Help! Bankrupcty or Settle? What do you suggest?

[Flatbroke1]

I presently do social work in Spain, my residence is Texas. Long story, I tried to do something good but in the wrong way.

I had several older vehicles paid on the credit cards, a lot of break downs, travel, all went on the credit cards. I transferred balances from older cards to newer cards to take advantage of the low interest rates. The balances and interests have now gotten out of control.

I have credit card debt among 3 credit cards, 2 with Discover 1 with Bank of America. $85,000 total credit card debt. I have no other debt/assets no home etc. I am looking into chapter 7 bankruptcy. The problem is taking the time off and making a trip back to Texas to file. Filling for chapter 7 takes about 4 to 5 weeks from start to finish. I only have a 3 week vacation.

In the meantime I am contacting my creditors offering to settle for 10% in payments. So far Discover does not respond and BOA has declined. I am sending $200 per month prorated among the 3. I have been sending certified letters each month asking to settle for 10% in payments over the next 2 years but telling them I will pay off earlier if possible (I would snowball by paying off the smallest first, then proceeding to the next highest balance).

I was current making minimum payments (perfect credit) until Dec 1 2008. I have been making the partial payments since then. I am offering 10% because I figure that is what the time and trip to Texas will cost. Any suggestions? Is it worth trying to settle or am I wasting my time? Should I “bite the bullet” and file chap 7?

[lrprn]

Filling for chapter 7 takes about 4 to 5 weeks from start to finish. I only have a 3 week vacation.

The only time you must be in Texas in person is for your 341 meeting. Otherwise finding a lawyer, retaining him/her, sending your financial information, etc. could all be handled from Spain (not saying it's easy - just that it's possible). Signing the forms could be handled by mailing the forms back and forth.

Two questions for you....you didn't say how long you've been in Spain. Are you still considered a legal resident of Texas? Do you intend to return to the states to live in the future?

Until you are at least several months without making any payments, you are most likely wasting your time. And remember, even if you get the cc's to agree to a settlement, the IRS considers the forgiven amount is income and will charge you taxes on it. Are you prepared to pay those as well?

From what you've shared so far, your case seems like a straightforward Ch 7 no-asset case. If you tackle the unsecured debt now and wipe it out, then learn from what's happened and don't allow yourself to get in this situation again, then filing now may very well be the best long-term solution to your financial woes.

[Flatbroke1]

Thanks for your response, my driver license/car insurance are Texas. I have a mail forwarding service based in Texas. Texas is where I came from before living in Spain and that is where I'll go when I leave Spain. I had already checked with several Texas lawyers. They are reluctant to file for someone they haven't met, that is why I am looking at the 4 or 5 week time frame. The one I will use if I go through with chapter 7 has a minor concern about our residence but says the driver licenses and insurance should cover that. He also had a minor concern about fraud because our balances were so high. He feel's that it might be interpreted by the trustee that we were "charging and charging knowing we could never pay". My last charges were in Oct or Nov 2008. I have made token payments since then hoping that if I kept paying something it show that I was trying to pay and that fraud wasn't my intent. Your thoughts?

[BKINAZ]

I charged normal and a little higher at the end (could be seen as fraud)...but at the time I still had my largest client so there was no fraud. I lost my client in mid december (charged until late nov early dec) so I am fairly covered.

As for settling...each time you pay you kinda push the clock back...I am finding they won't talk to you (seriously) until you are 5 almost six months behind in pymts. So take that info for what it's worth. Good luck!

[BigJohn]

Thanks for your response, my driver license/car insurance are Texas. I have a mail forwarding service based in Texas. Texas is where I came from before living in Spain and that is where I'll go when I leave Spain. I had already checked with several Texas lawyers. They are reluctant to file for someone they haven't met, that is why I am looking at the 4 or 5 week time frame. The one I will use if I go through with chapter 7 has a minor concern about our residence but says the driver licenses and insurance should cover that. He also had a minor concern about fraud because our balances were so high. He feel's that it might be interpreted by the trustee that we were "charging and charging knowing we could never pay". My last charges were in Oct or Nov 2008. I have made token payments since then hoping that if I kept paying something it show that I was trying to pay and that fraud wasn't my intent. Your thoughts?

You might have some problems.... maybe. Did you use the credit cards in Spain? If you did, the credit cards probably will be able to piece together you were on 'vacation'.

How some people avoid that issue is they run their credit card thru a US business and then somehow (creatively) have the business deposit the money back into their checking account.