Charge Offs vs Chapter 13

[BKINAZ]

Oh MJ I see...that I don't know. You're probably right...I need to research that...

[BKINAZ]

MJ "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."

It sounds like if you are insolvent you don't have to pay taxes. Below is from a website...i am not sure of his credentials. Meeting with a BK attorney on Feb. 9th...I;ll ask.

3) Insolvent Financial Condition
When you are insolvent, meaning your liabilities owed exceed your total assets, you are not required to pay any tax on any debt reduction or debt settlement benefits you receive.

[blindsided]

To be sure you qualify, or for how much, be sure to fill out and file Form 982. Most consumer debt falls under line 1b.

http://www.irs.gov/pub/irs-pdf/f982.pdf

[BKINAZ]

One thing I have learned in here (site)...don't put the cart before the horse, and talk to a BK attorney FIRST.

So with that said...my meeting is scheduled for February 9th. It may be stupid of me (yeah it is) for me to do what MJ's friend has done right now which is call them up tell them I have x-amount, take it or I am moving on. Only to find out later that I do have to pay taxes on the settlement differences with the CC companies. If I settle for $30k on $160k debt and I have to pay taxes on $130k...that would be more than stupid.
Am I right?

[becky20]

We were served 3 times in the matter of a few weeks over credit card debts which sped up our filing. We had stopped paying 6-12 months earlier, so it wasn't done quickly, but some were relatively small, none were more than $5K.

[StartingOver08]

We were served 3 times in the matter of a few weeks over credit card debts which sped up our filing. We had stopped paying 6-12 months earlier, so it wasn't done quickly, but some were relatively small, none were more than $5K.

As hhm said in another thread around here - those amounts under $5k are the sweet spot for collectors. Its easy and cheap to bring a suit to collect so those are the first one's to sue. But, as you pointed out, it was 6-12 months to sue you - so you have time to file

[HHM]

I'm sorry for starting a third (or fourth) thread in as many days. But I am desperate in trying to figure out if we can avoid bankruptcy.

But why? There are probably some fatal assumptions you are making about BK. If you think having a bunch of charge-offs on your credit report is somehow better than BK, forget it. Charge-offs, become collection accounts on your CR, all the collection agencies will update and report all sorts of negatives. And yes, eventually you will get sued. As time goes by, your chance of getting sued does reach 100%. It will happen, unless you fall off the grid. It may happen in 8 months, it may happen in 4 years. But at least one of the collection agencies, down the road will sue.

Benefits of BK are this
1. Control
2. Certainty.

BK brings you back in control of your financial life, you control what happens to your creditors. BK brings certainty as to the status of the debts, no looking over your shoulder asking, when will I get sued.

[Trixie007]

Benefits of BK are this
1. Control
2. Certainty.

BK brings you back in control of your financial life, you control what happens to your creditors. BK brings certainty as to the status of the debts, no looking over your shoulder asking, when will I get sued.

I absolutely love the way you put that! Thanks for posting this- it brings the whole mess down to the 'prime' factors!

[BKINAZ]

But why? There are probably some fatal assumptions you are making about BK. If you think having a bunch of charge-offs on your credit report is somehow better than BK, forget it.

Actually that's not it at all. First...charge offs...not even thinking it as an option any longer. So we can discard that.

So why? Lemme put it to you this way... I have a "friend" this friend has $70k in cash that was 100% reserved for retirment. It hasn't been touched in years...only added too. But it was in a brokerage account (just closed out) and not protected in retirement IRA's. So that money may be in play now.

My friend acknowledges that he screwed up, owes the money on the CC's...but he is thinking about number one, and does not want to give up his honest retirement money because it was in the wrong account.

IF chapter 13 happens...it is a possibilty that he may have to give that money up without some creativity happening. IF...the CC's can be negotiated to 20-30 cents on the dollar...then that may be a better option. The credit score is irrelevant...that boat has sailed. lol

[HHM]

My friend acknowledges that he screwed up, owes the money on the CC's...but he is thinking about number one, and does not want to give up his honest retirement money because it was in the wrong account]

Umm, you want to take a guess on what would happen to that money if the "friend" gets sued?

In any event, if there are assets that cannot be protected in BK, then debt settlement is a viable option.

[BKINAZ]

Umm, you want to take a guess on what would happen to that money if the "friend" gets sued? .

And that's why I am saying a charge off is no longe an option for me...er...my friend.

Although I think Ifound a way to protect it. er...he did.

[HHM]

And that's why I am saying a charge off is no longe an option for me...er...my friend.

Although I think Ifound a way to protect it. er...he did.

And what would that be?

Bottom line, if you can't protect it in BK, you cannot protect it from creditors. Pretty much all the same rules apply in the debt collection scenario as do the avoiding powers of the BK trustee.

[BKINAZ]

And what would that be?

Not quite sure if I am allowed to say what he would do on here. So I will keep it to myself unless someone wants to email me.
not crazy about the lipstick lol