Anyone "Settle" their accounts?

[BKisSucky]

Thanks guys for all the info.

The reason we originally wanted to file was because of unemployment. We are atleast 120+ days late on a lot of our stuff, some have gone to collections already.....there really was no end in sight for us. I have an 8 month old daughter and we lost our health insurance, so we are looking at coming out of pocket for that now that me and DH are both doing 1099 work. With my car loan and student loan my 28k turns into more like 60k.

Things have changed recently and my dh and I will be in a more comfortable position to pay stuff off. Not real plush, but enough to pay off our debts. I thought because on paper we are prime candidates to file a straight, no asset, Ch. 7, creditors may see that they should get some $ while they can. I understand many creditors won't negotiate, just exploring all of my options. Like I said, I would love to be able to salvage my credit.....DH and I are looking to by a house sometime in the near future and it would be a lot easier without the darkness of a BK looming over us.

I talked to my CPA and she informed me that you really end up paying most of the debt in taxes, so "settling" will be pretty pointless. She DID say however that the IRS may "forgive" those taxes if you are still in a difficult financial position. I also researched and found a few attorneys that will settle debts for you. One guy claimed he could settle up to 80% of the debt and his cut is 35% of your savings. Could be BS, but also another option I am just exploring.

If we do file BK, we would have to do it ASAP, before any real money starts coming in. Our last 2 years of taxes will prove we have been under some hardship. How will making future money effect us in a BK? Does it totally screw us?

Please don't rip me a new one if some of my ideas are ludicrous or inaccurate...that's why I am here....to learn!

Thanks again everyone for all of the info!

[Minnymouth]

Bankruptcy is based on your last 6 months of income vs expenses.

Future income would change everything if it is a lottery win, inheirtance, etc......

A new job would not affect the BK unless you are paying into a Chapter 13 and there would have to be a 10% or more increase in salary.

Contact you a attorney and see what your options are and how they would handle your case.

Keep us posted.

[Rover]

BKIsSucky,

The additional information you provided should have been in your original message.

Briefly, your credit is already seriously damaged. It's already too late to salvage your credit. If you think your credit can be salvaged at this point by any of the strategies you propose, you are in denial, which is a stage that most of us go through before we face facts.

IMHO, your only realistic option at this point is Chapter 7. In fact, filing for bankruptcy is probably the fastest way to salvage your credit and get that home loan you want.

If your income will be improving, bankruptcy will help you get back on your feet better than any other strategy.

BTW, bankruptcy is not sucky. Bankruptcy is your friend.

[SinkingFast]

Thanks guys for all the info.

One guy claimed he could settle up to 80% of the debt and his cut is 35% of your savings. Could be BS, but also another option I am just exploring.

If we do file BK, we would have to do it ASAP, before any real money starts coming in. Our last 2 years of taxes will prove we have been under some hardship. How will making future money effect us in a BK? Does it totally screw us?

Please don't rip me a new one if some of my ideas are ludicrous or inaccurate...that's why I am here....to learn!

Thanks again everyone for all of the info!

Those debt reduction things are just scams. If it could be done professionally, you could do it yourself. The Credit Counseling Agencies have agreements already in place with every major bank that issues CC's and the best they can do is reduce the interest. The principal stays the same.

One tip for you if you're flying without health insurance,........... You may be able to get coverage for the baby thru your State. I checked into that when Hubby got laid off and Missouri has a program for it. A friend who lives in Michigan told me to check on it. Must be some sort of program like that in just about every State. Anyway, the State program wouldn't kick in until the kids had been without coverage for 6 months there. We needed for the kids to have coverage in order for them to participate in activities at school. You can't be in the band, or theatre, or participate on sports anymore without insurance coverage, and those school program pamphlets policies are a thing of the past.

Also, watch/listen to your local newspaper/TV/Radio for immunization clinics. When we were going thru that with twins, it was very expensive even with insurance. Have to pay up front and wait to be reimbursed. Some immunizations weren't covered. So I went to immunization clinics a lot. The nice part of that is a doctor does a quick physical exam and checks out reflexs and such, same as a paid visit, only it's free.

Good Luck to you. I really do hope everything turns around for you like you're hoping it will!!

[BKisSucky]

Just a note on the "income" from settlements. If you are insolvent at the time you settle, which if you owe a lot on your house is easy to be, you do not have to report the write off as income. You can fill out IRS form 982 instead.

ALH- you were right on with this. I somehow missed, or didn't understand your post earlier this month when I read it. I did some research and found about insolvency...came back here and realized you had already posted this wonderful information. Short and sweet, it is the solution. Why nobody else really talked about it I am unsure. Insolvency will be my friend before I make BK my friend. All that insolvency requires is that your liabilities exceed your assets. I have ZERO assets. I pointed the insolvency rule out to my CPA and am awaiting her response. If there are no problems, I am just going to move forward with the settlement process, and of course include as a stipulation that they not disclose any info about the account with any 3rd parties. I just might be able to salvage my credit afterall.

Thanks everyone for all the contributions to this thread...there is a lot of great info here now...I will definitely save it. Keep ya posted too...

B

[no_it_all]

Most likely the credit card companies will not settle with you. The collections agency will offer settlements, but that is probably six or more months away. As pointed out in the previous posts, the amount "forgiven" may be considered taxable income, depending on your net worth at the time. Note that if the debt is discharged in bankruptcy you are most likely exempt from any taxes on the discharged amount....

[SinkingFast]

Settling is all great and fine. And using insolvency is a nice legal fix for taking care of the tax liability issue.

But,............ Where you gonna come up with the funds to settle?? A Creditor isn't gonna let you just write off a $15K balance. The Creditor may offer to settle $15K for a lump sum payment of $8K-$10K. So where's the $8K-$10K gonna come from??

If I had those kinds of funds laying around collecting interest, I wouldn't be on a BK Forum. I'd be doing some serious lobbying with Creditors for Settlement offers myself.

[BKisSucky]

Sinking,

I originally came on this forum to learn more about BK and see if it was a good option for me and my family. I will investigate and research a subject to death before making a decision, so just covering all of my bases.

I certainly don't have 8k laying around. Most of my debt is spread across a lot of creditors, so it is not like I am trying to settle one HUGE account. This would be a lot of offers I would be sending out, and I am conservatively estimating that maybe 50% will bite. If, by some miracle of God, all of them were to accept, then I will have to work something out at that time, but I HIGHLY doubt it.

After I start the settlement process...then negotiate....then get something in writing.....I think I will have a little time to work with. Even with a payment amount of $1,000 spread across the creditors for 3 months, I could probably get a majority of the small ones taken care of. Then, if need be, deal with CA's for the big ones later. It will probably be easier to negotiate with them since they are usually so eager to violate FDCPA. I have gotten many deleted in the past....

I will keep you all posted on how my settlements come along, and keep you in the know of current CA tactics. Thanks for everyone's input!

[SinkingFast]

I didn't mean to sound rude, BKis.

We have 9 Creditors. We're 5 months in arrears on payments. So far, only 1 has offered up a settlement on their own. None of them would consider payment alternatives. Like taking smaller amounts each month until we got squared around to where we could pay the full minimums.

The one offer we did get was a reduction from $13K to $8K. So roughly one third knocked off. But the Creditor wanted the $8K in a lump sum payment. Otherwise, no deal on the settlement offer.

The further along you go, ie getting to collections agencies, the harder and harder it gets to negotiate. That's more money outa pocket for the original Creditor at that point. If the Creditor sues you, then the Creditor has legal expenses as well. Now if your debt gets to the point where the Creditor just gives up and sells to a Zombie Debt Collector, no law suit involved, then you may be able to cut some deals. ZDC's buy debt for pennies on the dollar. So anything they make above what they paid is profit. But that may be a couple years down the road before the debt gets sold to a ZDC.

[aa06a47]

MBNA and Sam's club (GE Money Bank) sold my debt in BK. Imagine that. I will say MBNA called and tried to settle with me for 50 cents on the dollar, they wanted me to borrow money from friends and family. I told them I had no friends or family able to loan me the money, but would check around. All I could do was check to make sure they were on my BK petition.

[BKisSucky]

No offense taken Sinking...I didn't mean to sound defensive.

I know I am in for a rough ride in some REAL rocky territory, but I am ready to learn on my little adventure.

If I can make it happen, all the better. I'll keep ya guys posted...

B