, the chances are high they will sue. I have a family member who was sued over $900.

[BigJohn]

You're right TRIX it's a roll of the dice and like vegas we probably aren't the winners.

Actually BIG personal stories like that help us all see the light sooner rather than later...and it is becoming clear there really is no other way out (other than 13). Although it still puzzles me why the CC companies wouldn't settle with me .30 on the dollar vs a lot under what they will probably get.

We were offered 30 cents on the dollar on one debt after we had already filed BK13 over 2 weeks previously. Some of these people are jokers.