Is this preferential payment?

[smkrishna]

I am planning to file Ch.13 in 2 or 3 months time from now. I have 2 CC's that I am going to stop making payments. But, like most people, I am still under confusion whether to go for Ch.13 or not depending on whether I receive the summons or not from Collection Agency for one of my Investment home HELOC payment last year.

One of CC is Citi and balance is $18.5k and the other one is Discover card and the balance is just $4.2k. I heard that Citi is trying to negotiate with most of the people if they stop making payments. But, Discover is not doing that. I am thinking about whether to payoff this card (4.2k) from my wife's savings. She is not earning and I am not going to include her in Ch.13 also.

If I pay off Discover (from my wife's savings) few months before filing and if I end up going for Ch.13 in June or July with just Citibank and Chase as my creditors, will it create any issue?

[justbroke]

It's a preferential payment. Why would you even payback an unsecured card that you're going to discharge in bankruptcy? It's a waste of money! (Even in a Chapter 13 context, it's a waste of money. You may end up paying $0.10 on the dollar in a Chapter 13, or less.

Why settle? Chapter 13 is probably the best debt settlement there is. A guaranteed discharge of all your debt, if you make it through the commitment period of the Plan! It also keeps creditors at bay, and for the most part, you only pay market value for most property, and no interest on unsecured debt! Try that with debt settlement.

(Yes, there are legitimate uses for debt settlement, but not when you're about to file Bankruptcy.)

[smkrishna]

Thanks Justbroke. As always, thanks for prompt response.

As I said in my post, I am 90% decided to go for Ch.13, but still that 10% confusion in my mind about debt settlement with CA (if possible) or if I don't get summons, then I don't have to go for Ch.13. In that case if I don't go for Ch.13, then I thought that it's better that I can just pay off the creditor with smallest balance and try to negotiate with other creditors to settle for lower amount.

My another issue is: If I leave this country forever while I am in Ch.13 - say next year, then my attorney said that I can make arrangement to just pay off whatever amount I am supposed to in 5 years term to trustee and leave without any issue. Is it correct?

Thanks again for your help.

[justbroke]

My another issue is: If I leave this country forever while I am in Ch.13 - say next year, then my attorney said that I can make arrangement to just pay off whatever amount I am supposed to in 5 years term to trustee and leave without any issue. Is it correct?

I don't know. Unless you're in a 100% plan, I'm unsure if just paying what your "plan base" amount is... would satisfy the terms of the plan of reorganization.

Personally, I've never heard of such a thing. Of course, you can leave, but you would continue making the monthly payment until the 5 years is up.

Debt settlement can be challenging is the message I was trying to put forth in my prior post. Not all creditors are going to want to settle for "pennies on the dollar".

[smkrishna]

Thanks again for sharing your thoughts. I would clarify with my attorney on this.