Can you negotiate debts and then discharge

[Festus]

Are there any circumstances where you can negotiate your debts while in Chapter 13. 1) Can my attorney give me a letter to talk to my creditors? 2) Say you come to a resolution with all creditors will the case be discharged or do you have to discharge first?

Any help would be greatly appreciated. I am getting conflicting information from several sources and just wanted to feel the situation out before I talk to my attorney.

[despritfreya]

There are three issues to your proposal:

1. You will never get all creditors to negotiate what is owed. Just won't happen.

2. While you are in a Chapter 13 you cannot divert $$$ to payoff a creditor. Your disposable income is property of the estate therefore you cannot make side deals. If you want to negotiate for a reduced amount you need to drop out of the 13.

3. Someone other than you CAN offer to pay a reduced amount to each creditor on a one-on-one basis. No creditor has to agree to anything but the 3rd party is certainly free to try. If that 3rd party does purchase the claim and, once purchased, the claim is assigned to him or her, the 3rd party can withdraw the claim or just leave it in the mix for payment under the Plan.

[catleg]

Can a claim really be withdrawn in a chapter 13? I did a little research on this once and concluded that it was not possible, especially post confirmation.

I agree with your general point that this is just not a feasible possibility.

[despritfreya]

Absolutely a creditor can withdraw a claim. Once withdrawn, however, the creditor has no recourse. Just did one in the past few months. Obnoxious creditor was bought off by a debtor-friendly 3rd party. Claim was transferred then 3rd party withdrew it - this happened two years after Plan confirmation. As soon as the deal was struck I informed the Trustee that no further payments were to be made on the claim pending its withdrawal.

[HHM]

Are there any circumstances where you can negotiate your debts while in Chapter 13. 1) Can my attorney give me a letter to talk to my creditors? 2) Say you come to a resolution with all creditors will the case be discharged or do you have to discharge first?

Any help would be greatly appreciated. I am getting conflicting information from several sources and just wanted to feel the situation out before I talk to my attorney.

I think you are harboring some misinformation about how chapter 13's work, so it will be difficult to answer your questions. Second, even if you could negotiate, why would you want too, and what leverage would you even have over your creditors to do so?

Chapter 13's allow you to pay back what you can actually afford to pay back. In that sense, a chapter 13 is already like a forced settlement. Unless you are paying back 100% to unsecured creditors, I don't really see any benefit to trying to work with creditors outside the plan. All that happens if claims gets reduced is more money goes to the other creditors that didn't reduce their claims. (hence, no real incentive for any creditors to reduce a claim).

[Festus]

We have an attorney that treats us like cattle. Our fault I thought they were good and should have checked them out more.

The deal is my husband's mother passed away and is leaving a fair amount of money, which we will have no control over if we remain in chapter 13. It would cover the majority but not all so we would want to settle with our creditors on our own. The cattle attorney thought there is a good chance that we could do this for 20-30 cents on the dollar. There are some we could potentially pay 100%. Another friend who works with CCS told us we could get a letter and negotiate while in BK. This didn't sound like it could be done because basically the court has control of our financial life but that is what brought me to this forum. The CCS friend also told us that some might be willing to put us back on payment plans, is that fairytale as well?

This is causing my marriage a great deal of harm and my husband's resentment over the money not being in his control is ruining our marriage.

We have pretty much decided that when the money comes in (she just passed away and the estate is nowhere near settled) that we will discharge, but we have been given some misinformation.

On another point who would these third party debtor-friendly people be?

[despritfreya]

In response to:

"On another point who would these third party debtor-friendly people be?"

Typically a family member; signifigant other, such as a domestic partner or; a very close friend.

[HHM]

We have an attorney that treats us like cattle. Our fault I thought they were good and should have checked them out more.

The deal is my husband's mother passed away and is leaving a fair amount of money, which we will have no control over if we remain in chapter 13. It would cover the majority but not all so we would want to settle with our creditors on our own. The cattle attorney thought there is a good chance that we could do this for 20-30 cents on the dollar. There are some we could potentially pay 100%. Another friend who works with CCS told us we could get a letter and negotiate while in BK. This didn't sound like it could be done because basically the court has control of our financial life but that is what brought me to this forum. The CCS friend also told us that some might be willing to put us back on payment plans, is that fairytale as well?

This is causing my marriage a great deal of harm and my husband's resentment over the money not being in his control is ruining our marriage.

We have pretty much decided that when the money comes in (she just passed away and the estate is nowhere near settled) that we will discharge, but we have been given some misinformation.

On another point who would these third party debtor-friendly people be?

I love it when idiots at CCC companies try to give legal advice. Ask that person how many chapter 13's they have filed.

Okay, I see the predicament you are in. Assuming your case wasn't previously converted from a chapter 7, you can dismiss the chapter 13 at any time. Keep in mind, dismissal is different than discharge. If you dismiss, creditors add back all interest and late fees, BUT, then you can approach them for settlement. Despite claims to the contrary, you need to "budget" for settlement in the range of 40-50% (also, keep in mind the tax implication). Some creditors will probably settle for 25 cents, other won't, so you do need to plan a realistic budget to settle ALL debt.

[catleg]

So here's a question: would it be better to have the strawman buyer approach the creditors while the ch13 case is ongoing, when the creditor has a "known" value coming from the plan payments (and the possibility of an inheritance is unknown to them), or after the ch13 was dismissed, thus making collection prospects uncertain?

If I was a creditor I would smell something fishy in the first scenario and be more likely to hold out, vs scenario two which seems more natural but risky.

[NoTomatoCan]

So here's a question: would it be better to have the strawman buyer approach the creditors while the ch13 case is ongoing, when the creditor has a "known" value coming from the plan payments (and the possibility of an inheritance is unknown to them), or after the ch13 was dismissed, thus making collection prospects uncertain?

If I was a creditor I would smell something fishy in the first scenario and be more likely to hold out, vs scenario two which seems more natural but risky.

Great question... I could see it cutting both ways. If you were a creditor in a confirmed plan, receiving 20% as a general unsecured over 5 years, wouldn't a guaranteed offer for 25% or 30% in one lump sum be preferred? Since even the successful completion of a CH13 could be considered speculative, I would think that taking the guaranteed 25%-30% now would be the smart play.

Yes, it might smell fishy, but at least you are getting your money and getting out while the gettin' is good!

[HHM]

Great question... I could see it cutting both ways. If you were a creditor in a confirmed plan, receiving 20% as a general unsecured over 5 years, wouldn't a guaranteed offer for 25% or 30% in one lump sum be preferred? Since even the successful completion of a CH13 could be considered speculative, I would think that taking the guaranteed 25%-30% now would be the smart play.

Yes, it might smell fishy, but at least you are getting your money and getting out while the gettin' is good!

One big hiccup with this sort of plan, while your in an active chapter 13, your creditors are not allowed to talk to you and they won't.

[busby]

Early in my Chapter 13 experience - I had a thought about starting my own collection service, buying old debt for pennies-of-the-dollar, contacting the debtor and offering them a settlement for a little more than the debt was purchased for but not near the original amount.

This would allow the collection agency to realize a profit, the debtor have this item listed as paid or at least closed on their credit report and they wouldn't have to worry about further collection attempts on it.

I would never actually do this since this isn't the industry I'm familiar with but the concept has always seemed interesting to me.

Since the debt is for-sale from the original creditor for substantially less than it's value - it would be nice if the debtor or someone similar was able to purchase it.

Again, because I'm not familiar with the financial industry, there are probably reasons why this wouldn't work.

But if a not-for-profit collection agency bought a $1,000 debt of mine for $150 (.15 cents on the dollar) and then offered me a settlement of $300 - I would jump at it to have the debt satisfied.

[catleg]

One big hiccup with this sort of plan, while your in an active chapter 13, your creditors are not allowed to talk to you and they won't.

One would be foolish to attempt this without having an attorney writing the letters.

That said, it could be my dad, my opportunist neighbor, my invisible friend, etc.

I wonder how PRA (who owns more than half of my debt) would deal with this.

Likewise, I thought there might be some value in buying off the debts who didn't file a timely claim in my BK13 case, as insurance.

Probably nothing will ever come of it. Just an interesting concept. Certainly at the big corporate level this is done all the time.

[HHM]

One would be foolish to attempt this without having an attorney writing the letters.

That said, it could be my dad, my opportunist neighbor, my invisible friend, etc.

I wonder how PRA (who owns more than half of my debt) would deal with this.

Likewise, I thought there might be some value in buying off the debts who didn't file a timely claim in my BK13 case, as insurance.

Probably nothing will ever come of it. Just an interesting concept. Certainly at the big corporate level this is done all the time.

It doesn't matter, the automatic stay PREVENTS the creditor from doing anything in regard to collecting a debt that is included in a BK.

[tammygirl1]

HHM, what about a case where we owe 1/2 a medical bill (ordered by court) to ex-wife for son's Ortho? The actual bill to the dentist is in her name. What if she does not file a claim to our BK? Do we still owe it since we are supposed to pay 1/2 of the children's medical and could we pay her even if we wanted to during our open BK? Our Atty listed this bill as 'unsecured' in the petition....