BK or Collection (Credit Cards)?

[mike2006]

u only paid 20%..so good of you.


thanks

I told a collection lady at Citi I will give her $1100 to settle $11000 in debt. She told me $2200 and I took it. This was a month ago on debt incurred about 2 years ago. I guess they are all different. Something is better then nothing. 40 cents on the dollar is still pretty good and the poster can probably afford this with a lifestyle adjustment.

[Quandary]

I'm curious as to why some think BK is better than settling these debts. Can anyone educate me? Thanks.

[lrprn]

I'm curious as to why some think BK is better than settling these debts. Can anyone educate me? Thanks.

As you noted in your original post back in November, sometimes the high interest rates and late fees on non-secured debts increase what you owe faster than you can pay it down. If you declare bankruptcy, in Ch 7 the debts are wiped out, usually within six months, and you are free to start building again. In Ch 13, some to all of the non-secured debts are paid off, sometimes at pennies on the dollar, plus you can keep assets. Best of all, the difference between what you do pay back to creditors vs what you originally owed doesn't count as taxable income like it does if you agree to a % of the debt directly with the creditor.

[HHM]

I'm curious as to why some think BK is better than settling these debts. Can anyone educate me? Thanks.

Bankruptcy puts the debtor in the drivers seat with their debt. In a chapter 7, the unsecured debt is discharge, why not pay $1200 to a lawyer to file BK to get rid of $80,000 of debt instead of paying $20,000 to your creditors to settle. In a chapter 13, the debtor's circumstances determine the amount paid back, not some arbitrary, and uncertain negotiation with the creditor. In addition, to get the most favorable settlement terms, you generally have to be in default for 2 years, so your credit is shot anyway. Also, there are tax consequences to forgiven debt that do not exist with BK.

[Quandary]

What is the likelihood a creditor will file an action for a $4,500 debt? CapitalOne has referred this debt to an attorney and I'm wondering whether to dispute this debt based on unreasonable finance charges and other fees or simply wait and see. Unfortunately, CapitalOne is also aware of the fact that I have settled other debts. Any ideas?

[ChainSmokin]

[HHM]

What is the likelihood a creditor will file an action for a $4,500 debt? CapitalOne has referred this debt to an attorney and I'm wondering whether to dispute this debt based on unreasonable finance charges and other fees or simply wait and see. Unfortunately, CapitalOne is also aware of the fact that I have settled other debts. Any ideas?

Actually, fairly likely. Also, you are not likely to get anywhere with the unreasonable finance charges, the U.S. Supreme Court has pretty much given credit card Carte Blanche to charge whatever they like in that regard.

What people fail to realize (through no fault of their own, since this is industry info) is how much value their is in a judgment. Even if you are not a candidate for successful collection now, you may be in the future. Also, that judgment can be sold on the secondary and tertiary debt markets. Usually after several years of default, the original creditor can usually get back at least what they put out when you used the cards by selling the debt to someone else. The person buying the debt from anywhere between 5-50 cents on the dollar is hoping to collect much of the accumulated interest in fees. The only way to put a stop to it is either PAY, or DECLARE BK. (on a side note, statute of limitations hold outs don't work that well, and if you go that route, your credit screwed for your entire life until you deal with the debt).

[Quandary]

Thanks. If this account is in my wife's name, can they garnish my wages to collect a judgment?

[ChainSmokin]

[HHM]

Thanks. If this account is in my wife's name, can they garnish my wages to collect a judgment?

Probably not,

but the real answer will depend on several factors. i.e. were you married when the debt was incurred, are you an authorized user of the account, do you live in a community property state.

However, if the account is just in your spouses name, then the judgment is generally only valid to garnish her wages; however, they can put a lien on "joint" assets and raid money in joint bank accounts.