Wait Long Enough And Creditor Settlement Offers Become JUICY

[ryan]

I'm 16 months into default on all my credit cards. After 2 lawsuits, one dismissed and one about to 'go away' at least for awhile, I am starting to get the low settlement offers that people are promised on some websites.

Discover acct is now with a CA and recently sent me an offer:

$7,500 on $18,900. So, if I had it would I do it? ....no.

But, it shows how even a creditor known as a 'hardball player' will soften up over time.
Just for your Information.

[BrokeinMD]

What they're not telling you, Ryan, is that they'll slam you with a 1099 for the change on that juicy offer. From what I've read here, if it's included in your BK, and you get a 1099, you report it on Form 982, but don't pay taxes on it. If you settle, you're obligated to pay the difference as 1099 income. Ouch....

[BKParalegal]

You can still use the form 982 on a settled account 1099, the IRS provision is regarding insolvency which doesn't always just mean bankruptcy.

[BrokeinMD]

Oops....forgot the IRS insolvency test. Thanks...

[keepsmiling]

I had an offer from Citi after 5 mos--25% , with payments spread over a few months. I wonder how they decide who gets which offers?

[tobee43]

Oops....forgot the IRS insolvency test. Thanks...

even with the insolvency test it's extremely rare if never you pay tax based on the 1099c...for that matter even 1099s...which to me are scarier! LOL!! but i have dealt with them.

bkpara is right....you don't have to be in or filing bk..

yeah ryan....those CA's are the worse and liars....even if you sign something with them...discover sold them your account and one certainly does not want them in one's life. but the again i KNOW you know better, but it is interesting about the "time" table as when they began to contact you.

[HHM]

Hmm, $2,500 for BK or thousands upon thousands of dollars to settle...choice seems easy to me...no point in wasting money settling no matter how good the offer.

[tobee43]

Hmm, $2,500 for BK or thousands upon thousands of dollars to settle...choice seems easy to me...no point in wasting money settling no matter how good the offer.

now that's a no brainer....i think i will pick door number 2!

[ryan]

Hmm, $2,500 for BK or thousands upon thousands of dollars to settle...choice seems easy to me...no point in wasting money settling no matter how good the offer.

I agree. When I joined this forum, way back when, I was planning to try and settle these accts one by one as they made me offers. However, 'knowledge' can change an open mind. I now see what a crummy deal these settlement offers are, almost REGARDLESS of the amount.

If I ever have to file BK, I now see it as a far better alternative to wasting cash on settlements.
There's really no comparison, imo.

[flyinbroke]

It depends, a BK would cost me between 1-2K a month for the next 5 years on top of the front payment of 3K or so.

I preferred using the law against them, and hope to balance them out with a cancellation/mutual dismissal with prejudice. 1099s will get cancelled out since my student loans alone render me insolvent.

[lovemybugs10]

Same here. 1-2k a month for 5 years is a much harder hit even if I'm not able to file as insolvent and have to tax the difference as income.

I just settled with Citi. Balance was 35k, settled for 5200.

[treehugger1]

I find it interesting that since I first joined this forum (2006), there are a few more folks who are "bankrupt" but will not file a BK-13 due to a personal cost-benefit analysis. Yet, we are still insolvent. I appreciate the continued dialogue from folks who could not, or would not file a BK 13 for a variety of reasons. This adds depth to the definition of bankruptcy and supports the argument of a growing number of us who file "informal bankruptcy." LOL.

flyinbroke, I finally received a 1099 for a written off deficiency balance due to a voluntary repo. My student loans will keep me insolvent for a long, long time. It is amazing that one can continue to "sort of" go about their everyday life being insolvent and dealing with 1099's, creditors, collection agencies, collection attorneys, etc while at the same time avoiding a BK 13.

I also remember a time in the past when I thought there was no other option other than a formal filing of BK.

I am approaching 3 1/2 years on some accounts and I only have two remaining unpaid judgments against me. Now, I'm not exactly proud of how things worked out, but I have not stood in the way of any creditor attempting to collect on a contract. I have made them (and CA's) work , but for all practical purposes after 3-4 years, they leave me alone.

I am considering looking at making an offer of 10% on the two judgments due to citi. But I think I will wait to see what other suits might come up inside of the SOL time limitations.

[dontburnthep]

I am also getting ready to follow this path. Doing this versus a 7 is a no brainer, doing this versus 1-2K for 5 years in a 13 isn't as clear cut.

[lovemybugs10]

It became really easy to ignore the phone. I'm not sure when that happened, but I simply don't pick up unless I want to talk to someone. Collectors, friends & family alike. I heard the surprise in Citi's collector when she pulled up our account. She couldn't hide it.

BOA has me a bit nervous because I haven't heard from them in a week or so. Wishful thinking- I get a 1099 from them, more than likely yet another attorney or agency will start calling me and try to collect.

I would rather file bk than have a judgment against us, I think.

As a side note, something I'm surprised about. Cap1 is sending us credit card offers. How common is that? (to receive offers while having high balance cards that are two years behind on your credit report)

[ryan]

I am also getting ready to follow this path. Doing this versus a 7 is a no brainer, doing this versus 1-2K for 5 years in a 13 isn't as clear cut.

I probably should have been a bit more specific about BK vs. debt settlement.
I was referring to a Chapter 7, at least in my own case. I'd agree the ch 13 alternative might not be such an easy call.

Treehugger1's comment makes me think, I guess I am in "Informal Bankruptcy" for almost the last 18 months.
...some of his comments reflect what I feel currently. I am surprised I'm able to go about my work, pay other bills, etc and be completely insolvent this long....strange.