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$130K in debt, collections, settlements, getting sued.

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  • $130K in debt, collections, settlements, getting sued.

    WARNING - A lot of reading...needed to provide some background. Thanks!

    Okay, I have a few questions here. I haven't posted in a while since I started thinking about Bankruptcy. I decided to sit and wait for settlement offers before going the bankruptcy route. I moved and forwarded my mail to a P.O. Box so I'm not getting bombarded at home. I have a new cell number, so the only number they have is a work number that I don't have to answer...I just check/monitor the voicemails at my own pace.

    I received my first notice of a civil law suit in the mail from Chase Bank on a credit card balance owed of $17,000. The collector is Weltman, Weinberg, & Reis. I called in and they told me that Chase would settle for 80%. I told them I could only do 30% and payments of at least 4 months. He is supposed to get back to me by the end of the week.

    I am going to try and settle all of my debt (appx $130K) for 30% and hopefully stretch it out over 4 - 6 months. I have the ability to borrow from a family member for these so I should have no problems coming up with the cash in the short term and then paying them back in 1 - 2 years.

    Here are my questions:

    I received a settlement from Discover for 30% that got lost in the mail and got to my P.O. Box too late and it had expired (as of 11/16/09). I called in to see if I could act on that and they said it's too late, but they could offer me the following:

    - The balance is around $12K.
    - Current interest rate is still at only 8.4%
    - If I pay $800 this month, $800 in Dec, and then maintain minimum payments of $240/month they will take off $1100 in interest/fees and my account will be in good standing.
    - They will also drop the interest rate down to 7.9%.

    If I were to do this, would it help my credit out in the long run (despite having 9 other accounts that I have to deal with and will probably end up settling the debt on)?

    Should I just let this Discover account go to collections and try and get another 30% settlement?

    My creditors are:

    Chase Bank - $17K - Offered me 80% settlement on $17K, I countered with 30% over 4 - 6 months.
    Discover - $12K - Read above, no current settlement offer.
    Sears Gold Mastercard - $1200 - Need to call to negotiate settlement.
    Citibank - $5K - Need to call to negotiate settlement.
    Advanta Business - $15K - Need to call to negotiate settlement.
    AT&T Universal Card - $20K - Need to call to negotiate settlement.
    Bank of America - $30K - Offered me a 50% settlement on a $30K balance...can I do better with them?
    Bank Atlantic - $14K - Need to call to negotiate settlement.
    Best Buy - $2500 - Need to call to negotiate settlement.
    Citi Platinum - $11K - Need to call to negotiate settlement.
    Citibank Simplicity - $8K - Need to call to negotiate settlement.

    All accounts are around 150 days past due and since last activity.

    I would imagine that a lot of these are close to legal action as the first one just came in the last 2 weeks and I stopped paying all of them at the same time.

    One other thing to take home pay is around $4000/month, but I am starting to get a lot of clients on the side (IT company for small businesses), so I should be bringing in a minimum of $1500 (gross) extra per month, with a lot of months in the $3000 - $5000 extra range.

    I am really trying to avoid bankruptcy because of this new extra income coming in. I just think it would make a 5 year bankruptcy for me really messy. Thoughts on that?

    I am a pretty detail oriented person, so I can definitely handle working on these settlements myself with all of these I'm not too worried about that end of things.

    My main objectives are:

    - Settle all of this debt in the quickest time possible
    - Start rebuilding my credit
    - Never get into this type of mess again!

    My biggest bright spot is that I have very positive cash flow...hope that post wasn't overwhelming!

    Thanks again!

  • #2
    If you start down the settlement road, be careful to make sure the OC does not have the right to sell the deficiency that remains after settling.

    They do this often, and it can ruin an otherwise sound plan.

    With an expected increase in income, I can see your reasons for settling. It is not something most should do, but your circumstances make it appropriate to consider.

    It will take a while to get all creditors to agree, as well. Hopefully you can reach decent agreements with all.

    Good luck in your efforts.
    11-20-09-- Filed Chapter 7
    12-23-09-- 341 Meeting-Early Christmas Gift?


    • #3
      Also remember that settlement offers come with 1099's.

      To answer the BofA question at the very end they were offering me an 11% settlment on $72,000 lines of credit so yes, you can do better.

      Most will get to the 15 to 20% range as well.
      Last edited by Lajazz947; 11-20-2009, 01:50 AM.
      Very fortunate in the grand scheme of things but have learned my lesson.

      Filed 12/15/08, 341 1/12/09, Cont to 2/12/09, cont to 3/12/09, cont to 4/15/09, cont to 5/11/09, cont to 6/02/09. Discharged 9/16/09, Closed 10/23/09


      • #4
        How certain is that new income and your business in general? I'm really wary of your optimism because there is something that got you this deep in debt in the first place and it strikes me that undue optimism might be a cause.

        IMO settlement is rarely the right way to go both because of tax issues and because of deficiency issues.

        Your post reads like someone who is great at nailing down the details but whose lost sight of the big picture.
        So the poor debtor, seeing naught around him
        Yet feels the narrow limits that impound him
        Grieves at his debt and studies to evade it
        And finds at last he might as well have paid it.


        • #5
          The bottom line, practical question. Where are you going to get the funds to settle. Although some cards may settle for 20%, some don't. Average settlements are 40%. The goal of settling your debts "quickly" and rebuilding your credit are mutually exclusive. If you qualify for chapter 7 BK, you are FAR BETTER off filing, unloading the debt and moving on. Most credit recovers in about 2 years from chapter 7 bankruptcy. It will take you more than 3 years to recovery from debt settlement unless you have ALL the funds necessary to settle TODAY.

          What NEVER makes sense to me is this.
          To have a realistic shot at settling $130,000 in debt, you need $52,000.
          To file BK 7, you need about 2000-4000 in attorneys fees.

          Why would ANYONE be so STUPID to spend (WASTE) the money to settle if they can file BK. The ONLY time someone should settle is if they have Assets that cannot be protected in bankruptcy, and it otherwise makes sense to keep those assets. Other than that scenario, settlement rarely achieves the goals most people think. Anyway, that is my rant.


          • #6
            Another thing to remember......

            Charged off credit card debts get sold for pennies on the dollar. With that being said however, their is a fly in that ointment. Seems that the charged off credit card debt buyers are having problems obtaining financing (imagine that!), so the what was pennies on the dollar is now down to 1.9 cents per dollar for bad debt.

            Remember that when bargaining.
            All information contained in this post is for informational and amusement purposes only.
            Bankruptcy is a process, not an event.......


            • #7
              I think your settlement plans are wildly optimistic.

              If nothing else consider the amount of time and energy that's going to be consumed in this adventure, and there is no guarantee that it will end successfully, in fact, judging by your creditors I would say you will not succeed. They are just too many and feel "empowered".
              They've got the US government in their back pockets, why should they cut a deal with you?

              You'll be happier just filing chapter 13 and getting on with your life, or chapter 7 if possible.

              P.S. Chase was the first one to sue me too. I think it may be a "get tough" thing against perceived "strategic defaulters".
              Last edited by catleg; 11-20-2009, 01:21 PM.
              filed chapter 13..confirmed...converted to chapter 7...DISCHARGED!


              • #8
                why not hire one of those debt settlement compaines..let them do all the foot work to settle, and make one monthly payment to the settlement company. I think I owe over $100k myself. I get settlement letters all the time. I do not think i have seen such a letter where it is almost nothing. normally my settlement letters are between 40%-50% - and I never recall seeing on what
                happens to the write they just write it off, or sell it to someone else that will just come after the difference?
                which really would not make since to even pay to settle if that is how it works out.


                • #9
                  $130k in debt is not unusual but ya'know, that is an awful lot of accounts.

                  If it was just a couple companies like BoA and Chase, it might be doable. But with 11 accounts (maybe those 3 Citi can be grouped, maybe not) it is going to be a nightmare. Not to mention the strategy involved with trying to keep some hanging while negotiating with others.

                  And everything with settlement is such a crap shoot as to what percentage you get with who. And there is the time involved. You will probably spend as much time & effort on those little Best Buy & Sears Gold accounts as you will on the big ones...just not worth it.


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