CH13 versus debt settlement

[airahcaz]

Forget about which creditor claims what and when. It does not matter. You list all of your debts. You have a confirmed Chapter 13 plan. You make your payments. When you have completed your plan, the Court will issue a discharge of all remaining debt, if the debts are eligible for discharge. The Chapter 13 trustee takes care of everything; all you do as a debtor is make the payments.

I suppose we're just trying to find out how the courts decide who gets paid in the plan - they calculate that you have X that can go to creditors - wait to see who comes to the table - then distributes?

And by complete plan, you mean at the onset, or after the full 3 -5 years? - thanks

[IamOld]

Right Frogger - but remember - I am a PACER-holic :-)

[Pandora]

Just watching the claims trickle in... So far four total...but they have until around August...

OMG IamOld - your PACER bill is going to be outrageous! LOL Limit accessing it to Friday's or Monday's.... that way you'll have everything for the entire week - and can save each thing on your computer so that you always have access to it, should need be. Remember, its $10 per quarter that's free - after that they direct pay out of whatever account you used to set it up, so dont forget to keep track of what you owe, and when it's taken out of your account.

to the OP: Debt settlement vs. BK... hmmm - no brainer IMO - file BK. Just as HHM stated, you're basically playing russian roulette, hoping they dont pull the trigger before you get the chance to. CH. 13 is generally off your credit report in 7 years vs. DS @ 10 years. Whatever you decide to do... get it in writing from the DS company - in specifics - as to what's what with the settlement agreement before you send any money or agree to anything verbally. Remember some states accept verbal as an in-stone agreement, so dont agree to anything when you speak with them (and check your state laws)

[airahcaz]

OMG IamOld - your PACER bill is going to be outrageous! LOL Limit accessing it to Friday's or Monday's.... that way you'll have everything for the entire week - and can save each thing on your computer so that you always have access to it, should need be. Remember, its $10 per quarter that's free - after that they direct pay out of whatever account you used to set it up, so dont forget to keep track of what you owe, and when it's taken out of your account.

to the OP: Debt settlement vs. BK... hmmm - no brainer IMO - file BK. Just as HHM stated, you're basically playing russian roulette, hoping they dont pull the trigger before you get the chance to. CH. 13 is generally off your credit report in 7 years vs. DS @ 10 years. Whatever you decide to do... get it in writing from the DS company - in specifics - as to what's what with the settlement agreement before you send any money or agree to anything verbally. Remember some states accept verbal as an in-stone agreement, so dont agree to anything when you speak with them (and check your state laws)

Thanks, it is looking like I need to file BK, I had posted on other threads about my hesitancy due to working in the financial industry, but I think that is less of a concern now

[lrprn]

I suppose we're just trying to find out how the courts decide who gets paid in the plan - they calculate that you have X that can go to creditors - wait to see who comes to the table - then distributes?

Basically, yes. The court decides which creditors get paid in the plan by which creditors file claims on time (typically 90 days after the first date set for your 341 meeting - the gov't gets 120 days). Any creditor that doesn't file a claim on time gets paid nothing by your trustee.

All the debt you owe any creditor that was notified you filed but does not file a claim is wiped out as long as you successfully complete your Ch 13 plan. If you don't successfully complete your plan, then you still owe these creditors what you owed them when you filed plus penalties and late fees.

And by complete plan, you mean at the onset, or after the full 3 -5 years? - thanks

After the full 36 or 60 months of your plan are successfully completed *and* your trustee does an audit of your case (usually takes 2-3 months, sometimes longer) then the court issues your Ch 13 discharge.

[MarieT]

As someone who was vigorously fighting filing ch 13 and thinking we would try to settle with the creditors, now that we have filed ch 13 I wish I would have come around sooner. We felt forced into it by a creditors lawsuit and I lost tons of sleep worrying about it when we should have just filed BK in the first place. Go talk to a GOOD BK attorney and see what your payment plan is going to be. Ours is so much lower than I had ever imagined it could be and way less than if I had tried to settle. Our confirmation meeting is end of next week and not sure of next step but at least we're in the BK process and I do not cringe every time the phone rings or scared to answer the door!

[knitty]

Same here...debt settlement cost a lot of money, (one small one settled), then Chase sued....filed BK shortly after but should have done it much sooner. Once we retained the attorney and could refer the creditors/collectors to him it was like a GIANT boulder being lifted from our shoulders! We're a little over 3 years into it and it's been smooth sailing. Still have mortgage/foreclosure issues but even that may turn out ok.

[airahcaz]

Well, I sided with my attorney (a new one) today. With high income, she said that the courts would dictate my every move for 60 months, paying creditors they choose, and possibly 100% of the debt if my remaining income warrants it. Plus, my income could rise over 5 years, and that would also be taken into account?

Although my 3 properties are in arrears, none are in foreclosure as yet. By not filing, and settling some debts, I can possibly get out from under by addressing each creditor when necessary, and I can always file BK once I am foreclosed on at least one of my properties - live rent free in one, and continue to collect rental from 2 of them. Thus the only benefit may be lien stripping 2nd mortgages if possible, but the houses are underwater vs the first mortgages by themselves.

Lastly, if I do file, I can always reaffirm the first mortgages if the real estate markets have improved, warranting me to keep one or all of them. Thoughts?

[lillymarlene]

Last year when I was going on "free consults" one of my favorite questions was what's the difference between chap 13 and debt settlement? All 3 of the attorneys I saw said essentially the same thing that at least with bankrutpcy you have the law on your side. Then, also that the creditors are forced into accepting the terms of what you can pay, there will be no more interest and you will not be taxed on the "forgiven" portion of the debt. I felt there was quite a lot of advantages. Then as MarieT pointed out the payments are so much less than trying to settle.

airahcaz, I remember specifically asking my attorney about "reaffirming" a debt. I wanted to keep banking with a credit union I really liked but owed money, to. He replied that no way can you "reaffirm" anything in a 13.

[HHM]

Yep, the attorney you spoke to sounds like an idiot.

Reaffirming 1st mortgages, stupid, stupid, stupid and totally unnecessary.

One issue, if these properties were investments of properties from the get go, you need to be wary of an "assignment of rents" clause in the mortgage. If you collect rent without paying the mortgage, you could be causing yourself significant problems.

Also, then there is the issue of recovery...how long do you really want to wait to get back on track...remember, with DS, once you settle, the 7 year clock STARTS at time of settlement, plus the 7 years on all the accumulated negatives that are piling up, or wipe out the debt, pay back what you can actually afford, and the recovery clock starts when you FILE chapter 13.

[airahcaz]

Yep, the attorney you spoke to sounds like an idiot.

Reaffirming 1st mortgages, stupid, stupid, stupid and totally unnecessary.

One issue, if these properties were investments of properties from the get go, you need to wary of an "assignment of rents" clause in the mortgage. If you collect rent without paying the mortgage, you could be causing yourself significant problems.

Also, then there is the issue of recovery...how long do you really want to wait to get back on track...remember, with DS, once you settle, the 7 year clock STARTS at time of settlement, plus the 7 years on all the accumulated negatives that are piling up, or wipe out the debt, pay back what you can actually afford, and the recovery clock starts when you FILE chapter 13.

RE: assignment of rents, I'd show living expenses etc, and the problems that arise, can't be more than what I'd experience in BK for wage garnishment? after all, I'd have no savings for them to take?

Good point on recovery, but my priority is the nest way to manage it, versus quickest way to credit recovery, no intention to necessarily buy another home

Wiping out the total debt is a clear advantage of BK though - so tough.

[HHM]

Well, you know the saying, you can lead a horse to water, but you can't make it drink.

"manage" what exactly, you have 3 properties you are behind on and are heading to foreclosure, I presume some amount of other debt. There is really nothing to "manage", you either solve it, or linger in debt limbo.

Intentially taking rent with an obligation to pay it over = fraud, fraud = non-dischargeable debt (at least, that is the worst case scenario).

[frogger]

"manage" what exactly, you have 3 properties you are behind on and are heading to foreclosure, I presume some amount of other debt. There is really nothing to "manage", you either solve it, or linger in debt limbo.

You have 3 properties that you are behind on and have no money to catch up and/or maintain the property. Between vacancies, damages, wear/tear, idiot tenants, taxes, insurance, and everything else, you're too broke to own any rental property.

Get out. Get out now.....

[airahcaz]

You have 3 properties that you are behind on and have no money to catch up and/or maintain the property. Between vacancies, damages, wear/tear, idiot tenants, taxes, insurance, and everything else, you're too broke to own any rental property.

Get out. Get out now.....

agreed, that can be foreclosure, and BK as necessary after FC?