Payback Plan with creditors

[treehugger1]

I just got off the phone with a gentleman from BOFA/MBNA. I owe them approximately $9500.00. Just a week or so ago they stated they could not work out a five-year payment plan, but now they apparently see the light. Essentially, what they are willing to do is a bit like paying off the CC's and rolling the amount into an unsecured loan at 1.75% interest for five years. They will not report negative items to the credit bureaus. I told him I constantly monitor my credit report, so I woul dbe looking for any negative items. I asked to see the plan in writing and they said I could expect to see the contract in a few weeks. I also stated that I could not even begin with the plan until the first of May. Iwas very open and honest and told them I could not guarantee anything in the future as my income was, in fact, spiraling down. I even told him what they were potentially up against; garnishment by other creditors, etc. The truth is that I believe they have nothing to lose by working with me. I have now managed to get negotiations on $26000.00 of my approximately $69000.00 in unsecured. (This does not include the $75K - $77K in student loans, but I have to pay these anyway). I still have four credit cards with CapitalOne (total of approx $10K), a credit union visa ($8K), and another credit union visa ($5K), along with various other unsecured debt. The credit unions may be difficult, but since the amount owed exceeds $5K in my state, they will have to sue me in the local circuit court. I'm sure this could happen, but I suspect this is highly unlikely. I want to post these somments as it is possible that some creditors will work with you. I was skeptical that they would go to five-year plans, but it appears some will. I'll keep you all up-dated, as I negotiate this very slippery slope in the near-term.

[manglicmot]

Wow, good work. That's surprising.

[HHM]

Read the fine print on the agreement. Odds are, if you ever declare BK, a couple things may happen, if you declare in the next 6 months, odds are they will be a good footing to object to the discharge ability of the debt (because this is a "new" loan). Second, although it doesn't really matter to you if you end up in a 7, but if you file a 13, the new loan will probably terminate and they will reinstate the make a claim for the credit card for all accumulated interest etc.

But in any event, if your income is going down, why settle? You may have answered this before in that your income right now is too high for a 7, but if your goal is to file BK, why through good money after bad with these settlements.

[treehugger1]

There is no 7 in my future. There is only a 13. Everyone who works with me keeps me out of a garnishment. My ultimate goal is to simply survive until my income stabilizes. If I can get all my creditors to work with me on five year plans at 1.5% - 2.0% interest, I'll be as well off as filing a 13 (In Oregon, the trustee percentage is 10%!) A 1.5% - 2.5% agreement amoritized over 5 years does beat this. I do know that any new agreement could be superceded if I file for BK. This will definitley not happen for the next 6 months. If my income decreases to the point that I cannot meet the new agreements, then I believe nothing is lost. The 13 is based on disposable income. It doesn't seem relevent whether I eventually wind up filing BK in the future. I'm doing everything I can to show "good faith" with creditors. I can't control my future earnings, but I can show incredibly good faith and generate contracts showing BK was my last result.

The catch in all this would be a creditor that is unwilling to work with me and moves to garnish my wages. Then, all bets are off interms of any new agreements. I still have about 65% of my unsecured creditors to deal with, and there is no way of knowing if they will negotiate five-year plans. However, with the exception of wages, I am judgment proof.

HHM, I agree that the risks are enormous, but I think sometimes we do need to play all our cards.

[CATCHMEIFYOUCAN]

Treehugger1

You sound like you have a PLAN !

Good Luck, Catchmeifyoucan

Just a note, I had I think up to 2 maybe 3 consolidated loans (basically paying off all my credit cards - or most) but ended up racking them up on top of owing the loans back. In the end it all went into BK.