Anyone "Settle" their accounts?

[BKisSucky]

I have been contemplating BK now for a few months. Not including my student and car loans, my husband and I have about 28k in unsecured debt. I am thinking about offering 30% settlement offers to all of my creditors as a last resort before filing. Of course, my terms are that they agree to not report any derogatory info to the credit bureaus.

I know many creditors will just say flat out "no". The "we do not negotiate" kind of attitude.....

Anyone know of some good techniques to use to get them to agree to such a proposal? Anyone with experience in this area, your advice is appreciated!

Thanks!

B

[philnk]

Taxes!!!!

Won't you be socked with taxes on that unpaid amount?

[robivi3]

That would be reported to the IRS as income.

[Jenny]

Settlements usually have to be paid in full. Do you have $8,400 cash in the bank to make these settlements? And as has already been pointed out, the balance, $19,600, is taxed at 15-25% depending on your tax bracket. That's an extra $2,940-$4,900 in taxes. Do you have cash for that?

[BKisSucky]

Yes, I can definitely pay them off within 3 payments for the bigger ones, the smaller ones I can pay off in 1.

My husband and I are both independent contractors and times have been schlim for the past 2 years (to say the least). Things are looking up now, and if I can salvage our credit rather than file BK, I am all over it.

My rationale is, we would definitely pay the price of higher interest rates if we file a BK. And that's IF we can even get approved for a loan!

We are FTHB, so I want to leave as many options available to us as possible. If we can make this happen I want to.

Can we afford it? Yes, I think we can. Will it be tough? Yes. Will it be worth it? Yes. Will my settlement offers take? We will see.

Very useful info about the taxes, something I had not taken into consideration. Thanks guys! Anyone else with experience in low ball settlement offers please post!

B

[SinkingFast]

If you offer them 30% they're gonna peg you for the whole amount. They may make the interest more attractive, drop the late fees, and the overage penalties, but they won't budge on the principal.

If they make a move first, that's different. Typically you can expect to get your best offer around 50-60% of the principal balance. They may let you pay in payments, or they may expect the whole amount all at once.

One thing you gotta remember,........... You're not negotiating with the guy next door to trade favors. The CC Banks have teams of lawyers on retainer, the unsecured funds are backed in case of default (that's a Federal Banking Requirement), and you're trying to play their game, by their rules, on their court.

Good Luck. Hope it works for you.

[katze]

I tried to get a settlement with my credit card companies and they would not budge. Good luck.

[aa06a47]

If you can afford to pay 30% of your debt due now, I doubt you can file bankruptcy and make it stick. Of course, if so, you would give all that money to the trustee.

If your saying you can pay 30% in 3 years, then yes, you should file bk. Settlements are bad deals, especially when taxes are condisered. Remember, you owe about 30% on the money that is "forgiven". In BK, you don't owe the taxes.

[Rover]

You can make any offer you like to the credit card companies. However, from what I've read here, the credit card companies won't settle for less than full payment and refuse to remove unfavorable info from your credit report.

When you think about it, I don't think there's anything else that the credit card companies can do. The first time a credit card company agreed to anything less than the full amount, that fact would spread quickly and the CCC would be inundated with low-ball offers to settle and full settlements would be rare.

Other creditors may settle for less, and if a credit card debt is sold to a collection agency, the CA may settle for less.

[alh]

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.

[LostOne0069]

If you can afford to lay out $8+k in one lump sum or in 3 payments... then declaring bk over $28k may really be a bad idea. Chances are you'll end up pushed to a chapter 13 anyway with a high repayment percentage.

[philnk]

Form 982 for BK settlement?

Isn't form 982 for bankruptcy discharges? Or is the term "discharged" used for non-bankruptcy creditor settlements?

[SinkingFast]

There is a deal for insolvency, Phil. And you do have to file paperwork with your income taxes so you don't get hit for taxes on the amounts discharged as income. But that doesn't apply to debts discharged thru BK. The paperwork is a bit extensive and your circumstances must meet the criteria as well. With proof.

[philnk]

Form 982

This form sure is confusing. Would be nice if someone showed an example for an individual who had a creditor settlement at 60% of original dept and didn't have any assets after.

[aa06a47]

The only reason they should settle is if they know you have no option but bankruptcy. If you can pay 30% of your debt in 3 years, they will flick you off there sweater like a fly. They know in chapter 13 bk, they, more than likely, will get more than that in a 5 year plan, if you can do that much in 3 years on your own plus pay any tax penalties.

It, and perhaps I missed something, doesn't seem you have any reason to file bk? Are you late on any payments?