Please share your experience with collection agencies

[screwedupbyRE]

hi folks,

I'm in the process of filing chapter 7, but someone suggested that I should not. And try to negotiate all my debt (the $s I owe to CC) with collection agencies.

I owe abt 100k on CC (5 cards). What's your experience dealing with collection agencies. Generally how much do they negotiate to pay back per dollar? Do they ever negotiate? How long they wait to file a law suit?

I'm late by ~2 months on all CC.

Thanks for sharing.

[screwedupbyRE]

forgot to mention, I have Chase, Citi, WAMU, Patelco (credit union) and DCU (credit union).

Thx

[Cali]

I have 3 of the accounts you have and I never thought about negotiating.

I haven't been contacted by a collection agency yet and I stopped paying them in Feb/March.

[lrprn]

When you negotiate debt rather than filing, keep in mind that (1) all of your creditors do NOT have to negotiate, (2) you can suggest terms but in the end the creditor controls what they will do and what they won't, (3) it is possible that even with a signed negotiation, any missed payments can send you back to square one, and (4) worst of all, the interest will keep piling on.

Bottom line - look at your financial situation in a cold, emotionless way. Can you really afford to pay back $100,000 in debt? How long will it take? Is it realistic to do so?

I don't know who is trying to convince you to negotiate rather than file bankruptcy, and I don't know why you are trying to avoid filing when it seems the best option in your situation. Can you explain your reasoning so we understand what you're thinking better?

[screwedupbyRE]

Irpn, there are couple of reasons that I want to avoid bankruptcy, which leads me to think about negotiating with creditors or collection agencies, rather that filing ch 7.

1. I'm on the path for laddering up to the management cadre in my comany, where I'll have to handle big $s. Bankruptcy will be blamish and might screw up my career.

2. One of my friend had to pay approx 48k to creditors adn end up negotiating to 22k. And borrowed money from friends to pay it off. I have similar situation. Many friends of mine have come forward to help.

3. Suppose I file for ch 7, there's no guarantee that creditors/trustee wont haunt me after I'm discharged. (see postings here on this forum about the same issue). Knowing my luck, I'm pretty sure that I'll either be screwed up while filing for chapter 7 or after it is settled.

Somehow I'm hoping that I can negotiate 100k debt to 40-45k and pay it off either by borrowing $s from friends and pulling money from SEPR/401.

That's why.....

[Poppie]

ScrewedUpbyRE,

Just a few thoughts on your situation (and I'm far from an expert on BK, but I do know some things about collections and settlements):

Debt settlement doesn't look good on your credit reports either. I have a couple of old settlements on my reports and they still hurt my scores years later. And many unscrupulous creditors will just sell the portion of your debts you didn't pay to bottom feeder collection agencies who will hound you day and night and put entry after entry on your credit report. It may be illegal, but it happens every single day.

Also, borrowing money from friends is a sure fire way to end a friendship. What if something happens and you miss a payment to them? I would have a horrible time facing friends that I owed money to.

Pulling money from retirement is a very bad idea. I won't go into all the reasons for that. But one thing is that retirement funds are not touchable in BK. So if you filed, you could keep your full retirement fund without worry. Cashing it out means paying a ton of fees and taxes on it.

Question about your career --- If you are already with the company you plan on moving up with, then would they have to know about the BK? I can understand if you change companies then they might pull your credit, but if you are already employed there and proving your worth, are you sure they will pull again?

[HHM]

I think you are overestimating the risk you face at work as an excuse not to file. Keep in mind, BK brings resolution to your debt on your credit report, a bunch of defaulted, outstanding balances is probably looked upon worse than filing BK.

However, if your income is relatively high, debt settlement may be an option, but for the VAST MAJORITY of individuals, debt settlement is something you do if you cannot file BK, debt settlement is not something you do to prevent filing BK.

[EveryDayAdam]

I have to agree with the sentiments of the others on here. BK is a financial tool that will certainly help you in your financial future.

As far as your career goes, in most cases i've seen, as long as you've proven yourself to the company in the past, then they probably won't even look at your credit history, since they already know you. I've seen credit histories used to filter out some people from a stack a resumes, but if they are seriously considering you for an internal promotion, then I doubt they are going to even think about a credit history. Corporate networking and past performance plays MUCH bigger roles in that. Only time I could see it being an issue is if someone you were competing against for a promotion found out and used it against you...

Just know this: if you settle this debt, you are going to be on the hook for taxes on any forgiven amount of debt...can you afford to pay the reduced amount, as well as pay the taxes on the remainder? If you settle for 1/2, you'll have to pay taxes on $50,000...which would be another 10-15k.

Another consideration: if you are borrowing from friends and family, you are just shifting the problem from one of a business nature to one of a personal nature. You owe $100k to some faceless corporations. But if you end up owing $50k to all your friends and family, then it can put serious strain on your relationships with them. The easiest way to ruin a friendship is to borrow money.

The easiest, quickest, and smartest thing to do is to file BK. You pay a lawyer about $1500 and it all goes away. You don't have to pay any taxes, it's over and done with in about 2-4 months, then you can put this part of your life behind you, and you never have to worry about it again.

Yes it dings your credit, but by the time you've gotten to the point where creditors are willing to accept settlements, it's already shot to hell...just as badly as a BK would be.

Also...consider this: If you settle with these credit cards, then you've got histories on your report that all say charged off, settled, etc...all showing late payments and it will take months if not a year or two to be all said and done. Lets say you keep your accounts current, paying only the minimum, until the day you file BK. When you file, this freezes your credit report (minus the BKs). Lets say your BK does become an issue in regards to a future promotion, you can say "I was able to keep and manage those accounts well, but I saw that it would soon become unmanageable, so with that foresight I acted quickly and decisively in a way that I felt was the best course of action for myself." Your credit report will show good payment histories up until the day you file, and the only negative would be the BK itself.

What caused you to be in this situation in the first place? Did you have some unexpected medical bills? Or was this just irresponsible spending? If it was medical bills, you could actually use the BK as a positive with a little spin work:

"My family had some medical issues that had to be resolved. We tried to pay those, but I quickly saw that the medical bills put me and my family in over our heads. We made the decision that I felt was best for me and my family in order to protect our futures. By filing BK, we were able to put that part of our lives behind us and look to the future. If you give me the promotion, you can be assured that I have the foresight to see tough times ahead, the experience that our company will need to deal with tough times, and the courage to make those tough decisions in order to protect our company."

Suddenly, your BK isn't a negative anymore and may actually help your cause.

[screwedupbyRE]

Thanks all for you replies.... also, any insight on #3? <<3. Suppose I file for ch 7, there's no guarantee that creditors/trustee wont haunt me after I'm discharged. (see postings here on this forum about the same issue). >>

also, something I didn't mentioned that I own two properties also. Both up side down. One going into floreclosure, another planning to own it - Only if lender negotiate interest rate while signing re-affirmation.

BTW, did someone had any experience of any kind negotiation with lender while signing re-affirmation contract?

Thanks for reading and posting your replies.

Also, EveryDayAdam - I like your justification upon BK for employer <<I have the foresight to see tough times ahead, the experience that our company will need to deal with tough times, and the courage to make those tough decisions in order to protect our company>> Good one ;)

[treehugger1]

As to your concerns for #3. If you file a BK 7, you need to make sure that every one of your creditors, friend and foe, are included in the unsecured creditor matrix. If you have accounts that you are not sure are under the original creditor or a collection agency, you include them both. After all debts are discharged, you may have a bit of work to do, but if the debt is discharged, then the debt is discharged. In my opinion, BK is an option to get out from under a huge burden of debt; it is not an option to "protect your credit." Let's face it, if you can't pay your debts, then your credit will be shot regardless. Once your debts are discharged, you can begin the task of rebuilding your credit. Many on this forum have stated that the rebuilding proces after a BK 7 is not as difficult as one would think.

What are your priorities? I don't think you can have your cake and eat it too.
Why not have the cake and enjoy it. Worry about digesting it later.

Cheers!

[kornellred]

Don't forget - you cannot file Chapter 7 if the means test indicates that you will have disposable income left over after you meet your living expenses on a month-to-month basis. I don't see how you could get 100K in unsecured debt if you earn less than the median income in your state, but I could be wrong about that.

And don't consider advice from people who have no experience with bankruptcy. To most people, "bankruptcy" is looked upon as obscene.

[ssdsco]

[QUOTE=kornellred;168037]I don't see how you could get 100K in unsecured debt if you earn less than the median income in your state, but I could be wrong about that.[QUOTE]

Easy. Lose a high paying job.

[treehugger1]

If you happen to be lucky enough to have a few $100K sitting around in protected retirement funds and have no other assets you need to protect, one can always "lose" their job, or take a job for 6 - 12 months that puts you below the means test for a 13. Is this frowned upon by BK trustees? I have no idea.

What is your goal? Sure, you can screw around with "plans" for years, but how soon do you want/need credit recovery?

What is your age, and how do you sit with respect to retirement funds?

Can you survive on a 25% wage garnishment?

Legal counsel that I spoke with regarding BK stated that the majority of those who seek initial consultation, eventually file for BK (7 or 13.) However, there is a large percentage that do not? What do thsy do? Again, I have no idea. But, keep in mind that not paying your bills is a civil issue in general.

Should you be a high-wage earner, one should assume you will eventually undergo debtor exams in a search for assets. Not too much of a big deal, if you have no assets.

If you owe money, and you make noney, eventually someone will probbaly get their hands on it.

If you are unsure of what you near-future plans are, you might best protect your bank accounts and paycheck from some strange seizure. While we live in a nation of laws, there is no guarantee that folks always abide by them; creditors and CA's.

[tay666]

I don't see how you could get 100K in unsecured debt if you earn less than the median income in your state, but I could be wrong about that.

That is easy to do.
We have over $100k in CC bills and last year our total income was a whopping $22000 for a family of 3. Less than half the median income.

That's what happens when you loose a good job when the company goes under due to the jobs being shipped to China. And then your wife cannot work due to medical conditions.
We now have less than half the income we had 4 years ago.

[BigJohn]

We are below median and our unsecured debt is over $200,000.