Settlement Question - Settle big part of my debt and BK the rest?

[sajecw]

Hi All,

I am being offered a payoff of $14,500 on a debt of $114,000 without further recourse from one bank, who I carry the most debt with.

All of this debt was a cash advance. None of the money is left. Spent on my business that failed.

I have about $265,000 in total debt and my attorney was worried about the fact I just took the big cash advance for $114,000 from one bank in October 2008 and $40,000 from another and have almost no audit trail for the money.

I was told to wait the full year then claim bankruptcy. This way the trustee can not recapture any checks I may have cut after I took the cash advances out.

Now I am thinking it may be worth paying of the large cash advance debt and take the 1099 income hit so the bankruptcy will be $151,000, not $265,000 and the big cash advance will not be included.

Then I figure I can file after 6 months from my last payment, not the whole year.

*** Can I settle with one creditor and put the rest of the creditors in the bankruptcy or will that just give me more problems with the trustee?

I can borrow $15,000 to get it done...

*** Is this worth it?

Thank you

[BigJohn]

Are you making money now, and if so, how much?

Did you run the $114,000 and the $40,000 thru your bank account?

Was the money spent on the business?

Is the business still in existence?

Do you want to keep the business?


What other assets do you have?

[EricaCallaha]

Even if you pay this "settlement", the trustee can go back a year for preferential payments. With the dollar amounts that you are talking about, you can bet your last nickel that he will look back at least that far. I think it is better to wait out the year and file on the full amount.

Who is going to give you $15K? You are going to end up bankrupting them as well. And seeing that you are settling with one debt while creating another is not going to show in your favor.

This is better to let go. Wait out the year. Go cash only. I don't think that what you are proposing is worth the risk. The last thing you want is the US Trustee involved presuming abuse and fraud.

Good luck.

[Willy13]

I was wondering. I know when you take a settlement you get 1099'd for the money forgiven. Does that also apply to settlements in adversarial proceedings? Just wondering if settling before BK is any different then during/after like in an AP. I'm guessing it's the same but just thought I'd ask.

[sajecw]

Are you making money now, and if so, how much?

Did you run the $114,000 and the $40,000 thru your bank account?

Was the money spent on the business?

Is the business still in existence?

Do you want to keep the business?


What other assets do you have?

_______________________________________________

No assets. Upside down on my mortgage. Making just enough right now to pay for basics. Family member was going to lend the money to me.

All the cash advances went into my bank account directly, then I pulled out cash and made one certified check payment to an ex-employee I owed money too. I used the money mostly for business expenses.

I am thinking I jus have to wait out the year from my last cash advance/credit card use so it is cleaner...

I wish I had something to show for all of this mess. Just 3 months down on the mortgage, no car, etc...

[AngelinaCatHub]

That one certified check payment could be your downfall. I would wait the year. You are being given sound advice. Trustees can search back as much as two years if they feel justified in doing so.

Please stay away from the debt payment scamsters. For the most part they really are scamsters out to prey on your vulnerability at this time, and when you finish, you STILL owe the debt to the original creditors.

Again, listen to your lawyers and the advice here. Only my opinion, 'Hub.

[sajecw]

My last cash advance was in the first week of November 2008. I am thinking January of 2010 for a file date.

I am just so stressed out with the unknown. I am concentrating on keeping the house and getting by for the next year. Requested an Affordable Home Loan Mod and it is in Countrywides system.

I cant even get a job in my profession now with my credit score. Just side jobs.

I was denied for a bank account today!!! I wanted to move to a bank with free checking and they denied me because of my credit.

I have no collections or judgments. Crazy.

There is no exposure for a checking account. If I overdraw, they refuse the transaction.

[BigJohn]

Do you want to keep your business?

When did you pay back the ex-employee? Was the debt business related? Did you have a contract?

[GWBcasualty]

I was denied for a bank account today!!! I wanted to move to a bank with free checking and they denied me because of my credit.

I have no collections or judgments. Crazy.

There is no exposure for a checking account. If I overdraw, they refuse the transaction.

If they denied you a checking account, it has nothing to do with your credit score but with Chex System... ergo, something to do with bounced checks/past overdraft/etc...

[sajecw]

If they denied you a checking account, it has nothing to do with your credit score but with Chex System... ergo, something to do with bounced checks/past overdraft/etc...

I had one bounced check and I had enough money in the accounts that were linked. The bank didn't call me to tell me they needed to transfer, get this, $14.55 from my saving to my checking on a 541.00 check.

That is the only thing that has ever bounced or overdrafted.

[StartingOver08]

Really - if you are going to file - don't even think of settlement.

Once you settle with one - the others get more agressive because they think you have money! Put in your time, plan your BK - then file. The best revenge is a good BK. You at least have the knowlege that you need to have a smooth one.

As to the chexsystems report - yea, I would clear that up so you don't have issues opening a new checking account. Once you land on chexsystems - even for a nominal amount, it makes your life a living he** for at least five years.

[dingdong]

You may not be on Chexsystems, some banks use score driven qualifications to open an account.

Just call around to a few banks and ask them if they use Chex or a credit score to approve.

There is a forum/website called Chexvictims.net that has a lot of info on banks and what they use to qualify you for a checking account. To get the info you have to join the forum,.

[catleg]

If you pay the settlement you're pissing the money away.

Paying the bank is going to do nothing to make things any easier with the BK trustee. He is looking for money to recover for other creditors, more than anything else. (and of course he'll take a commission).

The lookback for preferential payments is 90 days. To insiders, 1 year. Consider whether he is going to find anything that is going to look like it's recoverable under those timelines and if so he'll make a claim.

Now, the money paid to the ex-employee, was that wages, or a debt? There are exceptions for contemperaneous exchange, and I'm sure wages would fall in that category, but he'd have to prove it.

As far as banks, just try another. In many cases they're just trying to verify that you exist and that your name address DOB DL# and SSN all match.

[BKINAZ]

I tend to agree with STARTINGOVER in why settle? But it is something we are considering as well. We are also waiting to file (a year) and i am just hoping the creditors will work with my timeline. ;)

BUT...with that said, who is the bank (credit card) that you are settling a little more than .10 on the dollar? How long did you not pay them? Did it go to a collection agency?

Lastly...if you are insolvent (in our state Arizona and it sounds like you are) at the time of settling and you get a 1099. You do not have to pay taxes on that 1099 amount.