Settling credit debt - your experiences?

[btbeme]

I am weighing a Ch 13 against the possibility of settling credit card debts with the card companies. Specifically, I have cards issued from Citi, Discover, AmEx, Chase, and BofA, all are 30-90 days past due. Sears, HBC (Costco), and Capital One are current.

What has been your experience with a timeline and an amount these clowns have been willing to settle for? I calculate about a 15-20% payback in Ch 13 and might qualify for a Ch 7 (but have a second property that has some equity that I share with siblings and am loathe to put the Trustee in charge of that). A 13 would also strip a large HELOC, so I am leaning heavily in that direction.

Bank by bank, what have you found?

[anykey]

I doubt it will work.

[optimistic1]

It will be hit and miss, and it can depend on a variety of factors. If what you say is true, about owning property with equity in it, you are likely to be sued. They have access to alot of information that helps them determine what step to take next.

What state do you live in?


I personally have heard much more negative aspects to debt settlement than positive ones. Those types of businesses are often unregulated, and can potentially get you in over your head.

Here is a scenario to consider.

You agree to pay a debt settlement company to pay off your 30,000 in credit debt.

You have 10 creditors, you start paying $500 a month to settle all of it in 3 years time.

What happens if one of those creditors decides to sue you instead of settling, they get a nice quick default judgement and start garnishing your pay. Hopefully you have the extra cash to cover it, and continue to still pay the debt settlement company at the same time. Otherwise you are in for one of those OH SH*T moments in your life.

Ch.13 is your safest bet that offers real protection.

[catleg]

I can tell you from personal experience that you have some of the toughest creditors out there. My wife and I are in chapter 13 now after being sued for almost a dozen cards mostly from Chase and Citi, but also Discover and GE Money.

After more than a year of non-payment and several months into chapter 13, the only creditors who've sold off their claims (most interested in immediate cash) were US Bank and HSBC and GE Money. Citi, Chase, BofA, and Discover still own their accounts, long since charged off but they're not giving up.

I would guess that, to get a good settlement deal you would have to catch a creditor right about when they're about to give up on the account. Since the vast majority of mine still hold their claims, they're not giving up yet. BofA offered to settle a business card for 10c on the (inflated by interest and penalties) dollar but I declined, what would be the point? So everyone else on the list moves up a spot?

[albacore44]

What state are you in ?? since you want to strip your mortgage, i assume your primary property is underwater. If you happen to be in california, you can protect the equity in your second property under the ca system 2 $20K Wild card.

[frogger]

I think that bk would probably be your best debt settlement solution. Any other way will probably come back to bite you.

[treehugger1]

If you can go with a 15% - 20% BK13 payback, then I doubt you will get any better settlement. Even if you settle for less than owed, you might be stuck with a 1099 for the forgiven part of the debt. You can argue insolvency with the IRS to escape taxes, but this too can be a crap shoot. I'm no BK expert. But, again, if a BK 13 for 5 years seems reasonable to you, then you should seriously consider it. If you are worried about your future credit, I don't see how a BK will look any worse then a bunch of accounts notated with some kind of settlement. Just my two cents.