Settling with cc companies.

[bkrupt]

Hi guys,

I stopped paying my Citibank card when my rate went from 11% to 29.99% on Jan 1. I had $25k in balance owed at the time which took my min monthly payment to about $870! I didn't receive the opt-out letter which would have closed my account at the 11% rate.

Anyway, a few days ago they sent a settlement letter knocking off $14k which would make my balance $12k.

Will settling affect a bk in any way? I'm guessing I'll have to start paying them monthly again if I do?

Thanks for the help.

[flyinbroke]

Yes. If you are filing for Bk and know this for sure, settling is a preferential payment.

I got the same letter yesterday thru UPS express. Stopped paying last month, just missed second month, got the letter for about 49 percent of the balance. I don't have it in full, nor will I have those kind of dollahs anytime soon (the IRS strikes...) Citi seems willing to work out deals with people...may call and see what can be done.

[bkrupt]

So what will happen if I settle and then decide months down the line that BK is needed, cuz I don't know for sure right now. What will a "preferential payment" do?

Thanks

[bkrupt]

Oh, I should add that I would NOT be able to pay back the $15k in a lump sum. It would have to be in installments over some years since I am currently unemployed. And even then, it would have to be VERY low payments. Would they allow such low installments on a settlement?

And to elaborate, if they approve of sub-$100 payments (for example), how would 'preferential treatment' apply? I have one card that I have not been late on (9k balance, $170 month min payment) and a third card that I stopped paying 1.5 months now. Total of 3 cc's. 2 in default.

Much thanks for your help in advance guys.

[bkrupt]

If anyone else has any thoughts or useful links regarding my questions, I would greatly appreciate it. Thank you.

[braincramp]

I guess I wouldn't settle if I was going to file BK.I have a similar balance with Citi and they offered me $211/month for 5 years which cut off 9 grand. I couldn't afford the $211 anyway so it was a no deal.

[HHM]

You are 99% not likely to get a settlement AND a multi year payment plan. The reason they offer reduced principal is because cash NOW (lump sum) is more valuable in many instances than cash over time.

This plan is a non-starter, file BK, it is better for you anyway.

[moe]

Hah. How funny that I think I know the answer to this question...well, kind of.

Paying any debtor for a year before the debt is a preferential payment. So you are advised, if you are declaring, NOT to pay any debtors.

The issue is that I don't know what happens if you do pay. They request the money back from the debtor? I have no idea!!!

Sorry...I sort of know the answer that you will have an issue but not what your options are in how to solve it.

Is $25,000 all you owe? So all you would owe would be $12,000? Or do you have more debt?

If you have no income, then the $12,000 will only be more of a problem unless your minimum payments would be almost nothing and there would be no interest accruing.

But if you have income, and that is your primary debt, and can afford the payments I certainly would do it. As long as you are sure you will accrue no more debt in the future.

What my husband and I are discovering is that there are some future drawbacks to bankruptcy in employment options and the like. So it is to your advantage to avoid bankruptcy unless you have your future all perfectly mapped out. If you are retired or have rock solid job security or something then don't worry about it. If not, then I'd exercise caution and pay off the debts rather than declare if humanly possible. Why have that unknown consequence when bad credit heals itself much more quickly in the future?