Bad Advice from My Attorney ??

[ameangreenbe]

I have unsecured debts of $113K. If I paid back 100% of this amount over 60 months my payment would be $1884 a month. I can afford this with plenty of room to spare.

Why would my attorney continue to state that CH13 is the best option for me when the trustee will most likely demand full payback based on my income? Keep in mind that I have NO assets whatsoever to protect. I'm letting the bank foreclose on my home ($150K negative equity).

My thought is that settling the debt for 20-50% of the amount owned is a better strategy. My credit is trashed either way we go.

What am I missing?

[UpsideDownMI]

If you can settle your debt without bk, by all means go for it. If you are facing a lawsuit or possible wage garnishment chapter 13 can protect you. Also, keep in mind that the negative equity on the house you are letting go will become unsecured debt and could lead to more problems down the road.

[HHM]

If you can settle your debt without bk, by all means go for it.

Before we jump the gun here, how long would it take you to gather 20-50% of your debt. All things considered, most settlements (to be sure to be able to settle all debt) is 40-45%; so how long would it take you to raise $51,000, cash, for lump sum payments. Also, realize, you are accumulating around $2,700 per month in interest. If it would would take you more than 12 months, then BK is the better option, even then, by the time you have $51,000; your debt in 12 months would be $145,770, most likely requiring close to $60,000 to settle. Do you see where this is going. Unless you have the cash NOW, to settle, chapter 13 is a better option. Chap 13 brings certainty as to the status of the debt, interest does not accumulate in chapter 13, so the amount you pay is fixed at the beginning; the attorney can object to proofs of claims filed by the creditors to reduce the amount owed, and no income tax consequences. Chapter 13's and debt settlement are equally negative on your credit report.

Whether you go Debt Settlement or Chapter 13 comes down to the numbers.