24 Million dollar question

[Lajazz947]

I keep hearing that BK instead of negotiating written off debt is actually BETTER on your credit.

I have a hard time believing this since if you negotiate you do not have the BK on your record and you can at least say you paid some money back.

Opinions?

Experiences?

[JRScott]

Generally by the time you get to where they will negotiate you are several months into default on the cards with a hit each time you miss the payment on your credit report.

I did negotiate with a few cards. The problem I found is that some were willing to try to work with you and some weren't. For me it was about 50/50. Generally also even for some willing to offer a deal I did not have the cash to pay them on hand.

[keepmine]

The big drawback is, the possibility of a 1099C being issued on the settled portion of the debt.
In general, if you can settle at a huge discount and can either handle the tax liability or, are exempt {insolvent-IRS form 982} then a negoiated settlement will be preferable. Of course, get any deal in writing before payment.
Problem is, many creditors won't go much under 40% or so. Plus, they'll want the money quickly-in just a few months. I know at about the 150 day mark of default on my accounts, Cap 1 offered a 50% settlement and Chase a 45%-both offers were insolicited. But, since I owed a total of $71K among all credit card companies, a settlement in that range was undoable.

[Minnymouth]

Negotiating debt normally creates lots of late payments, send to collection accounts, and 1099's for tax purposes if the accounts are settled. And some companies will not negotiate..... it's pay all or nothing.....

All of the above will stay on your credit report just as long as a bankruptcy will almost.

When I filed BK, I had no late payments and was behind on nothing (but it was coming fast)..... By filing BK when I did my credit score took very little impact. Even after filing I had a very good credit rating. Due to NO LATE PAYS, NO COLLECTIONS, NO JUDGEMENTS. Just one blow "BK"......

Debt relief organizations are a business also..... in the business to make money off of trying to organize your debts into a payment plan where they get paid FIRST.... then your creditors (if your credits will agree - some do - some don't).....

Just my thoughts

[WoodSprite]

When I filed BK, I had no late payments and was behind on nothing (but it was coming fast)..... By filing BK when I did my credit score took very little impact. Even after filing I had a very good credit rating. Due to NO LATE PAYS, NO COLLECTIONS, NO JUDGEMENTS. Just one blow "BK"......

That's good to hear, Minny. I checked my credit report this morning (my 341 was just a few weeks ago) and was astonished to see that although the bk filing is reported, my score is 722. There are only three ccs in my matrix, I'm affirming a lease, which has never been late, and I have 25 years of perfect credit before The Event Which Precipitated My Demise. Still, you'd think the numbers would be worse than that. They still have time, I realize...

[justplaintired]

That's good to hear, Minny. I checked my credit report this morning (my 341 was just a few weeks ago) and was astonished to see that although the bk filing is reported, my score is 722. There are only three ccs in my matrix, I'm affirming a lease, which has never been late, and I have 25 years of perfect credit before The Event Which Precipitated My Demise. Still, you'd think the numbers would be worse than that. They still have time, I realize...

That's awesome! Not a bad score at all. Congrats!

[WoodSprite]

That's awesome! Not a bad score at all. Congrats!

Well, I'm not counting my chickens until I see that discharge, but I sure was surprised.

[Frogge]

I am amazed now that I've been researching BK so much how it compares to debt settlement and negotiations. I always thought avoiding BK was the most important thing, as I'm sure a lot of people do. I was worried about the scrutinization throughout the process.. trustees eyeballing your accounts and spending, etc.

I knew a someone personally that went the DS route, and ended up going BK eventually -- I'd bet with lower scores by the time they realized it was their only option. It seems to be a common story here, too. I now think unless you just CAN'T file for some reason, it makes no sense not to if your credit is already tanked.

[Minnymouth]

WoodSprite,
Awesome on that credit score... that's how mine played out.... at the end of discharge mine was around 682 and holding.

It doesn' take much of a "hit" with only a BK on it, and no late pays or collections. Those are what really puts the "punch" on it.....The 30, 90,120 day lates.... and especially collections.

Within a year or sooner you should be able to buy anything with a good interest rate.

Bankruptcy really never even affected my credit that much. I still have credit cards, low interest rates on loans, mortgages, etc.... and am able to purchase anything I need.

When I refinanced my house I was really concerned about the interest rate. The girl at the Credit Union told me my credit score (720) was better than most people who applied for loans (no problems, good low rate).....

So often filing BK is a lot better than trying to negoiate or go thru debt settlement.....

[Stilltheone]

Negotiating debt normally creates lots of late payments, send to collection accounts, and 1099's for tax purposes if the accounts are settled. And some companies will not negotiate..... it's pay all or nothing.....

All of the above will stay on your credit report just as long as a bankruptcy will almost.

When I filed BK, I had no late payments and was behind on nothing (but it was coming fast)..... By filing BK when I did my credit score took very little impact. Even after filing I had a very good credit rating. Due to NO LATE PAYS, NO COLLECTIONS, NO JUDGEMENTS. Just one blow "BK"......

Debt relief organizations are a business also..... in the business to make money off of trying to organize your debts into a payment plan where they get paid FIRST.... then your creditors (if your credits will agree - some do - some don't).....

Just my thoughts

I was exactly like Minny when I filed...no lates, no judgements, no collections....but it was coming, so we filed.

Our credit really took little impact from our bankruptcy. Of course, it's on there and will be on there for many years, but our scores aren't in the toilet and it's been easier to obtain new credit.

Good luck!