Question on Debt Settlement plan vs. Ch 13

[njguy1972]

As I start the process I am working with a lawyer who is putting together Ch13 paperwork. We talked and he is going to try and work out a payment plan I can afford. Since bankruptcy is the last option I want (work for a financial company and can lose my job because of it), I would prefer to work deals with the cards with a payment plan.

Has anyone been able to successfully do this?

For me it would be if I can arrange a deal to pay back 50% over 60 months, which is probably going to be what I pay the trustee.

The advantage I will have with a settlement payment plan is that if I get a raise, bonus, or tax refund that it will be mine to pay down the plan faster or use as I see fit. Also, a settlement payment plan may be better if I need to refinance my mortgage, get a new car, or need to get a corporate credit card from work.

I am aware of the additional taxes yuo need to pay but am willing to do that if the cards are willing to deal.

Please let me know your experience with the cards trying to cut deals when you were preparing for ch 13.

[sassiebaz]

Im wondering the same thing. I am set to take a counseling session with Consumer Credit Counseling. But after reading what's been said on here, Im realizing I may be better off with a CH13....I can't get my hubby to agree though. We already have a CH7 from 5 years ago. But I think we are about $100K in debt and are trying to make it on $60K a year income, with a growing family.....I need to get a consult w/an attorney!!!

[HHM]

As I start the process I am working with a lawyer who is putting together Ch13 paperwork. We talked and he is going to try and work out a payment plan I can afford. Since bankruptcy is the last option I want (work for a financial company and can lose my job because of it), I would prefer to work deals with the cards with a payment plan.

Has anyone been able to successfully do this?

For me it would be if I can arrange a deal to pay back 50% over 60 months, which is probably going to be what I pay the trustee.

The advantage I will have with a settlement payment plan is that if I get a raise, bonus, or tax refund that it will be mine to pay down the plan faster or use as I see fit. Also, a settlement payment plan may be better if I need to refinance my mortgage, get a new car, or need to get a corporate credit card from work.

I am aware of the additional taxes you need to pay but am willing to do that if the cards are willing to deal.

Please let me know your experience with the cards trying to cut deals when you were preparing for ch 13.

Your plan is a non-starter. Settlements are about LUMP SUM payments, NOT payment plan. You WILL NOT get a reduction in amount owed and a payment plan, that is not how debt settlement works.

Debt settlement works like this.
1. You stop paying your credit cards
2. The money you would have paid to your credit cards you deposit into fund.
3. That fund, as it develops over time, is used to make offers to your various credit cards to make a LUMP SUM payment to settle the accounts.

The down side
a. Debt settlement puts your creditors in control, after all, you put the decision in their hands to accept or reject the settlement
b. As you have already pointed out, the tax consequences can be devastating, after all, once you do a settlement, you cannot discharge the tax debt.

Stop making excuses and file BK.

[njguy1972]

The settlement you suggest is through those debt settlement companies. i know a few people that worked payment plans with the cards a few years back when the financial markets were much different.

ch7 or 13 should be a last resort and not something to jump into. It should be the last resort.

I do not see why a credit card company won't settle for 50% payment plan vs being forced into a bk proceeding and maybe getting nothing.

[DUMBAGAIN]

CC companys will not accept a repayment over 5 years for a settlement. (I know I work for one), however sometimes they will offer a 3 month payment settlement. The problem with this is once you go past due most of those types of offers all come at once, thus, you don't have enough money to satisfy them all at once. Also you are risking law suits! If you live in a state that allows wage garnishments, they can take up to 25% of each of your paychecks until paid in full. Trust me I've rolled the thought of settlement over and over in my head for months, but I've decided just to go with the BK and be done with all the worrying about "what might happen next" Good Luck

[bcvw]

The settlement you suggest is through those debt settlement companies. i know a few people that worked payment plans with the cards a few years back when the financial markets were much different.

ch7 or 13 should be a last resort and not something to jump into. It should be the last resort.

I do not see why a credit card company won't settle for 50% payment plan vs being forced into a bk proceeding and maybe getting nothing.

You are deluding yourself with that sort of thinking. CC companies are not wanting to keep a settlement plan on their books for 5 years, it's just not something they will want to deal with.

[HHM]

ch7 or 13 should be a last resort and not something to jump into. It should be the last resort.

That is such garbage advice (sorry to be blunt). You cannot, arbitrarily, declare one option a last resort without considering the pros and cons of all options. From a purely financial perspective, why pay $20,000 to pay off $40,000 worth of debt when you can pay $2,000 for a BK. Makes no sense, people who say BK is a last resort are grossly misinformed about Bankruptcy and are merely propagating a stereotype that BK is somehow devastating, what is devastating is continuing the pattern of making poor financial decision to avoid some phantom consequence of filing BK.

[magyar123]

That is such garbage advice (sorry to be blunt). You cannot, arbitrarily, declare one option a last resort without considering the pros and cons of all options. From a purely financial perspective, why pay $20,000 to pay off $40,000 worth of debt when you can pay $2,000 for a BK. Makes no sense, people who say BK is a last resort are grossly misinformed about Bankruptcy and are merely propagating a stereotype that BK is somehow devastating, what is devastating is continuing the pattern of making poor financial decision to avoid some phantom consequence of filing BK.

BIG AMEN to the above

[njguy1972]

actually for me the ch 13 will probably have me paying back more than if I try to negotiate on my own.

The 1st lawyer I spoke to said I would be in a 100% payment plan based on the means test. He would not even look at my actual budget. He said it would be the same if I keep my condo or not. He said he would defer my student loans and I could not do a 401k, even though the company matches. That lawyer is a former trustee.

My current lawyer is trying to work with my budget but thinks I will be between 40-75% payback. He is keeping my student loan outside the plan as an expense that needs to be met and is even trying to put my 401k contribution into my budget, since my current company matches up to 5%. He does general law an has over 10 years of experience with bankruptcies. I will let you know how things go after he reviews my information formally and suggests my payback amount.

The downside I see with a ch 13 for me is that the trustee can take tax refunds, bonuses from work, and can increase my payments if I get raises and such.

If I am able to successfully negotiate a payment plan (probably unlikely since I would need all 4 of my creditors to agree - all large well known companies), then I may be able to pay back 25-40% over the negotiated period of time.

A ch 13 may lead to me losing my job (financial services industry and they require you tell them if you file - listed in employee handbook) and unable to find a new job. I also have a corporate card from the company for traveling to clients (does not happen often) and they will know when I file because the card is likely to be canceled. The company I work for is doing mass layoffs and it is easy for them to add someone to the list who has a ch 13. Without the ability to work I may lose my condo.

With a debt settlement / repayment plan - I would not need to tell my company, my credit report would not be hit as bad, and it may be better if I need to find a new job or want to refinance my condo.

I have read your posts and it sounds like the card companies are reluctant to negotiate into a payment plans. At this point, since I have retained a lawyer to start the ch 13, I see no harm in trying to negotiate. All it takes is a letter and a phone call. The worst they can do is say NO. In that case they will have to accept whatever the trustee decides to give them anyway. Plus we are waiting until around February to file. By then I will be 3-4 months late on all my cards.

[HHM]

I don't have time to respond to everything that is wrong with your assumptions and assertions in your thread, but I will try to later.

The main false assumption is that you would be able to get a "settlement (reduction in amount owed) AND a long term payment plan" from the creditors.

But again, my main point is not to arbitrarily rule out a BK. But, if another solution would be better "ALL THINGS CONSIDERED" then you should go with that option.

[woeisme]

I understand your big concern is losing your job. I've been down the road of both credit counseling services and CH 13. The 60 month plans require 100% payback, the advantage is that they may be able to reduce the interest to near 0% (all mine were under 10%). Dis-advantage, you CANNOT reduce principle if paying over time. Debt settlement, which you are talking about, where they take partial payments and forgive the remainder of the debt, require a lump sum payment. You can try that route, but as others said, you risk lawsuits in the meantime as you build up enough resources to try debt settlement. I can understand why you might want to give this a try due to your job situation. You might want to try the debt settlement route to save your job, but be prepared to file CH 13 if you need to with short notice in case you have lawsuits or wage garnishments hit.

[anne1975]

wait a sec....are you saying with a 13 you have to payback 100%???
My lawyer didn't tell me that- He said my payback was pennies on the dollar (if all went well) All my debt is unsecured credit card debt-

[anne1975]

That is such garbage advice (sorry to be blunt). You cannot, arbitrarily, declare one option a last resort without considering the pros and cons of all options. From a purely financial perspective, why pay $20,000 to pay off $40,000 worth of debt when you can pay $2,000 for a BK. Makes no sense, people who say BK is a last resort are grossly misinformed about Bankruptcy and are merely propagating a stereotype that BK is somehow devastating, what is devastating is continuing the pattern of making poor financial decision to avoid some phantom consequence of filing BK.

This is more like what my lawyer told me- (that it wouldn't be a 100% payback- that it'd be much much less and like "pennies to the dollar")

[sassiebaz]

Myhusband is absolutely against ch13...because we already have a ch7......what do I do? I don't know how to convince him otherwise.....

[2strong]

I am currently in one of those programs consolidation products. What they do is set up a trust in your name and they take a certain amout per month out of you checking account then when you build up some money they start to make your creditors offers to settle your accounts. My plan is to pay 55% less. You can probably do this your self. I just got a letter from citi card saying they would settle for less so I think the longer you wait the less they will settle for