What is workthroughs fail?

[sleeplessinohio]

Hi Everyone,

My husband lost his job a couple of months ago. Something neither of us ever saw coming. Because of our profession, we just thought it couldn't happen to us. We were wrong.

I've been reading more information on workthroughs with creditors. It sounds like most creditors would prefer to settle for something rather than nothing (If we are able to file chapter 7).

We have quite a few creditors to work with. I assume a workthrough will work only work with some of our creditors. If we are able to reduce our debt (nearly 100k at the moment) with workthroughs, we may be able to avoid bankruptcy.

What happens though, if we start this process, and aren't able to avoid bankruptcy? Will the fact that we tried to work with our creditors work for us or against us? Though we will be okay for a few months, there is no way I can begin this process and then wait an additional 12 months to file. Would our workthroughs be considered preferential payments?

As an aside, may I ask.. we are current on our mortgage and always have been. We have a fixed rate mortgage, as opposed to an ARM. However, now that our income has been reduced by 60%, I'm wondering if we might be able to qualify for any programs. I've been reading about scams in this area, too, and I'm almost afraid to start looking for any relief. Do any of you know of any "safe" programs we could look into?

I'm so grateful for this forum. Thanks for any insight you can offer. It is appreciated muchly.

sleepless in ohio

[southernbelle]

I'm no expert, but I am assuming by the term workthrough you mean you contact the creditor directly and workout some sort of repayment plan with them directly. If that is the case, and you have worked out the numbers and know that a workthrough will eliminate your financial problems and put you back on track (without creating additional hardships) then I say try it BUT, if your primary source of income is gone and trying a workthrough will prolong the inevitible, then you might be spinning your wheels.

Longterm, if you can't maintain the payments required with a workthrough, it might not be worth it because with a reduction in your income of 60% and with the price of food, gas and everything else increasing, you might just be prolonging filing BK anyway. Keep in mind the fact that a workthrough is strictly voluntary on the part of the creditor and at any time, they can change the terms of your repayment plan with them if they decide which can put you in a worse position because you will be out of any monies you already paid them.

If you determine after you attempt a workthrough to file BK anyway, any payments made to creditors COULD be considered preferential if the following applies:



Just remember, there are no guarantees with a workthrough and if you decide to file chapter 7, you can eliminate the debts you have and get a fresh start. A couple of years after the BK, you could essentially be back to where you are today credit wise. Do the best for your family long term and make sure you do your homework before making a move.

As to the question of safe mortgage programs, I don't know, but I'm sure someone else will chime in on that one. Good luck and I hope things work out for you.

[lillaimof2kids]

We tried working with our creditors. We were able to get some to drop our interest rate and accept a certain payment monthly. Other bus. loans, we were able to get a couple differ payments for a few months while we tried to bounce back. Of course it never worked for us as we've filed CH7. I figured if nothing else they knew a year ago we were trying our best and didn't make it. I highly doubt any of those creditors would file any complaints against us. We were honest with them from the start.

Now one thing you need to consider...in order for most CC companies to do this they want to have auto withdrawls for those payments to ensure you'll never be late. We had several companies continue withdrawing after we canceled our payment plan. We had to close that account to get it to stop. When we canceled our auto withdrawls, I also call the bank to let them know. That way when the CC didn automatically take the payment I would call the bank and they would take the money back and put it back in my acct. Some CC co. were sneaky and would change their "description" when withdrawing the money. I never had any even withdraw amounts, like $200. I would only agree to like $251 or $121, that way it was easy to track money coming out of our acct.

Good luck!

[Minnymouth]

If you have suffered a 60% reduction in income and now the increase in gas/food/utilities its going to be very hard to maintain a good payment plan with anyone.

Your priorities should be your home, auto, food, insurance etc. See what you have left to pay on credit cards. If its a small amount left over then your really wasting your time trying to work out payment plans.

They may work out a payment plan with you but your interest rate will probably not change only the amount of the payment. Thus the account continues to grow instead of going down any.

You could pay on $100k for the rest of your life and never get it paid off. You did not say whether this included your home and auto also.

If not, then the kindest thing you can do for your self is file for bankruptcy. Your credit will be shot anyways with any late payments, or reduction in payments.

So you might as well file and wipe the slate clean, get a fresh start in life, and hopefully can survive on what your income will now be until things change.

Just trying to "stay afloat" will not benefit anyone but the creditors. It will not solve your present situation or problems that you wil confront in the future.

You didn't say whether you had a lot of equity in your home or not or if you vehicles are paid for or not.

Hopefully you can file and keep most of your possessions especially if you want to maintain your present home and can afford to do so.

Keep us posted......

[sleeplessinohio]

Minnymouth, lillaimof2kids, and southernbelle, thank you very much for looking in and taking the time to respond. I'm listening and appreciative.

sleepless

[catalina2225]

I had work through agreements with two of my biggest creditors for a whole year and when I figured out that I was just prolonging the inevitable, I filed for bankruptcy and they were included. There was no problems including them in the bankruptcy. But, I did stop the automatic payments at the same time I called them and gave them my attorney's name and my case number. They didn't take anymore from my account from that day forward. I really wish that I had just gone ahead and filed instead of trying to work it out.