Negotiating with a judgement...

[Corrosion]

My wife and I have been considering BK for several months. There are 2-3 judgments and we both have wage garnishments. Roughly 40k total debt. We have an appointment with an attorney on the 31st. Since the time we made the appointment we have come into quite a bit of money through an inheritance. The amount would probably be enough to cover 85-100% off all our debt if we can negotiate.

If I call and try to negotiate a payoff with the creditors, mostly CC, that already have judgments or garnishments against us what sort of percentage of the total owed are they likely to go for?

Would it be advantageous to continue with the BK to use the money more effectively or trying to negotiate with the creditors ourself?

Would there be a difference in the time frame that our credit score is affected positively between a BK and negotiating it?

Thanks...

[jacko]

If you have a sizable inheritance, than you can kiss the BK good bye. Why not exempt some of that inheritance such as contributions to a ROTH IRA, dental work if need be, repairing homestead property etc..


As for your credit(debt) score, its already shot with the judgments.

My wife and I have been considering BK for several months. There are 2-3 judgments and we both have wage garnishments. Roughly 40k total debt. We have an appointment with an attorney on the 31st. Since the time we made the appointment we have come into quite a bit of money through an inheritance. The amount would probably be enough to cover 85-100% off all our debt if we can negotiate.

If I call and try to negotiate a payoff with the creditors, mostly CC, that already have judgments or garnishments against us what sort of percentage of the total owed are they likely to go for?

Would it be advantageous to continue with the BK to use the money more effectively or trying to negotiate with the creditors ourself?

Would there be a difference in the time frame that our credit score is affected positively between a BK and negotiating it?

Thanks...

[frogger]

And be very careful where you put that money. If it can be found, it can be seized by the judgment holders.

[Corrosion]

Thanks for the replies...

@frogger, do you have any suggestions as to the best place to keep the money? Most will be turned around and sent back out to creditors and such, but I do want to be in control of when and how much. Thanks

[jacko]

Why would you do that? You're credit is already shot. Any settlement will incur taxes.

Thanks for the replies...

@frogger, do you have any suggestions as to the best place to keep the money? Most will be turned around and sent back out to creditors and such, but I do want to be in control of when and how much. Thanks

[Corrosion]

@jacko - do what exactly? What would be your suggestion?

[empowered]

I think what @jacko is saying is why would you attempt debt settlement now that your credit is shot.

I haven't been on this forum too long but I've already seen numerous postings where people who've already filed ask whether they can abandon the bankruptcy and try settling when they get a job, a windfall, whatever. The conventional wisdom seems to be, at least for those who have filed, is that the filing is already on the credit report so there's not much to do about it other than follow through, especially if, with a Chapter 7, you can look forward to a discharge of all debt in about 90 days. I think people are suggesting that this wisdom also applies when you haven't yet filed if your credit is already ruined by the debt.

If you use a debt settlement company, those are almost always scams. In general, negotiating a debt settlement is also fraught with difficulty. Plus, though I don't know the in's and out's of it, you are apparently liable for taxes on at least some settled amounts since it is considered income, I believe. You should research that.

So there's the cost of giving away all your windfall even though your credit report will look ugly for years anyway.

I don't know what to say about how to keep the money and declare bankruptcy though someone else may came up with some suggestions. Some people "plan" their bankruptcy filings and wait months to ensure that the circumstances are right. I don't know what would erase a large windfall in terms of time though, or if anything would. I assume someone else will add to this.

Good luck with your decisions. It's great that you're researching your options.

[Corrosion]

@empowered - I guess I am trying to decide if I should continue with the BK even though I will be getting money to cover the majority of the debt(judgements, garnishments, etc) or contact the creditors myself to pay off the remaining balances. From you comment you are saying to continue with the BK, correct? That is the way that I am leaning as well. This seems to be the easiest and quickest way to to get this all taken care of. The money is gone one way or another. Thanks for the input.

[spidge]

You have not filed BK yet and you are in a good position to settle for 10-25%. I would think attempting to settle starting with those who do not have judgements should go first. I am willing to bet they would rather have thier money now. Will the garnishment give them 100%?

The credit is already smashed but you could insist as part of the settlement deal for the creditor to report paid as agreed. This can be touchy but I have heard it done. Be sure to save everything and if you can get them into email for saving conversation purposes even better.

I settled with one but in response to my "settlement payment" they sent me a new invoice showing the new ballance after applying my last "payment". Well After I copied all the emails into one file for them and a government body they quickly responded with settled as agreed. Each time they break a rule its close to $1,000 fine.

Debt settlement is an animal that is very different than BK so do some research and get educated. You may come out ahead.

Your in a good place.

[empowered]

Oh, all I'm saying is that I think it's good you're doing some research before going either way.

I haven't been around the block with this particular situation but more people who have will soon chime in with their experiences. I think that, for what seem to be good reasons, because are skeptical about whether a lot of debts in collection can be successfully settled in a way that benefits you more than seeing their discharge.

What you might do, providing that others who've gone down this road don't think it's foolhardy, is find out what kind of sum would be required to settle and what that would get you. Would it clear your credit report? Would it still be seven years even if you pay the whole thing off? What if you can only cover 85%? Would they really give you an equitable payment plan or suddenly force you into further default on the remainder by demanding the entirely of the remainder at once when your windfall was no more? Or have they now added so much interest and penalties that that windfall wouldn't stretch as far as you hope.

And then there is the possibility of continue harassment for years and have to prove again and again that the item is paid.

I think you need to hear from others who've had more experience with collection than I have. When I lost my job and fell behind on payments and my creditor wouldn't give me a payment plan, my debts were quickly passed on to collectors who began asking for $15,000 at once, just for a first payment. It was clear I wouldn't be able to trust them or control where things went after that and I didn't have the stomach to wait and see what came next. (Plus the veiled threats were immediate and so was an offer of a quick loan of something like $12,000 with exorbitant interest if I would only use my vehicle as security -- I'm pretty certain that the expected end of that would have been the surrender of my car.) So my experience on this path is thin. I had no assets to cash in, took the phone off the hook and ran straight to the nearest bankruptcy attorney.

Wait until a few more people who know more describe why they think what they think in more detail and then see how their situation compares with your own. But I would not call creditors and tell them I suddenly had come into money unless I was quite sure I was willing to fork it over. Keep that to yourself until you figure out your best course of action here.

[helpmeout]

@empowered - I guess I am trying to decide if I should continue with the BK even though I will be getting money to cover the majority of the debt(judgements, garnishments, etc) or contact the creditors myself to pay off the remaining balances. From you comment you are saying to continue with the BK, correct? That is the way that I am leaning as well. This seems to be the easiest and quickest way to to get this all taken care of. The money is gone one way or another. Thanks for the input.

Since you are planning on giving the money to the creditors anyway, why not file BK, let the Trustee seize the asset. This way you don't have to pay taxes on any amount that wasn't paid off.

Personally, I would be putting some of that away in an exempt account, such as an IRA and making any needed repairs if you own a home or buying staples to be used around the house. I would at least consult with a BK attorney to see how much of any amount left over you can exempt. This way you would be able to keep some of it.

[catleg]

Most national creditors will settle with you for around 40-50% of the current balance, which may have already ballooned 20-25% due to interest and penalties. Then you may owe taxes on "forgiven" principal balance, so figure that may cost you about 1/4 to 1/3 of the savings. So net you might get out of debt for roughly 66% of the current balance or 75% of the original debt.

The judgment creditors might be a little tougher to deal with, I don't know, not having made any payments to a judgment creditor. :-)

Your alternative would be a well planned bankruptcy, trying to secure as much as possible of your inheritance by putting it into protected (exempt) assets and then pay out the rest to creditors.

The big advantage of BK over debt settlement is...no tax on the forgiven principal.

A lot depends on your income and tax bracket. But it sounds like you've got enough money to avoid a BK. So it comes down to calculations and negotiating with creditors.

Credit score wise, it's probably a wash either way.

[SunshineGal]

If it were me, I would set up consulations with a few attorneys to discuss your options.

[frogger]

Perhaps you should take this time to plan for your future. Now would be a perfect opportunity to get things taken care of. Your health care, your vehicles, your groceries stockpile, etc.

If you spend all of this money now on settling (along with the possible tax consequences), you're probably going to end up broke anyways, so now could be the time to slow down and think about the best interests of your family.

Your credit is already shot, so think about planning.

As to the best place to keep that money, that's difficult. Don't keep it with anyone that you owe money to. Don't keep it in an account that you have used to pay your creditors with. Perhaps a savings account at a community bank?

And..... save your receipts for everything!

[Corrosion]

Thank you all for your input. It has not made my decision any easier, but I do have a greater knowledge of my options and how to proceed.

I have 2 appointments next week with attorneys and will add their input into the decision making.

Thanks again.