Should I settle or wait???

[crazychristo]

I reached a settlement agreement with UCB (Citi) for $12,000 on $27,000 CC debt. Should I pay or wait until the government unveils the toxic debt plan?

[AngelinaCatHub]

If you make any settlement outside of bk for a long look back it will be considered a preferential payment. Hold off is my vote. 'Hub

[EricaCallaha]

I vote wait. If you pay them and file...it could be preferential. If it is a payment plan and you are going to file...it's just like throwin' 20's in the toilet.

[LuciluS]

Also, you may receive a 1099C on the $15,000 and have to pay tax on it. Is a Chapter 7 filing in your future?

We haven't paid on most of our credit cards since 9/08 and will not be filing until 9/09, if I get the all clear on my skin cancer.

Attorney said we may have some CCs' try to settle and others file suit. He said don't try to settle and if some file suit, he will file something in court (forgot what he called it) which will allow us to wait to file Chapter 7.

Luci

[2Bshinyandnew]

The fact that it could be considered preferential treatment is of no concern of yours, its not YOUR problem.

I have no idea why people on this forum give a crap if a creditor gets preferential treatment or not (unless we are talking payments to family members or on secured items like cars, boats etc). If you later go file BK and the trustee says your payment to Citi was preferential, its not your problems its Citi's they are the ones that have to pay it back not you.

I think people get "preferential payment" confused with "insider payment".
An insider payment isn't always preferential and a preferential payment isn't always to an insider

[catleg]

Christo,
I'm guessing the original debt is about 24k with about 10% added in fees and interest, correct? So it's essentially about a 50% settlement.

In previous posts Christo said he has take home with wife of 10k/month net and 75k-85k joint credit card debt and dismissed a ch13 because the payments are too high (2600/month). Reading between the lines I'm guessing that it was a 100% payback plan.

So this is a standoff, BK and Citi won't let you off the hook and you won't readily agree to pay them, but it's very likely that either Citi or some JDB will eventually wake up and realize it's worth the trouble to sue you.

If your financial situation was much worse, I'd say hold off.

But from what I see, I would just pay it and be done with it, that's a pretty good deal in your situation.

You might try and negotiate for no 1099 reporting, and see if they'll agree to it, it's legal to do, as long as they have reason to believe you are insolvent.
But most people get tired of coming back and renegotiating agreements, so take it and run.

[AngelinaCatHub]

It is not that easy. If the Trustee sees a large payment to anyone or any organization, you will have to go to a 2004 hearing with a Trustee hired lawyer. You will be grilled as to this transaction.

ANY payment not equal to the other creditors, or deals worked our with anyone, is preferential. An insider payment is not preferential if it was fairly distributed with all other creditors, however if an insider gets paid and one creditor did not get paid, it is preferential as well as insider.

This is the way the Trustee looks at it. The Trustee gets a percentage of all monies recovered and if the preferential creditor gets sued by the Trustee, the extra trouble just may go against you. The Trustee has a personal interest in this. Make his job easier, and he will expedite your situation. I’ve been there, done that, had a very good Trustee but paid dearly not to have my god-daughter sued. I paid it twice. ‘Hub

[lalap123]

Everything I've read says that the preferential payment window to any one creditor is 90 days. It shouldn't matter how much you pay one creditor over another as long as you wait the 3 months before filing.

[crazychristo]

I am trying to settle each of them and avoid the BK altogether. AMEX settled for $5,000 on $13,000. BOA settled for $7,000 on $23,000 and now all I have is the big one with Citi. Their latest offer is $12,000. If I can get it reduced by waiting to see how this toxic debt bailout plan will work then I will be better off, but if they sell the debt to some company looking for 80% then I am screwed. Any advice?

[BigJohn]

QUESTION: If a person should take a deal like this and pays the debt off, and the debtor does not wait a reasonable time to file and files and the Trustee reverses the deal, does the debtor have to claim the original debt with interest and pentalities or just the reduced amount of debt when filing?

[2Bshinyandnew]

It is not that easy. If the Trustee sees a large payment to anyone or any organization, you will have to go to a 2004 hearing with a Trustee hired lawyer. You will be grilled as to this transaction.

Hub, with all due respect, this is just not true. If a trustee sees a large payment to anyone or any organization, the trustee MAY look a bit more closely but it is NOT any automatic flag that the debtor will be subject to a 2004 hearing.

See:

http://www.moranlaw.net/preferences.htm

ANY payment not equal to the other creditors, or deals worked our with anyone, is preferential. An insider payment is not preferential if it was fairly distributed with all other creditors, however if an insider gets paid and one creditor did not get paid, it is preferential as well as insider.

This is true...but it still doesn't automatically mean a 2004 hearing for the debtor.

How will it "go against you"? Your god daughter is not the same as citibank. I don't know why you seem to think ALL pre-filing preferential payments are going to be a problem for a debtor. I'm glad you were able to protect your god daughter from being sued, and I understand your experience was awful, but what you experienced is not the same thing as someone accepting a deal from Citibank (pre-BK) and sending them $5000 to settle, and then finding out you are still in financial trouble two or three months later and end up filing BK anyway.

Tell me, if you had owed the money you paid to your god daughter to citibank, would you have cared if citibank was sued? AND, if the debt had been to citibank and not your god daughter, would you have even paid it preferentially? We all want to make sure our family is taken care of, that is why the Bankruptcy Code was written the way it was. Your experience was exactly why the Code allows trustees to look back for insider preferential payments.

Have you seen anyone post on the forum that they were subject to a 2004 hearing strictly for paying a NON INSIDER (citibank, Discover, BOA, Best Buy, etc) creditor preferentially?

I've posted this before, but here it is again:

http://www.moranlaw.net/preferences.htm

"Preferences

[2Bshinyandnew]

I am trying to settle each of them and avoid the BK altogether. AMEX settled for $5,000 on $13,000. BOA settled for $7,000 on $23,000 and now all I have is the big one with Citi. Their latest offer is $12,000. If I can get it reduced by waiting to see how this toxic debt bailout plan will work then I will be better off, but if they sell the debt to some company looking for 80% then I am screwed. Any advice?

I did not get any sort of settlement offer from Citibank until I was 120 days past due, and then they offered 50%. BOA offered 15%, AMEX was 20%.

If you wait and it goes to a CA you may do better...you probably won't do worse. The increased late time will damage your credit report more though.

I had a $23,000 credit line with BOA as well. Wonder why they picked that #?

[2Bshinyandnew]

QUESTION: If a person should take a deal like this and pays the debt off, and the debtor does not wait a reasonable time to file and files and the Trustee reverses the deal, does the debtor have to claim the original debt with interest and pentalities or just the reduced amount of debt when filing?

If the trustee reverses the deal, it happens like a mini lawsuit, sort of separate from the debtors bankruptcy. The debtor doesn't need to do anything, the trustee will collect the $$$ from the creditor. When the debtor files their original petition, as long as they answered all questions honestly and filled out their schedules accurately, that pre filing "deal" will be disclosed and the creditor will be included on the creditor matrix. The amount owed should be listed as unknown or disputed.

[humrc]

my mother took out a loan for me 16 months ago. the loan is in her name only. I have been making the 500 dollar payment to her from my checking account. would this be considered inside payments

I dont want to stop paying my mom but Ch.7 may be likely without a miracle. if I have to work something out with her and if i wait 90 days before i file will this be less likely to cause problems?

[lrprn]

my mother took out a loan for me 16 months ago. the loan is in her name only. I have been making the 500 dollar payment to her from my checking account. would this be considered inside payments

Do you have a written. witnessed agreement that you will make the payments in return for use of the asset (I assume a car)? That could make it a legitimate payment.

Without an agreement, then yes, it's possible your trustee could consider this an insider payment and force your mom to give the cash back.

if I have to work something out with her and if i wait 90 days before i file will this be less likely to cause problems?

The lookback for insider payments can go back a year, so stopping for three months would be good but still may not get you out of the risk zone.

An experienced bk lawyer can tell you what to expect in this situation. If you haven't set up 3-4 free initial consultations with bk lawyers in your area, it's time.