Why not debt settlement?

[jillian763]

Just wondering why people choose bankruptcy over debt settlement? I am in the process of filing for bankrupcty and still have doubts about going through
with it. I also interviewed for 2 jobs in the last year and didnt get them. Of course I'm perfect (kidding!) and the top reason coming to my mind is that the interviewer/companies did a credit/background check and thats why i didnt get it...Sorry, just venting and scared with the ramifications of bankruptcy...

[Silver26]

I think its just a personal situation, We tried consolidating and debt management but no one wanted to really work with us in either situation. Settlement can work but your going to take a hit on your credit report and your going to owe taxes on the settled amount. We had one credit card that was at about 20K I just for the heck of it tried to settle and they would only settle for 12K paid in 3 payments.There was no way we could do that. That was the best they could do and they knew I had an attorney fully paid for and was ready to file. For us I wanted the legal protection and we needed a fresh start. If i could do it over again I would have filed years ago.

[josephga]

I think allot of cases the debit so high a person just can't afford to settle. in my case i got my citi card in 94 never a problem never carried a balance until late 08. then I got sick, id had cancer in 03 so i couldn't find affordable health care. then in 08 was diagnosed with ms. very expensive disease. I worked as a self employed massage therapist, with the economy sales dropped, ran up over 23.000 in card debit mostly medical expenses . couldn't afford my apartment had to pay early fees for ending the lease. i was there 7 years so the complex went easy on me. i didn't put anything on my card after october. sold all of my furniture to send citi something for nov dec jan, then stopped paying. most likely I'll never work a public job again due to the progress of my illness. so debit settling isn't a option for me. I have a good friend thats set aside 2300.00 for me to file bk with or up up to 4000 if they will settle for that amount

[SeattleBK]

Number 1, reason for me is taxes. You have to pay taxes on the canceled balance of the debt.

Number 2, just wanted it over and done.

Number 3, I have tentative offer for a job that requires a security clearance and I may actually have a better chance at getting it because I did file bankruptcy and all my debts are resolved.

Some people don't get clearance because they refuse to file bankruptcy and resolve debt, but can't afford to pay on the debt either and the debt just sits there for over 180 days which is bad when applying for a security clearance.

[josephga]

if you get a 1099 does it count as a gift? would the gift exemption of 13.000 apply

[josephga]

if you get a 1099 does it count as a gift? would the gift exemption of 13.000 apply

never mind i checked. its viewed as income

[Dougie011]

I tried a debt settlement company. I GOT SCREWED. I have two credit cards that total around $43,000. In a six month period I paid over $4000 and only $1200 went to settle the debt. Long story short, I was going to be sued by one of them and they other was starting the procedure. The debt settlement company had a lawyer call me for advice. I told her I had decided to file for BK because of the pending lawsuits. She then stated the she was wondering if I had thought about Bk and thinks that might be my only option at this point. I was refunded the $1200 and put the $2800 as a lesson learned. I wish I hadn't used tried a debt settlement company and gone with a bankruptcy 6 months ago. I filed on the 16th of July and I have my 341 meeting on Aug. 17th.

Side note: with a debt settlement company you get phone calls ALL OF THE TIME! With bankruptcy I have peace and can sleep and not worry about who is calling.

[Exployer1234]

I checked into a debt settlement company and honestly the payments were way to high, plus I could not get the debt settlement company to list a secure debt (my car). I also looked into how the debt settlement company handled settling the credit card debt at half the price. When I still had my salaried job I went through and settled with a couple of my credit card companies that allowed me to break payments into monthly amounts for a reduced cost. It was the same thing the debt settlement companies did. Intern I ended up filing BK anyway a year and a half later.

If you decide not to file BK you can call the credit card companies and ask what thy will take for a settlement offer. Some will knock off 30, 40,up to 60% off the original balance depending on how old the debt is. Some CC's will take monthly payments as long as you set up automatic payments, others want the balance paid in full. I ended up working out a great deal with one CC for a 3000 dollar balance down to 900. Of course if you do not follow through with the settlement offer then the CC will hold you responsible for the full balance.

[justbeach03]

Debt settlement is a scam! I used one- trying to keep my head above water, cause it sounded better than BK. The way they negotiate the balance so low is they wait the 120 days for the cc companys to "charge off" your balance and sell it to a 3rd party. Then they negotiate with the 3rd party. This is the same thing I could've done without paying the high admin fees and them holding onto my payments the whole time till the "negotiate" better rates. The CC companys dont have to negotiate with them- 3 of mine wouldn't. They have $5800 of my money since oct of last year and havent paid any of it, cause they couldn't get chase cc to negotiate with them. Now my attorney has to send them a letter to break the contract and get my money back. Beware!!!

[blockhead]

I hired a lawyer who actually managed to get some good offers - trouble is you really need a lumpsum of 50% or so of the debt - they're not going to wait 3 or 4 years to get paid if they feel they can get a judgment against you instead. Then what if one or two won't deal and you don't have the money.

[nervous1]

If I could settle $40K worth of cc for $1,500 (attorney cost to file BK7), then I would settle.

Your credit is ruined either way, right?

[blockhead]

Yeah, although filing BK is on the public record.

[sah2]

Check out this recent article in the NY Times:

http://www.nytimes.com/2010/06/19/business/economy/19debt.html?_r=1&scp=1&sq=debt%20settlement&st=cse

In most cases Debt Settlement is a SCAM. Even if you find a reputable company, it is only helpful if you can immediately pay off the settlement amount. Basically, what the debt settlement company does is tells you to stop paying your CCs and pay them. They put your money into an account. In the meantime, your credit rating tanks and collectors will be calling you nonstop and possibly suing you. At that point, the debt settlement company tries to work out a deal with your creditors. For example, if you have $50,000 debt and they settle for $25,000, that is great, but only if you have $25000 to pay right away. If not, and you have to pay it off over years, your credit will suffer and you end up paying huge fees to the debt settlement company. With debt settlement, you have absolutely no legal protection from lawsuits, creditor harassment, etc. With bankruptcy you are protected. Debt settlement is far worse for your credit than bankruptcy

[angles]

We can mirror SeattleBK’s reasons.

We did not think that we could afford paying the taxes on the phantom income received from a 1099. The debt is dischargeable, but the taxes would not be.

Just wanted it over and done with and don’t want to deal with it over the next few years. We sleep better now although our petition does run through my mind all the time (did I forget something? What about this or that?).

The other thing, after this is all done we have no obligatory debt. We plan to keep our house and ride it through, but on paper we will have absolutely no debt and can give it up at any time – no hassle.

[ryan]

Whether you try settlement by yourself or with a settlement company I've come to see it as waste of effort (and Money) for most debtors.

Here's the exception: You have ONE or 2 delinquent credit cards or debt and have about 50% of the amount owed available to pay it. In THAT scenario its worth a shot.

If you have 6 or 8 cards and little money for settlement, forget it. Even if you manage to get a settlement with one card the others will sue you if they have to wait anyway. ....and the money paid to the first card then was wasted, imo.