Best way to get them to make settlement offers

[strugglingda]

I owe $160,000 in cc debt, and I am employed. What would be the best way to get these cc banks to settle with me? I owed to the run of the mill ones: citi, chase, boa, capital one, etc. Thank you for any advice you can offer.

[walkthaplank]

The "how" is to stop paying them for a while. The longer you go, up until the charge off point, the more likely you are to get them to settle for substantially less. The hard part is getting them ALL to take a settlement.

The more important question is "why?" Let's say you get them ALL to settle and you end up settling for 30%, are you able to come up with the addtional income taxes for the $112k you just added to your income for the year? Also if you settle with a few, but the others tell you to pound sand you may end up having to file BK anyway. You also need to come up with that money, usually in one lump sum, although they'll sometimes let you pay over three months.

Debt settlement is as damaging and in some cases worse than filing BK. If you are in a CH13 plan, even paying 100% you won't be paying any interest or taxes on top of the amount you owe.

I looked into debt settlement before deciding I needed to file BK. It was a worse proposition for me... even IF I could come up with the cash.

[Txgirl]

So do they usually work settlements before they charge off? Do they usually want a lump sum, or will they do payments?

[OhioFiler]

So do they usually work settlements before they charge off? Do they usually want a lump sum, or will they do payments?

They won't take payments as a settlement.

[Txgirl]

Thanks for the info and I will check out your link!

[fltoo]

This is a BK forum, so you are getting BK oriented answers. Your question is like going to a seafood restaurant and ordering steak. If you want steak, go to a steak house.


Go to a cc settlement forum and you will see that people are settling all the time and you will get tons of ideas how to do it.

I do not, absolutely, understand why people say settling is as bad as or worse than BK. You can cite tons of reasons, but I do not agree with this statement. If I could have settled, I would have done it in a heart beat. If I had no option but to do a chapter 13 BK for 5 yrs. at 80-100% payback to unsecured debt, I would choose the settlement route every single time. Fortunately I was able to do a quick chapter 7.

The payments are usually wanted in one lump sum so you need cash to do it.
You absolutely CAN get them "all on the same page" eventually if you go this route and it can be done for 10 to 25 per cent of the balance. This does not necessarily mean you need all the cash now. If you have a high salary, you can stop paying all cards and save the paycheck money for settlements.

You also need to be on top of the judgment issue, but, if you start negotiating with them, chances are they are not going to waste the money on a judgment. Again, the settlement forums have plenty of info on this topic.

Also, most people are insolvent so the tax is a non issue. Simply means your liabilities outweigh your assets without counting your mortgage. If you have student loans, this is an easy one.

Bottom line, check out BK and settling and do what is best and most comfortable for you.

[walkthaplank]

I was perusing settlement forums, one of them on a site that offers debt settlement services, when I decided that I was going to need to file for BK. I went to threads that had been going on for a long period of time to try to follow how they went over time and it was riddled with people using debt settlement services paying money every month, still getting sued, still having collectors call them, their families and neighbors and some saying that they ended up filing BK.

Like FLTOO says this probably isn't the best place to find out about debt settlement, I just know from my research for my instance, it was just giving me palpatations reading all of these peoples stories. It was really sad seeing the "rah rah cheerleaders" on those forums becoming the ones that said after years trying to settle debts still having to file BK. That is when I started looking into BK.

YMMV, ultimately it is about what is in your best interest based on your situation.

[fltoo]

Sorry walkthaplank, you missed what I meant by a debt settlement forum.

There are forums just like this one where people give each other ideas and help on how to settle debt themselves, NOT through a settlement company.
They do not promote or advertise settlement companies as this BK site does not promote lawyers.

They are very informative as this site is and run much the same way and with the same intent, only the topic is different.

I totally agree, that a debt settlement company is not the way to go.

[walkthaplank]

I knew what you meant, I was just thinking that even on the forum of an organization that offers debt settlement as a "solution" that even the cheerleaders on there were eventually talking BK. THAT was horribly depressing. I was considering the debt settlement route and the research I did on it for me told me that BK was MY best option. For me debt settlement held no upside. I kid you not when I say I was up until the wee hours of the morning reading these people's stories and I was becoming a wreck! I stopped having the palpatations when started researching BK and I talked with a couple of BK lawyers

I would definately recommend the OP hit as many debt settlement forums and sites in order to get as much info on that route as possible.

[albacore44]

I knew what you meant, I was just thinking that even on the forum of an organization that offers debt settlement as a "solution" that even the cheerleaders on there were eventually talking BK. THAT was horribly depressing. I was considering the debt settlement route and the research I did on it for me told me that BK was MY best option. For me debt settlement held no upside. I kid you not when I say I was up until the wee hours of the morning reading these people's stories and I was becoming a wreck! I stopped having the palpatations when started researching BK and I talked with a couple of BK lawyers

I would definately recommend the OP hit as many debt settlement forums and sites in order to get as much info on that route as possible.

I spent a couple of months studying those forums looking for a way out of my problems before I decided BK was my way out. even discussed it with a good friend, and found out he was paying $600 a month to some Ds agency in Texas........he recommended, then I researched some more and decided he was getting ripped off. needless to say he is no longer paying them, and preparing his paperwork for ch 13 . I feel bad he wasted all that money sending it to that firm. he could have used it for his BK.

[fltoo]

Agree BigBoy, I think once someone looks to BK, it is probably too late to try debt settlement. The people I know that settled were either business people with cash or like my gf that settled, having a salary that exceeded 100,000 grand with not many fixed expenses.

But, it really is not difficult to get 7-8 creditors on board for settlement. 15 might be rough.

Two things you absolutely need for doing a do it yourself debt settlement are either cash on hand or a very high amount of disposable income and the time and patience to deal with the creditors.

[HHM]

Although this is a BK forum, I don't think you get advice that is necessarily BK oriented.

However, I think you get a better perspective on ALL options available to you on this forum then you do over at DS forums as the people over there tend to be grossly misinformed about BK and have the same "misguided" attitude that DS is ALWAYS better than BK. My main problem with the DS industry is that it prays on misconceptions about BK.

As to the OP's question. There is no "one" right way to settle debt. Plus, ground rules of DS have been changing significantly. Less than 3 years ago, original creditors (Chase, Citi etc.) would rarely entertain settlements, now the direct creditors are more proactive about settlements. The best settlements are when you can pay lump sums. But again, it used to be that settlement and payment plans were not an option. It is still the case that "long" term payment plans plus settlement are not out there, as was pointed out, you may get 3-6 months. But generally speaking, stopping payments is a must and usually waiting for the debt to be charged off will yield better results.

Here is an interesting blog post about the costs associated with debt resolution options.

[HHM]

Now I thought this was so crappy, you got six months more interest at a default rate out of me, six months of late fees and on some cards months of over limit fees. It literally added thousands of dollars to my balance on each card. Then the settlement offers on a lot of cards were (by the time I calculated them out) about what my balance was before I stopped paying them and they added all those fees on.

That is the real rub of DS.
Let's say you owe $20,000 when you stop making payments. When you go to settle that debt in 12 months (12 months of 30% interest plus who knows what in fees), let's say that debt is $25,000

A 20% settlement at $25,000 is $5,000
A 20% settlement at $20,000 is $4,000

So even though 20% objectively sounds good, it amounts to 25% of the original amount owed at time of default. You start compounding this scenario over multiple credit cards and ranges of settlement (not every CC is going to settle for 20%), that ultimate settlement becomes fairly costly relative to the "original" amount owed at time of default.

For me it comes down to numbers, the fact is, BK will almost always cost less than DS. However, DS is right for some people, high income individuals or those with significant non-exempt assets, DS makes sense. But for the other 95% of the population, BK is the better, more cost effective option.

[fltoo]

Yes, HHM, BK is always cheaper than DS and as you stated only good for a low percentage of debtors.

But, it is a very valuable tool for those people and I stress that we are talking about people doing it on their own, not through the DS companies that I think never really are successful.

The downfall with the DS forums is that there are people there who should be considering BK only. It is not for someone with no cash and no great disposable income. They are the ones who think DS will work and then waste their money due to no money to carry out the plan.

Again though, if given the choice between paying creditors back 100% to unsecured for 5 years or DS, if I had the means, I would choose DS because it is a shorter time period. With all things needed in place for DS, the process takes about one year, including the initial defaulting.

Bigboy, the reason why a cc company would take a debt settlement rather than sue for a judgment and garnish is the future cost of money. It is also a bird in hand. By garnishing, they are getting a small amount of money that has less value every month and they are taking a chance that the debtor does not lose or quit his job. Also, remember that only one garnishment is allowed in place, so the second, third, etc. cc company would be waiting a long a** time for their garnishment to kick in.

Also, the almighty Chase and Cap1 most certainly do settle to the tune of 15-25% of loan balance that I know of, possibly even less in the next year if this economy does not perk up.

[fltoo]

Although this is a BK forum, I don't think you get advice that is necessarily BK oriented.
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HHM, you can order a steak at the seafood restaurant. Key is, it is probably not going to be the quality or as good as ordering it at the steak house.