Settlement vs Chapter 13

[Depressed]

I currently deciding between filing Bankruptcy or trying to settle with the CC companies. I maybe able to do a Chapter 7, but if I can't what advantage would Chapter 13 have over a settlement. It seems settling with the banks would be easier than dealing with the courts for the next five years.

I owe around 110K on the cards. 54K to BofA which should settle for around 15%. The others I'm not sure. The money would come from tax returns, family, and a 401K loan. I'm technically insolvent so I'm not worried about getting the 1099s.

When under a Chapter 13 plan can you buy a new car if you need one? Both of ours are at 100k miles, they'll last a few more years, but not another five.

I presume any sort of inheritance goes to the trustee while on the plan as well?

[forgotten]

Lets say BOA does settle for 15-20%.

That would be 8-11k you need to give them. Is the money from family going to be a gift or a loan? If its a loan, you are still in debt, just to someone else.

You are also talking about taking money from your 401k, which would be exempt durring a BK. You mentioned a 401k loan, so you are still in debt once agian (to yourself, but if something happens and you can't repay you have big taxes and penalties, which are not dischargable in BK).

Now you still also have $60k worth of debt to other credit card companies, who may or may not settle. They may take you to court and start wage garnishment, etc.

What usually happens when you try the settlement route on this much debt is you end up spending away all your exempt assets and still end up needing to file.

Some people do manage to settle everything, but it is no quick and easy road. Just make sure you know where you are going.

[HHM]

I posted this in response to your other thread (Means Test Accuracy)

You need to run some numbers. I think you might be overly optimistic on what you think you may be able to settle your debt for. The "average" settlements are around 40% (yes, some will settle for less, but some won't, so to likely settle ALL your credit card debt, you will need at least 40%, LUMP SUM CASH ready to go).

A chapter 13 is sort of liked a forced settlement and you can pay the amount over time. So, I wouldn't rule out a chapter 13 if you don't qualify for a chapter 7. The ONLY TIME you do debt settlement over chapter 13 is if you have non-exempt assets and cannot afford to pay the liquidation value of your bankruptcy estate in a chapter 13. Debt settlement is usually the TRUE LAST resort because 9 times out of 10, it is more expensive, there are tax consequences, and-get ready for it---debt settlement is JUST AS BAD on your credit report.

[frogger]

Debt settlement is usually the TRUE LAST resort because 9 times out of 10, it is more expensive, there are tax consequences, and-get ready for it---debt settlement is JUST AS BAD on your credit report.

Exactly. Well said HHM.