File BK or settle debts?

[dustinc]

I haven't paid on 4 credit cards in over a year and owe about $11,000. I don't know if I should try to settle the debts for a lower amount or just file BK. How much worse is having BK on my credit report vs. being over a year late on 4 payments? I know the BK will stay on 3 years longer, but if that's the only thing then I think I will just file. Thanks in advance for the advice.

[CityFarmer]

Also consider the tax consequences. As I understand, if you settle the debts, the difference between the amount of the debt and what you paid is considered income and is taxable. Debts discharged in bankruptcy are not taxable income.

[nc73]

11k is a small amount. Settle if you can. File if you can't. Pretty simple...

[dustinc]

But why settle if BK has the same negative effect as paying off except that it's on report for 3 years?

[HHM]

Well, if its been a year, you probably owe more than $11,000, but that is a moot point.

Are they calling you constantly, have you been sued?

You could try doing nothing and see what happens.

Big picture, you haven't paid your CC's in over year, if you really cared about your credit report, you would have stayed current, your credit is a moot point at this stage. Also, any negative entry stays on your credit report for 7 years, not sure where you heard that settlement is on your report for only 3 years.

[dustinc]

I owe $11k and that includes late fees and interest that accrued over the year. They don't have my number, so no calls. I get letters only and one says they are about to sue.

Doing nothing does not seem like a good answer. They will all eventually sue and get a judgment and garnish my wages. I don't have a job now but will grauduate from college soon.

I know late payments stay for 7 years and BK stays for 10. I meant BK stays for 3 years longer and that's the only thing that would make BK worse for me as I see it.

Anyone else see any other reason why NOT to file BK?

Well, if its been a year, you probably owe more than $11,000, but that is a moot point.

Are they calling you constantly, have you been sued?

You could try doing nothing and see what happens.

Big picture, you haven't paid your CC's in over year, if you really cared about your credit report, you would have stayed current, your credit is a moot point at this stage. Also, any negative entry stays on your credit report for 7 years, not sure where you heard that settlement is on your report for only 3 years.

[keepmine]

Everyone that has filed bk would have preferred not to.
Not having to answer yes to any question asking if you've ever filed bk is a good reason to avoid bk if at all possible. Me, I had no choice-I had $71K in cc debt. If it had only been $11K, I'd not have filed.
I'd lean towards trying to settle. You should be able to negotiate something in the 50% range.

[Snickers]

You didn't mention whether or not you had the cash on hand to settle.

Once in a settlement agreement, they are going to want the money now. From reading other forums, the most you will get out of any of them is maybe 3 payments over 90 days.

[junker]

you didnt mention what state you are in but.. they dont HAVE to sue you now..they can wait right up until the statute of limitations is about to expire and sue then. maybe 3 or 4 years down the road...and they KNOW you are young and getting out of college ....they know you will be getting a decent job...then the judgements come...garnishments .seize your car ...clean out your bank accts..etc...not to mention a potential employer checking your credit report...hows that going to look...in california a while back a employer did a investigation before hiring me...asked my neighbor if i was buying or renting...when he told them i bought the house they asked how do you KNOW he bought it..and that wasnt even for a great job....in another section of this forum they discuss how potential employers check credit all the time...
unless you are getting your degree in needlepoint..or pottery...i would clean up your credit as quickly as possible...

[poorold]

if you can settle and get away with 25%-30% than the 1099's you will get for debt cancellation (that count as income for tax purpoeses) will likely have little, if any, effect on your tax bill.

A single person has to earn almost $9,000 before they owe a dime of taxes.

[unclerico]

I would have to say that filing my 13 was the best thing I ever did. Paying 30% to unsecured is a lot like settling the debt, only like others said there will be no 1099's issued for forgiveness of debt which you would undoubtedly get.

Even though a 13 requires you to submit all of your "disposable" income to the trustee, I have way more money left over at the end of the month and can pay all of my utilities and other bills that are outside of the plan with ease. And we don't live on rice and beans either.

[klandsb]

UNCLERICO. I am so happy that you dont have to live on rice & beans ?? That is my biggest fear with filing a 13... I have been robbing peter to pay paul for so long that it would be nice to be able to pay everyone and still have a little extra to go around.

I tried the settelement route but you have to have a large sum of cash to pay them and why would you be thinking of filing bk if you have that avail ???? Just from my experience they dont want to set up a pmt plan its pay in full by this date or its a no deal.

[browneyes]

From what I read about settlement, you would need to go to the IRS website but I believe if you are considered insolvent then you don't pay tax on what is written off. I am no tax advisor, just researched settlement once, so check into that if that is a problem.