Settle CC debt before filing?

[User902021]

I apologize if this is a dumb question or if it has been answered already. I tried searching to find an answer, but the uniqueness of each situation I read about made it difficult to infer a general answer. Unfortunately, there is some urgency involved, since I will be required to respond today if it is something that is advisable.

Here is my question...

I will be needing to file for bankruptcy in the very near future due to a fraudulent claim against me that resulted in an adverse award (that stripped me of my business and stands to become a significant judgement debt once confirmed). I will be seeking a Chapter 13 filing, seeing as how I have some possessions of value that I absolutely cannot and will not ever surrender.

I have some credit card debt (maybe $50k total) that I have fallen behind on due to the impact of the Covid lockdowns (and having to pay absurd fees to an attorney who sold me out). Many of them have reached “charged off” status at this point and my credit is in the gutter (badly).

Chase sent me an offer to settle over $15k in CC debt for just over $5k. I don’t fully understand the impact this might have if I take the offer or if I don’t, with bankruptcy on the horizon either way.

I would appreciate if someone could please advise me whether this would be wise or not.

[shipo]

I apologize if this is a dumb question or if it has been answered already. I tried searching to find an answer, but the uniqueness of each situation I read about made it difficult to infer a general answer. Unfortunately, there is some urgency involved, since I will be required to respond today if it is something that is advisable.

Here is my question...

I will be needing to file for bankruptcy in the very near future due to a fraudulent claim against me that resulted in an adverse award (that stripped me of my business and stands to become a significant judgement debt once confirmed). I will be seeking a Chapter 13 filing, seeing as how I have some possessions of value that I absolutely cannot and will not ever surrender.

I have some credit card debt (maybe $50k total) that I have fallen behind on due to the impact of the Covid lockdowns (and having to pay absurd fees to an attorney who sold me out). Many of them have reached “charged off” status at this point and my credit is in the gutter (badly).

Chase sent me an offer to settle over $15k in CC debt for just over $5k. I don’t fully understand the impact this might have if I take the offer or if I don’t, with bankruptcy on the horizon either way.

I would appreciate if someone could please advise me whether this would be wise or not.

As a general rule, literally every attorney you talk with will tell you to not pay anything to anybody in your runup to filing. Paying/settling will not help you at any point in the process as you're going to have a Chapter 13 on your record for the next 7 years, and regardless of what other derogatory marks you have on your reports, the bankruptcy will trump them all. Long story short, save your money for your attorney and for a slush fund once you start your plan.

[justbroke]

The sad fact is that payments to unsecured creditors just prior to filing are considered preferences, and the Trustee will claw them back anyhow. Makes for too much work and, in the end, completely useless for you. It's like burning money just to watch it burn.

As shipo writes, just save your money for your filing and hopefully you can keep some (or all) of it. The same thing goes for using 401(k) money.

[nozar]

Also keep in mind that if you settle, you need to pay tax on the difference between the original debt and the settled amount.