Settlement?'s

[waziggy]

I was wondering what the general patterns are in offering to settle with creditors. My wife and I have operated a business for the past 8 1/2 years but since the downturn after 9/11/01 it's been a loosing proposition. At first we thought we would have to BK but have since tried some creative things.
For our creditors of the business we basically called in Dec and said we couldn't pay at the time due to the softness of the season and almost all were very understanding. I told each we went to an attorney (we did) who wanted us to file immediately and not tell anyone; let the court disposition our business assets and discharge all debts. I did the opposite and have conducted a going out of business sale. Last week I wrote a cover letter to each supplier apoligizing for our inabilities to pay 100% but that we were offering 50% payment in good faith and that if they reject our offer to return our payment and letter with "Unaccepted" written across it and that we would seek independent third party arbitration. By the way we mentioned again that if we had followed the recommendation of the attorney we would have declared BK and the debt discharged and they would have gotten zip. Again, what are the experiences of others who have offered to settle for a lesser amount of the debt they owe. What works and what doesn't work is the real question that could help alot of folks in the same circumstances. My gut says even if they reject our offer and seek court actions our initial offer in good faith might count for something in the eyes of the court and also the offer to arbitrate would also be seen as seeking to resolve the thing without tying up the court. Then there is our landlord who we've been paying the past 8 1/2 years and technically have 9 months rent due per the contract ($27,000 we don't have). For them I researched and am offering a one time payment of $5000 for a Lease Termination Agreement; again including the attorney's recommendation about BK and discharging all debt. My first meeting with the owners represented went very well. Input folks. What are others doing that works.

[HHM]

Frankly, if your business is OVER, you are throwing good money after bad to settle with your creditors. Your attorney gave you the best advice...not to be too mean here, but based on your decision making process exhibited here, I can see why your business is failing.

You need to look at the opportunity cost of money. Your paying thousand's of dollars to settle debts of a failed business, there are probably a hundred better uses for that money that would get you a greater return on that money than paying off your creditors.

Did you acutally send them a check? Depending on the type of creditor, despite your letter, they can accept your check and STILL come after you for the remainder (unless you have a signed release from your creditors releasing the balance owed).

[mmcconn2]

I hate to say it but HHM is right I understand you wanting to make good on your debts, but at the very least you should have not sent them any money until you both have agreed on the terms and had something in writing. especially since you are months behind as well. I was in a similar situation for almost 10 years and I wanted to make good on my debts, I paid them for 10 years and in the end had to file for BK. Sure wish I had the 10 years worth of payments now. Unless you can sit down and come up with a legitimate plan with better than 60% chance of it working to get you out of debt I would have to agree with the attorney that told you to file for BK. Good luck!

[waziggy]

Gee, so no obligation required for debts assumed just declare BK! What's wrong with accepting responsibility for your loss and then being as fair as you can be offering to settle with everyone you can. (1) you can always fall back on the BK and execute it later - sure it cost a few thousands but then again when years were great you make many many thousands more. (2) Even if they try to come after me as you say - from my experience most courts look very favorable on any offer to settle in good faith first up front from the defendants and (3) seeking third party arbitration is always viewed favorably by courts too.

Not trying to be hard as you put it but how many businesses have you started and ran? How many employees have you managed and support financially. When you have employees you also have families your supporting. It goes with the territory. This isn't my first business and won't be my last. Some work some don't but it's always better to not declare BK even for your corporation when you want to start another business in the future . Then again the real question was for others to share what worked and what didn't work in settlements seeking not to declare BK? Is this the wrong forum?

[waziggy]

Not months behind not even 30 days behind yet when I offered to settle at 50% of open invoices as decided the business would not be as profitable as wanted in coming year and therefore closing shop. Again; the question is on offering to settle for less than owed creditors experiences.

[HHM]

Well, if your barely in default, its very difficult to get creditors to settle. One thing with your case is that these sound like commercial debts. In the consumer sector, the original creditor will usually settle for %50 percent (after several months of default by the consumer). If it goes to a collection agency, you can usually settle for 35-40%, and if it goes to a debt purchaser, you can usually settle for 20-25%.

Commercial creditors are less apt to settle right away, but I would think after some default, they would settle. Also, you can do a business workout...which might be the way to go for you if your business is still operating but you are only having minor cash flow issues.

[waziggy]

These are all commercial. I'm being pro-active and aggressive versus waiting for them to act. Here's a strategy that works - tell your creditors commercial or consumer to send you immediately to collections - cause you know the collections agency gets a cut anyway reducing the amount you the creditor get and will settle for less. Challenge the creditor. When collection agents call - ask for their full name, company name and address. Use the company's address (city) to find their home phone number using directory assistance or the internet and call them at home. Leave them messages at home. Leave messages with their family members about the situation. Turn the whole thing around on them for a change. Turn their world upside down. It's what they will try with you. They'll settle for less a whole lot quicker! Been there - done that - it works! Same thing with offering a settlement amount upfront. They turn it down - which they will first pass most times. Then put in writing your offer to arbitrate. If they turn down arbitration; write back saying "I tried being reasonable with you so take me to court as you will gladly show the judge 1st you were willing to settle and 2nd you were willing to arbitrate and they weren't". Most judges will first throw the thing into settlement anyway to keep it out of court - so why not head there first. Beat them at their own game. When they say they want 100%, ask "would you be willing to take 90%". They'll say YES to 90% so reply immediately back - "You just offered to take less than 100% I knew you would so let's close this up and go back to what you can pay immediately" and offer it. Be aggressive is the point.

[waziggy]

100% acceptance from suppliers/creditors in one week. Offer accepted and accounts closed as PAID IN FULL! Yippee. Again, why delay or wait to go month after month not paying. After talking with differing credit and collections departments within the industry it saves them time and money in the long run and they are always more willing to work with someone who's coming forward versus changing them. Only thing I'm wondering now is could I have offered to pay less and still gotten acceptance!!!

[mmcconn2]

Not to be rude, but if you have these proven techniques why are you here looking for the forum's advise why not excercise these techniques and not file bankruptcy, most people here are only giving you their personal experience not trying to tell you what to do. There probably isnt a person here that doesnt feel bad about filing BK, but you cant look at it personal it is a business decision. Good Luck!

[waziggy]

I came here after being advised to declare BK by an attorney and told to check the site out. I wasn't willing or ready to throw in the towel and Chapter 7. Did exactly what I said in prior post and it works and thought I'd share that it works with others. See I do believe that (1) attorneys are pre-dispositioned to advise to declare BK - can't get billable hours for credit counseling yet they many attorneys advertise in the yellow pages under credit counseling. (2) notice some of the moderators are pre-law and again tend to be pre-dispositioned to advise to BK. MY POINT IS DON'T GIVE UP -NEVER EVER GIVE UP. It's always personal when it's you. I know folks feel bad but then again are really receiving the best advice in their personal case or the company line from vested interest. I have to say after posting I don't think I was given the best advice for me but the company line. It's my responsibility to exercise my own best judgment. Then again - it took a week to negotiate all debts down by being assertive, agressive, and in your face with the creditors. Just the opposite of the moderated response. Oh, yea I'm 51 years old, haven't worked for anyone else in over 10 years but just became a Sales Manager with a national corporation in an area with high unemployment (reason cited by local attorney to declare BK "you don't have a job, you're over 50, not a college graduate, the job market is tough around here). It's was a really good high school where when you get your ass kicked you immediately get back up and fight with more determination, grit, and spirit with only one agenda. WIN! BEAT THE OTHER GUY. PROVE THEM WRONG. Sorry but I see so many have given up.

[HHM]

Let me ask you this, how much money did you spend to settle your debts. i.e. how much did you have to pay your creditors to settle? You say you were determined, aggressive, etc, but really, your creditors won because you paid them.

Also, lets clear up a few misconceptions regarding what attorney's can and cannot do. Within the credit industry, Credit Counseling has a very specific definition, its a non-profit organization that collects debt for the credit card companies; however, they are the good-cops, to the bad cops of your standard collection agency. Credit counseling is the service of having the debtor enter a program to pay off the "full amount" due at the time they enter the program, but they stop additional interest and penalties. Credit card companies can go along with this because they get the balance paid full (granted over time), but also take a tax deduction on the interest they would have been charging you. Attorney's do not do credit counseling for various reasons, but mostly it would be a violation of professional ethics, because technically, the client of a Credit Counseling agency is the credit card company, not the consumer.

Attorney's can do debt settlement (some chose not to), but they can do it, plus file BK. I don't think attorney's are necessarily pre-disposed to recommend BK, most have some benchmarks whether to recommend BK or not, but under most circumstance, BK is by far the least costly option for getting out of debt and is therefore usually in the best interest of the debtor 8 out of 10 times.

[waziggy]

Sorry but I think winning is not BKing first and foremost. Settled $42K for $8K overall. Bet many on this forum would consider that a win or love to do the same not BKing. Then for what attorneys can or cannot do; why the ads in the yellow pages by the BK attorneys under credit counseling? Is it a coincidence it's the same list of attorneys under the BK section for attorneys and separately under credit counseling section in my local state capital phone book? Somewhere with that 8 out of 10 best interest to declare and any pre-disposition confuses me.
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The information provided is common sense and not necessarily supported by the legal community. Remember an attorney is one PAID to protect his clients from his PEERS!

[Chris]

What is a settlement? Is it a reduction of the amount owed yet still paid over time. Or is it a one time lump sum amount? If you don't have enough for living expenses now, much less any amount at all left over, does that determine whether or not to even think about settling? I guess what I'm asking is what is the total picture of deciding on filing, opposed to debit settlement, chapter 13 or taking a very long nap and wishing it will all go away.

[HHM]

Debt settlement is typically a lump sum at less than the total balance. It has to do with the Time-Value of money, $8000 paid today is better than $8000 paid over 3 years.