Settlement offer: 15% of 75,000 with B of A?

[catleg]

I believe debt settlement gives you an affirmative defense of "estoppel", likewise, bankruptcy also gives you an affirmative defense of "res judicata".

Down the road you can be sued (or merely pursued) for the debt whichever road you choose, if the creditor behaves unethically.

[tyfoon]

I believe debt settlement gives you an affirmative defense of "estoppel", likewise, bankruptcy also gives you an affirmative defense of "res judicata".

Down the road you can be sued (or merely pursued) for the debt whichever road you choose, if the creditor behaves unethically.

In either case, I am not sure if debtor would be able to collect anything else. But RJ appears to be a better defense.


Had to look them up:
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Estoppel is a legal doctrine at common law, where a party is barred from claiming or denying an argument on an equitable ground. Estoppel complements the requirement of consideration in contract law.[citation needed] In general, estoppel protects an aggrieved party, if the counter-party induced an expectation from the aggrieved party, and the aggrieved party reasonably relied on the expectation and would suffer detriment if the expectation is not met.

While there are many types of estoppel, in simpler terms, most estoppels prohibit an individual or group from being harmed as a result of another's deeds, statements or promises, when later actions or statements contradict or undermine what was originally stated, promised, or inferred. In a case, estoppel is used as a defense and provides immunity to the defendant, by preventing the claimant or accuser from presenting statements of facts when such statements contradict earlier statements or when the party, by negligence, failed to present them earlier. Additionally, estoppel in a defense may also provide a legal basis for a claim, when proof exists that the undermined actions or false promises, or the negligence to present the facts, caused harm to the defendant. In limited cases where statements or promises were not made explicitly, a party's silence alone may alone prevent them from making a later claim or statement. See estoppel by silence.

So, "Where A has by his words OR conduct...[led]... B into believing that a certain state of facts exists, and B has acted upon such belief to his prejudice, A is not permitted to...[say to]..B that a different state of facts existed at the same time" (per Lord Birkenhead in Maclaine v Gathy (1921)

For an example of estoppel, consider the case of a debtor and a creditor. The creditor might unofficially inform the debtor that the creditor forgives the debt. Even if such forgiveness is not formally documented, the creditor may be estopped from changing its mind and seeking to collect the debt, because that change would be unfair.
************************************************** ***

Res iudicata or res judicata (RJ) is the Latin term for "a matter [already] judged", and may refer to two things: in both civil law and common law legal systems, a case in which there has been a final judgment and is no longer subject to appeal.[1]; and the term is also used to refer to the legal doctrine meant to bar (or preclude) continued litigation of such cases between the same parties, which is different between the two legal systems. In this latter usage, the term is synonymous with "preclusion".

In the case of RJ, the matter cannot be raised again, either in the same court or in a different court. A court will use RJ to deny reconsideration of a matter.[2]

The legal concept of RJ arose as a method of preventing injustice to the parties of a case supposedly finished, but perhaps mostly to avoid unnecessary waste of resources in the court system. Res iudicata does not merely prevent future judgments from contradicting earlier ones, but also prevents litigants from multiplying judgments, so a prevailing plaintiff could not recover damages from the defendant twice for the same injury.

[HHM]

You would have a good defense to future collection, the issue is that there would be future collection. It puts an additional burden and hassle on you to deal with these issues as they arise. It is still quite rare for post chapter 7 debts to be pursued in any meaningful way.

[treehugger1]

Interesting that in your district the attorneys informed you that the 401 contributions might have to cease. The BK laws are so lame in this country and allow for different "regulations" to be interpreted by different districts. In the end, your best bet is probably a BK. Whether the road to recovery is a few months (BK 7) or five years (BK 13,) you definitely know where you stand. As to future issues with JDB's attempting to collect pre-BK debt, you will probably have to follow through and this requires some work on your part in the future. It's much easier to get into debt than it is to get out of it. In my opinion, if you are eligible for either a 7 or 13, one should move toward this quickly while the original creditors still hold all the paperwork. An early BK seems to nip the possibility of future issues with CA's and JDB's in the bud.

[tyfoon]

Interesting that in your district the attorneys informed you that the 401 contributions might have to cease. The BK laws are so lame in this country and allow for different "regulations" to be interpreted by different districts. In the end, your best bet is probably a BK. Whether the road to recovery is a few months (BK 7) or five years (BK 13,) you definitely know where you stand. As to future issues with JDB's attempting to collect pre-BK debt, you will probably have to follow through and this requires some work on your part in the future. It's much easier to get into debt than it is to get out of it. In my opinion, if you are eligible for either a 7 or 13, one should move toward this quickly while the original creditors still hold all the paperwork. An early BK seems to nip the possibility of future issues with CA's and JDB's in the bud.

thanks, fyi, 401k loan payback would cease (I owe $10k to my 401 plan). 401k contributions may continue as long as they are reasonable (3% is ok). Yes it is interesting that the district regulations differ.

[HHM]

I think you are confusing 401K loan repayments with 401K contribution. There is NO DOUBT that 401K loan repayments are allowed, (see code section 1322(f)). Find other attorneys.

[treehugger1]

I think I understood incorrectly. I thought the poster was referring to 401 contributions. Loan paybacks in a chapter 13 plan are totally allowed, and are considered prior to "disposable" incoem avaialable to the plan. In terms of continued contributions, 3% - 5% to a 401 seem to be the norm allowed. It becomes fuzzy when a defined benefit pension plan is involved and one also wants to continue contributions to a 403(b) or 457 plan. You can;t have it all.

[tyfoon]

I think you are confusing 401K loan repayments with 401K contribution. There is NO DOUBT that 401K loan repayments are allowed, (see code section 1322(f)). Find other attorneys.

Looking back at my notes, there was a disagreement between attorneys on this point. The code clearly states it would be allowed. One attorney specifically told me there was a chance it would be disallowed because of the way the loan agreement was drafted. The other two indicated that because my 401k loan is scheduled to be paid up by Sept. 2009 the permitted deduction would not be as high as i am actually paying (I am paying $650 a month to payback the loan). In any case, I was incorrect and the loan repayments may be a deduction, but not as much as I am currently paying.

[njguy1972]

I am not sure of your situation but I have been settling my cards since it makes sense for me vs ch 13. Per my lawyer I was likely to have a 100% payback where through settling I will pay back about 55%-65% after taxes. I am settled with 4 of 5 right now. BOA is cool where they will mention that the account is settled in full and that there will be a tax liability on the forgiven amount. Also, make sure you clearly ask on their recorded lines that the debt cannot be re-sold. All their calls are recorded based on what I was told. This will protect you as well. Of course get them to fax the letter before you send any money.

It will make sense to settle if any of the following apply to you:
1. You have cash on hand from a tax refund / work bonus that would be turned over in a ch 13 to the trustee
2. You can borrow from your 401k at a low interest rate to settle all the debts
3. You have a credit card from work that is required for your job. If you declare BK (even ch 13) it will be canceled and you will be required to alert your boss that you cannot use it for visiting clients.
4. You work in financial services or an industry where a BK may prevent you from promotions or getting a new job
5. You can save money with a settlement vs. a BK (especially if you are destined for a 100% ch 13 plan)
6. You have issues with the trustee involved with your personal finances for 5 years where you cannot make any decisions without permission.

From experience:
-BOA will settle at 15% if you are approaching 6 months overdue and they are about to charge you off with little haggling
-Citi will settle for around 30% if you are 4-6 months overdue with little haggling
-Discover will settle for about 30%-40% after 3 months with lots of haggling
-Amex is very tough. With NCO you can get to the 40%-50% range but other CAs play harder ball and will tell you that AMEX will not settle when they actually will. I have read that AMEX does not care if they have to sue to garnish wages.
-I have no experience with store cards but I have a feeling they may be easier since they just want to clean liabilities from their books since they are not in the financial business.

I put some numbers below based on 30% for most but moved it to 40% for some of the smaller balances since the banks / CAs may play hard ball on them. It is a lot easier to come up with 2k vs 13k and they know that.

You mentioned you have :
75k owed to BOA - @ 15% = $11250 ($63750 forgiven)
12k to Sears - @ 30% = $3600 ($8400 forgiven)
7k to Discover- @ 30% = $2100 ($4900 forgiven)
$2k to Kohls- @ 40% = $800 ($1200 forgiven)
$4k to Chase- @ 40% = $1600 ($2400 forgiven)
13k to GM- @ 30% = $3900 ($9100 forgiven)

Totals: $23250 in settlements ($89750 forgiven)
Federal Taxes: $89750 * 28% = $25130
(28% tax bracket for all income over 75k. If your salary is under 75k you may have a smaller tax liability)
State taxes: $89750 * 5% (depends on your state- mine is 6.3%) = $4488

Total of payment in a settlement: $23250+$25130+$4488 = $52868
which represents 46% of your total debt.

This number can become larger if you borrow from your 401k to settle or if you have to go onto a federal tax repayment plan that includes interest.

You said you would pay $700 a month in a ch 13 (42k) which is around 37%.
Your break even is around $850 a month.

I hope this helps.

[Michigan1951]

For newbie's reading the posts, using initials or abbreviations is confusing to say the least. I wish people would take time to SPELL out important words so we don't struggle through a post, please.

[OhioFiler]

For newbie's reading the posts, using initials or abbreviations is confusing to say the least. I wish people would take time to SPELL out important words so we don't struggle through a post, please.

Bumping old threads isn't generally accepted procedure.

Which acronyms are you struggling with? Perhaps you can start a thread on acronyms and abbreviations that will become a sticky.

[ForumReader]

Bumping old threads isn't generally accepted procedure.

Which acronyms are you struggling with? Perhaps you can start a thread on acronyms and abbreviations that will become a sticky.

I made that suggestion at the beginning when I first joined this site as I was confused with all these acronyms and abbreviations . It would be a good idea to have a sticky on just these. Sorry for jumping off this thread with a different topic.

[tyfoon]

I am also not sure what abbreviations were not understood.. I was new to the forum when i posted this topic and understood the answers..

BTW, ended up settling the accounts. Settlement on the GM account took longer then the rest. Had to wait until it was turned over to an outside collection agency before they agreed to 30% but by then balance had increased due to interest and late fees.

[jwmc1]

Be aware that JDB's might buy up the forgiven debt from BofA and still hound you for the balances, what HHM calls "the dirty secret of debt settlement". I would utilize your bk rights and be done with it.

I don't understand this. If you legally settle in writing the balance, how in the world can anyone come back to you and try to collect?

[treehugger1]

That's part of the key in a settlement issue. You better get it in writing before you ever send them a cashier's check. There are plenty of examples out in the world where a debtor thought they had a settled an account with a CA. Then, a few years later the remaining balance shows up with another CA or JDB. It sounds as if tyfoon has been quite careful and covered all the issues that could come up in the future.