Interesting Creditor Development

[treehugger1]

As I was contemplating how to plan my next few months financially, who should call but BOFA/MBNA. They are "concerned." So concerned THEY suggested I migt want to contact a non-profit consumer credit corp and begin negotiations for alternative paybacks. I gave this some thought and divided my $49K in CC and unsecured debt from all my CC and main-stream unscured creditors and told them that if EVERYONE of my CC's would buy into a 60 month pay-in-full plan (approximately $800+ per month plan), I'd consider it. I intend to call several of the companies THEY recommended and negotiate with these companies to get me the 60 month plan that will cover all of the above mentioned debt. I will of course demand to see written agreements between the unsecured debt companies and the debt consolidation company and will also demand that I see a clear paydown of my first months payment show up on my unsecured accounts within 30 days or I will discontinue their service should I accept the arrangement. When you are at the bottom financially, you are clearly the captain of the ship. I also realized that the new BK 13 is not as friendly to unsecured debtors as some might think. Especially when they know they are dealing with someone of no assets who is unwilling to share any personal financial information with them. I don't hold out much hope for the non-profit consolidation company, but I did note that the woman told me that should the non-profit company be unwilling to work within terms that were acceptable to me, then BOFA might have other payment options available to me. I asked her why BOFA/MBNA and I couldn't negotiate directly, and she stated that is not their current method (whatever the **** that means). She did say they do have five-year plans available internally. So why they would not skip the consolidation step is beyond me. I figure what do I have to lose? Bk 13 is always out there. Does anyone have anything to add about what appears to be a new approach by creditors. I just missed my first payment in 14 years. I'm thinking they noted I have approximately $150K in unsecured debt and thought, "Houston, we have a problem."

[Spartan]

My thinking:

They don't do one on one with you, b/c they don't know if you would file Ch7 or not. If you do file Ch7, the payment to them could be considered preferential payment and they will have to cough it up. Thus, they may only do the direct, IF they are certain that your financial health is not on its way to BK... They must have concluded that your situation is too risky for them to go that route.

[CATCHMEIFYOUCAN]

I was with a Debt Mgmt program in May, they wanted $3500 upfront to negotiate with the creditors. I got scared after I started comparing debt mgmt programs to BK. I ended up losing $500 to the program and they tried to convince me that I would fail in the BK process. NOT !
That Debt Mgmt program wasn't approved by the courts either (little did I know THAN)
Well, when I filed I had to take a CCCS class/course (similiar to the Debt Mgmt program) BUT approved by the courts. ONLY $50 bucks nothing more nothing less. The CCCS class said I didn't have enough disposable income to pay back the creditors, sent me a certificate that I completed and needed to go to the next step BK !
Make a long story short, I fild Ch13 was in a non confirmed payment plan for 3 months, decided to quit one job and converted to Ch7. Discharged as of end of January.

BK makes you "safe," from creditors, no more harrassing calls, no risk of being sued, garnished, etc.

Best Wishes, Catchmeifyoucan

BTW if you negotiate with the creditors there is a good chance you will have to pay the forgiven debt in taxes at the end of the year, but if you go the BK route and you are discharged THATS IT. No tax penalty to look at in the end.

[keepmine]

It's all just a play where all the actors have a part.
You can bet that BOA has some sort of agreement with the recommended CCCS that they'll share your financial info with the creditor.
Once they see you're truely broke they may well cut their own deal internally.
I hang out at a couple of credit related sites and over the years, I've seen a few posters with mega debts really get some sweet deals once, the cc company is convinced that a little of something beats all of nothing.
One poster got a 25% settlement offer from the old MBNA and several got 18 month paybacks with a 0% rate assuming they could pay 2.5% of the balance monthly.
I'd have a couple of suggestions for you.
First, stop volunteering info. They can see your reports. They know how much you owe and to whom. Let them make the first offer. When I was at the 90 day mark, Chase offered a 45% setlement and Cap1 offered 50%-both unsolicited. I liked the 0% bk deal better! You'll get a lot sweeter deal with some negotitation. Of course, make sure the deal is in writing.

Finally, reme ber the tax implications on the unsettled portion of a debt. They will issue a 1099C.
It'll be interesting to see how this plays out. The deal killer with the posters on other sites was, not all creditors would work with them and, in one case the tax liability.

[SinkingFast]

I quite frankly don't see how you're gonna get a DMP payment of $800/mo on $150K in unsecured debt.

We had CCCS figure a DMP for us on $120K of debt and the payments were near $3K/mo. That was our minimums at the time and we couldn't pay that.

CCCS is a DOJ approved provider. They don't charge a huge start up fee and their montly maintenance fee is something like $30/mo. So our DMP wouldn't have been paying them tons of money.

We too got settlement offers from the CC's. Nothing great like 25%, but we did get 60% offers. Problem was, if we had the money to pay that, we might coulda paid what we owed.

And it doesn't take much forgiven debt to bring you a world of hurt on tax liability. We cashed out a retirement IRA. Where we woulda normally gotten back $3K-$5K in refund, we wound up paying $8K instead.

Just some personal experiences for you to ponder.

[jal1129]

I was'nt sure from your post if your cc are 49k or 150k, either way I doubt a cccs agency will get you into a dmp for $800 a month. When I talk to a couple different agency about my 45K debt the best payment I could get was $1100 a month.

[treehugger1]

Here is what I'm thinking. I'm not sharing any of my financial info with anyone other than what they can see. I would never give any CCS money until they furnished me with signed agreements with all my unsecured creditors (I've heard they are seldom willing to do this). Futhermore, if I ever sent a check to a CCS for disbursment, I would want the ability to track the disbursment. I've heard so many horror stories out there in cyber space.

Last night when the BOFA rep called, she did want to attempt to extract financial info from me. I won't go there and she immediately backed off. I did get her to say that,"Yes, if I was not comfortable with CCS, down the road they would be willing to look at other options. She even mentioned "five-year" plans without prompting form me. So, I think they have a sense I'm a BK 13 candidate. What they don't know is my income. So they can't know if I would be 5% or 100% payback. I don't truly know that since I have not filed. She also eluded to the fact that they know I live in an extremely rural area of a very BK friendly state. For them to ever get a judgment on me requires they file it in my County. This would cost them a great deal of money and wasted time. I'm beginning to think they might work with me sometime in the future. They did mention that they would not consider any direct negotiations with me until 90 days has passed. When I told her she could have some money in 30 days if we could work something out now, she said, "That's not our policy." I mentioned that perhaps they should stop following what appears to be simlar to the crurrent US administration policy definition, and move in a direction that benefits everyone. I started laughing very hard, and so did she.

I would never allow forgiveness of debt. I don't care to deal with IRS debt. I would just be trading one debt for a potential other. I appreciate the comments of watching for such offers.

By the way, I called the local CCSA that I did my pre-bankruptcy counseling with and explained to them what I wanted to do. They went through their same old yarn about they need all my financial info, prepare a budget for me, etc. I said NO. I told them I would like to "hire" their services to negotiate five year plans with all my unsecured creditors. They replied NO, but 30 minutes later called me back and asked what I had in mind (I guess we are all capitalists). I think they pulled my file and looked at all of my unsecured creditors and have a history working with all of them. I suggested they take my 49 - 50K in unsecured add 5-10% for themselves and divide this by 60. I told them I already have great deals worked out in writing with my 6K in payday loans, and 20K in credit union unsecured, and can handle the student loans, if they can work with the additional unsecured. I think if they can get by their "standard procedure manuals", they will consider this. I'll keep you informed.

I also believe that unsecured creditors are going to get smarter when it comes to folks who make as much money as I do. It is not that I am unable to pay off my debts, I simply can't pay them under the current unsecured interest, etc. agreements I currently have with them. In this sense, they are indeed bankrupting me. They have to know that I'll have more money to pay them if I can stay out of BK 13 and stay out of paying a percentage to a CCS.

And the bottom line is that 6 - 7 months (even a year) from now I can walk into my legal counsel's office and say, "Let's file the 13." Maybe this is all for naught, but I have absolutely nothing to lose by trying.

[BKTango]

Reading your post....you sound just like me a little over a year ago. Now here I am fresh our of my CH7. Why put yourself through all if that seriously? Under BK you are protected against any creditors/thrid party collectors from calling you. Understand that you do not get to decide to "allow forgiveness of debt" that happens automatically. You will do this under their terms. Not yours. You will be held accountable for that forgiven debt to the IRS. During our pre-bk couseling appt. our payment to this court approved non profit company would have been $850 that was on $30,000 of unsecured debt. Highly unlikely you will ever get that low of payment on your amount. Also not all creditors will work with a non-profit or any "settlement" type of company. We ended up losing over $4000 to the company we were with, still got harrassed to death by phone, and still got sued. That's what you could be setting yourself up for. Going through all of that, including still dealing with the stress, just to file later on anyway. Why waste the time and sanity. I am not saying that all of those places, especially the non-profit ones would be bad for you, it's just you really have to go through it to know that it usually doesn't come to head the way you may think it will. Good luck to you, but make the best decision for yourself, and do lots of research.

[treehugger1]

I guess I have it in me to fight as long as I can. IF I go into BK 13, I'll be close to 100% payback plan and still have five years. In addition, everytime my income swings up and down as wildly as it does, I'll be filing for modification. I think I have to exhaust other efforts first. This afternoon I reached two more agreements with a credit union cc and mainstream cc to divide my current debt into 60 payments. The credit union shocked me, but then I realized they are an old account out-of-state and they woul dhave to find a collection agency licensed in Oregon. Then, if I refused to pay, the CA would have to hire an attorney in my County and sue me. I "helped" the credit union accounts manager see the ligh that they would probably get a very small percentage from a CA, who is going to know there are very solid rules and regulations in this state. I was somewhat surprised to find out how willing they were to give this a try. They said they will send a paper copy of an agreement. We will see. My first payments will start in May. I have now worked out tentative agreements with 1/2 of my creditors and am awaiting paper agreements. I've been working solidly on this for the past three days. I can even handle a couple of judgments leading to garnishment. Again, I could care less about my credit rating. I need to dig out from under the debt I'm in. If worse comes to worse, I can always file BK13. In the meantime, I'll be paying down some of my total debt. (Of course, it might be a wash if several cc's refuse to follow step and keep tacking on late fees, overlimits, and interest.) I haven't heard back from the CCS. In terms of the taxes, my accountant tells me, they can discharge any debt they want, but I can always disagree to "take" money. He said don't worry about it. But, I should worry about it if I've signed any agreement toward decreasing debt. I'm turning over every rock here. I don't know if he is correct or not, but I'v read other forums where debtors have sent letters to the IRS disputing agreements of "discharged debt." Again, we'll see what transpires these next 90 - 120 days. I'll definitely keep folks informed.