One Final try before BK. Plz Critique my final settlement letter (short!) thx

[joshuagraham]

I can tell you from personal experience--credit card companies couldn't care less about your personal problems, lack of employment, etc. All they care about is if the payments are flowing in or not. Back in 2009, before I defaulted on all my debts, I attempted to negotiate with my creditors to lower the monthly payments and reduce or waive interest because I had suffered a huge loss of income. The creditors did not care. When I actually quit paying, and let the accounts go 30-days late, 60-days late, etc., I again attempted to negotiate with my creditors to stop charging interest and fees, and allow me to pay a lower amount until I got back on my feet financially. Only Citibank was willing to do this. My other creditors refused to provide any sort of hardship payment plan which would stop the balance from going up. I mentioned the fact that I might have to file for bankruptcy, and the creditors did not care. I decided to stop throwing good money after bad and let all the debts charge off.

My advice is to quit paying, let the debts charge off, and deal with the possibility of a lawsuit by filing for bankruptcy if and when you have any assets or wages that are worth protecting. Right now, you and your "loved one" are having medical problems, which means that you might end up accumulating more debt which you'll need to discharge. Assuming that you do not own a house, or are "underwater" on the mortgage, you are currently "judgment proof" and therefore, it is not in your best interest to settle your debts, or to file for bankruptcy at this time.

Agreed. The banks figure that if there are any assets to get, the bankruptcy trustee will get them, and they'll get their cut, without having to hire a legal team to do it. And if there are no assets, that it would be so much in your self-interest to do Chapter 7, that you would be doing it anyway. And you can best bet that these days, some boutique data mining consultant has been examining the optimal offer to allow for a particular debtor situation - and it probably is much, much higher than the piddling amount you are offering.

[slvnomore]

Thank you so much for all the replys. I really appreciate all your help.

if it helps the banks are chase and FNB,.

I have one other question, When you say if you get a 1009c for the forgiven debt and then declare legal insolvency, (that dismisses the taxes on forgiven debt). you are very likely to be audited expecially if self employed. How often does that happen? That is new to me and seriously something to consider... thank you so much.

[GoingDown]

I want to thank you all so much for all the different opinions, It is really opening my eyes. as I said I have not sent it yet, If ever, as I am still learning. Thanks for answering my questions. If they have offered 30% (9K) and I counter offered 2K, you say they would laugh at me becuase they can make more in a charge off or with a JDB. Then what is the amount that you would offer for it to be taken seriously or as you say a reasonable offer? Also if i have no assets,home,and am self employed, however i do have checking accounts and pay pal, how does that affect the collection proof status please? ; )

Until they actually file a lawsuit, they can't get at your checking account. However, they have methods to find out whether or not you actually do have a checking account, and if they find it, they may be more likely to file a lawsuit against you.

And of course, once anyone files a lawsuit against you, your money is sadly safer stuffed under your mattress than it is in a checking account.

So, just to be clear, if you have a checking account, then in most cases, you are NOT collection proof. It's as simple as that.

PayPal is another story. The odds of them finding it are low, but if they do find it, they can take all the money in it. So, it is not safe to leave a lot of money in it.

Pre-paid debit cards can be used instead of a checking account, and while they are not 100% safe, they are definitely safer than checking accounts once someone has filed a lawsuit against you.

I think you can transfer money from PayPal to a pre-paid debit reloadable card, or just use the PayPal debit card at an atm to withdraw as much money as possible as soon as you get paid from PayPal, or use it at a store to make purchases and use up the money as quickly as possible, just to be on the safe side so that if judgment creditors ever did find the PayPal account, they wouldn't get much from it.


Read the ENTIRE stickie called "Exempt funds" for more info and ideas... There is a HUGE amount of information in it about checking accounts and pre-paid debit cards.

http://www.bkforum.com/showthread.php?67251-Exempt-funds

[TheBajan]

I want to thank you all so much for your input. I really appreciate it. I am just trying to understand all my options.

2) the tax implications as i understand it can be eliminated by qualifying for legal insolvency at the time of settlement, is that correct.

Technically, yes. However, really consider if you want to open up that can of worms with the IRS. As a former tax preparer, I can tell you that the largest group of people to get audited are people who file a schedule C (self-employed). If you manage to come up with $7k to settle both cards, (again assuming they will accept 15%), and you claim insolvency to avoid the tax on forgiven debt, you are inviting an audit.

Best wishes,

The Bajan

[slvnomore]

I want to thank you all so much for your input. I really appreciate it. I am just trying to understand all my options.

1) I wonder what the charge off value of a debt is to the oc below which they will not go.
2) the tax implications as i understand it can be eliminated by qualifying for legal insolvency at the time of settlement, is that correct.
3) If i could come up with the magic number. (15%?) and bank 1 and 2 did agree. to settle I still would have my discover card which is current which would seem to be the best option for rebuilding credit. That is why I was trying to settle . that and it scares me to declare BK and then have the possibility of a future catastrphic medical event.

forgive my non linear rambling....I am trying to take all this in.... but know that all your wise words are appreciated. : )

[LadyInTheRed]

The $2,000 you are offering them will probably cover your attorney fees to file a BK and get rid of all of your debt.

[kawh]

Everything bcohen said, and all the others who are trying to tell you how creditors think, they are all right.

If you tell these people you have X dollars to pay them, they will pay attention to that, and will believe you actually have X (to the nth power) to pay them. I don't think approaching them like this will be productive, and will be counterproductive. They truly are not interested in your human plight and are used to hearing so much that (probably) isn't true, they have no means or incentive to sift out truth, so they make a habit of not listening or trying.

Telling them you have anything available at all to pay them will not help your case with them, and it sounds like it will hurt your finances very much!

[TheBajan]

...what is the amount that you would offer for it to be taken seriously or as you say a reasonable offer?

The lowest I've heard of was 15%. In your case that means $4500. Usually, 25 or 30% is the lowest they go. Let me be clear that if it were me, I WOULDN'T make any offer. Besides having to come up with that just to settle one debt, you still have to deal with the tax implications of forgiving nearly $26k along with trying to settle your other debts. This is assuming the cc company even plays fair. You could pay them and if you aren't careful, they could still come after you.

Let's just assume they would accept $4500. Even if this were your only debt, BK would still be a cheaper option. Now, granted, if it was me and this was my only debt, I would probably TRY to work something out before filing. However, this isn't your only debt, you don't have the money to settle it much less any others, and your situation is still very dire.

Hope that helps. Separate the emotion from the decision. This needs to simply be a financial decision. What is best for you financially. There is definitely life after BK and it smells sweet!

[AngelinaCat]

We tried to settle with one of our two CC companies, and asked that if they dropped all late fees and all interest on the principal, we would work on paying off that. They laughed at us and said "all of it or nothing." We said: "Fine. Nothing is what you will get."

[slvnomore]

I want to thank you all so much for all the different opinions, It is really opening my eyes. as I said I have not sent it yet, If ever, as I am still learning. Thanks for answering my questions. If they have offered 30% (9K) and I counter offered 2K, you say they would laugh at me becuase they can make more in a charge off or with a JDB. Then what is the amount that you would offer for it to be taken seriously or as you say a reasonable offer? Also if i have no assets,home,and am self employed, however i do have checking accounts and pay pal, how does that affect the collection proof status please? ; )

[pamkev]

Great Post Bajan!

OP I totally agree with the others the letter is a wasted cause. When I tried to work it out with one of our cc companies the payment was lower by $6.00.

[TheBajan]

Dang Bajan you write a lovely post!
Been meaning to ask... are you pronounced Ba-han or BAY-jan??

lol.... BAY-jun

[justbroke]

But in my experience, once they found out that I was judgment proof, none of my creditors, nor the junk debt buyers EVER filed a lawsuit against me.

I don't think you two are saying different things. Creditors do want money. They don't care about your problems. They will likely do make an asset determination. They will proceed or not proceed based on whether you are "collection proof". (I don't like the word "judgment" proof since that would mean they could never win a judgment.)

And please keep in mind that saying any of this on the phone to a debt collector is a waste of time. The people on the phones most likely just got out of prison and couldn't find any other job to do, and they are the lowest on the totem pole. You have to send it in the mail for it to get to right people.

Now that I have actually had my bankruptcy discharged, I love when people try to collect the old debt. I actually get to tell them to "shut up and listen very carefully!"

[GoingDown]

I can tell you from personal experience--credit card companies couldn't care less about your personal problems, lack of employment, etc. All they care about is if the payments are flowing in or not.

From your personal experience, that is what happened to you.

But in my experience, once they found out that I was judgment proof, none of my creditors, nor the junk debt buyers EVER filed a lawsuit against me.

Capital One did sue me, but they sued me almost immediately after I stopped paying them, and before I had any knowledge about what to do about them, and certainly before I sent them one of my letters explaining my judgment proof status, and the fact that I knew they couldn't do anything to me, even if they got a judgment against me.

Since then, NOT a single one of any of my creditors or junk debt buyers has sued me.

That's my personal experience.

Every person is different, and your situation may be different from mine, and you may experience a different outcome, but to suggest that creditors don't care about wasting their money on a lawsuit when they know the person will not or cannot pay them back is just plain wrong.

Otherwise, I would have been sued about 20 or so times by now.

Instead, ALL of my credit card debts are BEYOND the statute of limitations. Even the one Capital One judgment is worthless at this point, since they did not renew it during the 5 year period under Arizona law.

So, it can be done.

If you are truly judgment proof-- no assets, no wages to garnish, no real estate to put a lien on, and no checking account, etc., and if they know you don't have any of these things, it would be foolish for them to come after you.

And please keep in mind that saying any of this on the phone to a debt collector is a waste of time. The people on the phones most likely just got out of prison and couldn't find any other job to do, and they are the lowest on the totem pole. You have to send it in the mail for it to get to right people.

[keepsmiling]

Dang Bajan you write a lovely post!
Been meaning to ask... are you pronounced Ba-han or BAY-jan??