Here ya go, settling with creditors

[fltoo]

Strictly speaking settlements with creditors, I will tell you what friend of mine was able to do, as her credit was shot, but, she absolutely cannot have a BK on her credit report. Her scores are in the 690's already. As other posters stated, this is not a chap 13.

She had 120,000 in cc debt and 3 rentals upside down with first and second liens plus her own house with an interest only loan.

She settled Citi, Chase, Discover, BOA, Cap1, Wamu for 20 cents on the dollar. AmX took 25 cents on the dollar. She short saled two rentals and negotiated with the lender not to have deficiencies. Kept one rental negotiating the second lien at 20 cents on the dollar with the lender removing the lien completely. Lender was GMAC. She found Countrywide the hardest to work with, btw.

On primary residence, negotiated with lender to change interest only loan to fixed rate. Tried to get them to lower the mortgage balance, but they would not budge. Can't remember who lender was. Possibly Countrywide.

I must tell you, it takes a lot of cash and perseverence to go this route.
This woman was on a mission for 6 months and was proactive. She never waited for the lenders to call. She called them every other day and offered them settlements until they agreed to her terms.

She was insolvent at the time of the discharge of debt so acct submitted the IRS form of assets and liabilities with her 2008 return. She was nervous about getting audited, but acct (business CPA) said he hasn't seen being insolvent throwing up any red flags moreso than anything else.

Time will tell.

[fltoo]

Here's more that answered what a poster asked

She stopped paying cc's and mortgages 3 months before she started calling them herself.

All settled for 20 cents except AmX played hardball for a long time and stuck to 55% settlement. They finally agreed to 25 cents on the dollar.

She didn't actually offer the 20 cents on the dollar. She would call a creditor and say, check my credit report, I am behind on x amount of accounts. She would tell them she had exactly 5000. (say on a 25,000 debt) and you can have it and if you don't take it, I am going to call my next creditor and offer it to them. They folded one by one. She opened a separate checking account and used it just for the creditors to pull the money out. Every time one settled, she would put exactly that amount in the account.

She gave AmX the same story but they kept asking her if she could borrow money from a relative. So, she waited a day, called them and told them she had the 5000. and borrowed 1250. from a relative (which she didn't) and said that was the best she could do.

They finally took it. She called these creditors incessantly for days on end just like the creditors call us. LOL It was like a part time job, she was on a mission and would not take no for an answer.

Every time she settled one she would call me squealing that one settled. She knows I am doing a chap 7. I told her she should go into the settlement of cc business!

She definitely got a faxed letter each time before she put the money in the account for them to withdraw, stating that the money was payment in full.

Don't know how it is showing up on the credit report, as she does not really care about her scores. Her only concern was that she did not file BK and have that show up.

Good thing is, her attitude has changed dramatically. She will only purchase something if she has the cash.

She has two loans left, one fed student and one private. She knows she cannot do anything with the fed, but she just defaulted on the private one this month, and is going to try to negotiate a settlement with them in two months. Knowing it is a long shot, she is going to try anyway. She is also prepared to pay taxes on the forgiven debt this time.

She opened up a separate checking account purely for the creditors.

She did this because she obviously did not want to give them her account where her paycheck is deposited.

It became apparent that they were more willing to negotiate if they could get a bank acct number and withdraw immediately. They hemmed and hawed when she said she would mail a money order since she was not willing to pay by a check from her regular account. (They would then have her acct number)

When a creditor settled, she would give them the "creditors" checking account number and then, the next day make an exact deposit of cash for the settlement for that creditor to withdraw.

She has since closed the "creditors" checking acct.

The bank where she opened up this account constantly questioned her about the large cash deposits, they have to report it. But, she figured she was doing nothing illegal, so she didn't worry about it.

[HHM]

she absolutely cannot have a BK on her credit report

Why does she think that?

So basically, she paid $25K to settle debt (I will take your word for it, she "might" just be bragging to you), and her credit is already trashed (actually more trashed than if she filed BK). To each there own I guess, but I think 90% of people would have prefered to pay $2,500 for a chapter 7 and get rid of it all.

Generally, most people that go debt settlement to avoid a BK are GROSSLY misinformed about BK.

The only time Debt Settlement makes sense is if you have non-exempt assets. Bankruptcy is always a more cost effective option.

[fltoo]

Why does she think that?

So basically, she paid $25K to settle debt (I will take your word for it, she "might" just be bragging to you), and her credit is already trashed (actually more trashed than if she filed BK). To each there own I guess, but I think 90% of people would have prefered to pay $2,500 for a chapter 7 and get rid of it all.

Generally, most people that go debt settlement to avoid a BK are GROSSLY misinformed about BK.

The only time Debt Settlement makes sense is if you have non-exempt assets. Bankruptcy is always a more cost effective option.

Wow. She does not THINK that, she CANNOT have a BK on her credit report. You also don't have to take my word for it.
As we have been best friends forever and have gone through many life's ups and downs together, I would never consider her to be a braggart, au contraire, due the mess we were both in. She got into the mess with investment properties and used cc to stay afloat. As with many of us, we only consider BK when we are down to our last dollar.

She was extremely well informed and had to be, to muddle through the mess.
You are misinformed if you think that debt settlement makes sense only if you have non exempt assets. Many people have high powered financial jobs and need debt settlement. Shot credit rebounds, BK stays on your public record for years and might influence future jobs and promotions.

I only posted because some were asking about it, and she had some very good ideas on settling without paying a settlement company.

I agree that BK is more cost effective, I took that route. But, sometimes there are more important issues than cost effectiveness.

[njguy1972]

I congratulate her. My lawyer is looking to settle some of my debts because I am going ch 13 and it will be a fight since I earn a decent amount and have real expenses that are higher than the IRS allowances. I also work in financial services and am required to tell my employer if I file bankruptcy.

For me it is:
1-negotiate with trustee to allow student loans and 401k contributions (up to the company's matching percentage) to continue. That alone will give the trustee an additional $500 a month to use while my student loan will grow from 29k to 35k over 60 months since interest will continue to accrue.
2-use a small work bonus and tax refund to eliminate some debt so that if I am forced into a 100% plan the monthly amount will be reasonable for me to meet without being forced to default on my condo and car.

Your friend may be in a similar situation where a ch 7 is not an option and she has a job that she can lose with a bankruptcy.

[fltoo]

She is in NJ, also, north. Commutes to the city for job.
BK was not an option whatsoever. Not only did the employer have to be notified, the financial job market up there is so competitive, she would never take the chance that the BK would hinder a future promotion.

[hereforinfo]

That sounds awesome! Maybe she could negotiate on my behalf to modify my mortgage, LOL. My only question is, how could she be insolvent with $25k in cash, as well as having an obviously great job (and I'm assuming well paying)?

[HHM]

we only consider BK when we are down to our last dollar.

That is the fatal assumption. BK is a tool like any other financial tool. It has a specific use (protect assets, eliminate debt). The sad fact is, too many people wait to long by relying on such fallacious reasoning (i.e liquidating 401K's that can be protected, etc).

As for "shot credit", BK rebounds a hell of a lot faster than shot credit as a result of debt settlement. Yes, BK is reported on your credit report for 7-10 years, but the "negative effects" only last 1-2 years. BK is a one time event. Even FICO concedes that after 2 years, a BK is non factor in a persons credit score.

I concede the point about the job issue (except your statement that "many people" have high powered financial positions). For the most part, people over-estimate the employment risk they face with a BK. Even people that must report a BK (stock brokers, financial managers, etc) are not going to be "fired" because of a BK. In fact, a BK can actually improves ones prospects because someone that is maxed out with lots of collection accounts is far more desperate and risky than someone that has taken steps to resolve the issue. This "excuse" tends to be a crutch to skew the decision making process and the the risk they face with employment is again based on misinformation and an over-estimation of the risk.

In your friends scenario who can say. But I would hate to see people draw an adverse inference from ONE persons experience.

As for Debt Settlement criteria, I tend to hold to the following guidelines

1. The person cannot receive a discharge in BK (i.e. meaning they have a recent BK); or
2. The person has substantial non-exempt assets that cannot be protected in BK or would be forced into a high percentage chapter 13 either from a high disposible income or a high liquidation value estate such that settlment would be more cost effective; or
3. There is a "real" risk that BK could effect the persons income stream (the challenge here is cutting through the non-sense to get to reality); and
4. The person can accumlate the resources to settle debt in under 12 months.

The answer to number 4 must always be yes, if its a no, then a BK is almost always the better option. So basically you need one yes to any of questions 1-3 and a yes to question 4. Outside of those 4 criteria, a BK always a better option.

[fltoo]

That sounds awesome! Maybe she could negotiate on my behalf to modify my mortgage, LOL. My only question is, how could she be insolvent with $25k in cash, as well as having an obviously great job (and I'm assuming well paying)?

did it over a period of time using paychecks, the cash was not in the bank in one lump sum.

[fltoo]

That is the fatal assumption. BK is a tool like any other financial tool. It has a specific use (protect assets, eliminate debt). The sad fact is, too many people wait to long by relying on such fallacious reasoning (i.e liquidating 401K's that can be protected, etc).

As for "shot credit", BK rebounds a hell of a lot faster than shot credit as a result of debt settlement. Yes, BK is reported on your credit report for 7-10 years, but the "negative effects" only last 1-2 years. BK is a one time event. Even FICO concedes that after 2 years, a BK is non factor in a persons credit score.

I concede the point about the job issue (except your statement that "many people" have high powered financial positions). For the most part, people over-estimate the employment risk they face with a BK. Even people that must report a BK (stock brokers, financial managers, etc) are not going to be "fired" because of a BK. In fact, a BK can actually improves ones prospects because someone that is maxed out with lots of collection accounts is far more desperate and risky than someone that has taken steps to resolve the issue. This "excuse" tends to be a crutch to skew the decision making process and the the risk they face with employment is again based on misinformation and an over-estimation of the risk.

In your friends scenario who can say. But I would hate to see people draw and adverse inference from ONE persons experience.

As for Debt Settlement criteria, I tend to hold to the following guidelines

1. The person cannot receive a discharge in BK (i.e. meaning they have a recent BK); or
2. The person has substantial non-exempt assets that cannot be protected in BK or would be forced into a high percentage chapter 13 either from a high disposible income or a high liquidation value estate; or
3. There is a "real" risk that BK could effect the persons income stream (the challenge here is cutting through the non-sense to get to reality); and
4. The person can accumlate the resources to settle debt in under 12 months.

The answer to number 4 must always be yes, if its a no, then a BK is almost always the better option. So basically you need one yes to any of questions 1-3 and a yes to question 4. Outside of those 4 criteria, a BK always a better option.

Once again, she did not care about her credit scores, just that a BK did not appear on public record.
I cited that she was afraid of a BK hindering future employment and/or promotions, not getting fired.
There is no way to measure whether a BK will adversely affect either of these. She was not taking any chances. The risk is not overestimated, it is there.
There are many people settling, just as there are many people filing BK.

We are on a BK board, so we don't hear much about settling. Go to a cc settlement board.

For lots of people, BK is the best, cheapest and quickest option.

I posted this because people were asking about settlements. I stated that you need lots of cash and perseverence, so it is not an option for most of us here. But, it is an option for some and the main reason for the post is to inform people that they can do settlements themselves and not go through a company that charges.

As for your statement, "you don't want people drawing an adverse inference from one person's experience", you must be so much smarter than most of us here. Your condenscending attitude is not only apparent here, but in many of your responses to posters. "Many" as in, there are many people who have high powered financial jobs.

[HHM]

The risk is not overestimated, it is there.

Ok, let's have a pissing contest

Just because a risk "exists" does not mean it must be over-weighted in our decision making.

Do you not go outside on a cloudy day because there "exists a risk" of being struck by lightening?

As for "potential" employment, the reasoning is the same as for hired vs fired. The "risk" tends to be over-estimated. At least do me the courtesy of not misconstruing my argument. I am NOT saying there is no risk. My point is simply that so much misinformation is floating around that the average person over-estimates the risk. They make the same logical mistake you are making...namely that because the risk exists, that somehow the risk is significant such that the employment factor becomes over-weighted in the decision making process and skews a persons reasoning.

Debt settlement may have been the right move for your friend...I do take issue with the reasoning process that you presented because I think it misrepresents why a person should settle (to avoid, at all costs, a bk based on any risk of future employment problems based on a misinformed assumption that the risk is "significant"). Thus, my response was merely to put the post in a wider context.

I concede people settle their debts, but usually it is out of some misguided reasoning that debt settlement is somehow superior to BK, which is absolutely false. Debt settlement is merely a different tool with its own parameters for use.

[fltoo]

I congratulate her. My lawyer is looking to settle some of my debts because I am going ch 13 and it will be a fight since I earn a decent amount and have real expenses that are higher than the IRS allowances. I also work in financial services and am required to tell my employer if I file bankruptcy.

For me it is:
1-negotiate with trustee to allow student loans and 401k contributions (up to the company's matching percentage) to continue. That alone will give the trustee an additional $500 a month to use while my student loan will grow from 29k to 35k over 60 months since interest will continue to accrue.
2-use a small work bonus and tax refund to eliminate some debt so that if I am forced into a 100% plan the monthly amount will be reasonable for me to meet without being forced to default on my condo and car.

Your friend may be in a similar situation where a ch 7 is not an option and she has a job that she can lose with a bankruptcy.

Tough position. Let us know how it turns out.

[relief13035]

Too complicated for me.

I say, if there's a problem with "potential" employment, the job wasn't meant to be in the first place. I refuse to let anyone make me feel like a criminal because I filed BK. Things happen and it's happening ALL over the country right now. GT WITH IT EMPLOYERS - we are human.

My Chapter 7 is making me feel like a brand new person.

[Overmylimit]

Great pissing contest I can see both sides here but as for people in my shoes, even if I used checks as they came in it would have to be 10"s of thousands of dollars at a time. There would just be no way.

[AMISLANDER]

Also, keep in mind with debt settlement....the debt forgiven is considered as INCOME on your tax return and you will pay for it.....