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Which is the right option - Settlement or bankruptcy?

Date: Mon, 02/19/2007 - 21:04
Submitted by on Mon, 02/19/2007 - 21:04
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For some reason I cannot log on!! Here is my new question and I will post my old underneath thanks!

I spoke with an attorney about bankruptcy and the news is not good. My husband and I make over the medium income so we would have to file a chapter 13; however, based upon government figures: we should be able to pay $1000 a month towards the bk! I'd like to know how they figured that out!! So basically we lose everything, have to shut off our cable, sell/eliminate one vehicle plus pay $60,000 over the next five years. So we will end up paying our creditors in full!! If this is possible, why am I filing bk? Can anyone explain this to me?

Would debt consolidation work for us? We don't want to lose everything, pay our creditors in full but still have the bad credit hit for the next 10 years. This just doesn't make sense to me. I don't mind a sacrifice and I don't mind paying what I owe but I swear our current budget comes back negative 400 per month. Our gross incoming is $8000 over the median which is 75,000.

I know you can't tell me what to do but if this was you what would you do? Go with the bk? Honestly I'm more curious about knowing the bk alternatives. My stomach is so sick that I can't sleep. Thanks!

First Posted January 30th

I realize it is harder to file bk now than ever before, however, it's something we have tried hard to avoid, but I'm wondering if it may be a better option for us.

We have roughly 52,000 in unsecured debt. Last April we signed a contract with a debt settlement Company to handle our accounts. We have already paid them about $5,000 of the $8,000 we will be paying them. We stopped paying all of our debt last April/May and instead have been putting our monthly payment an Escrow Account, which currently holds about $1200 (the rest has gone to their fees). There were three of our accounts that we were able to send Power of Attorney Letters to and they have pretty much left us alone (until recently). However, three of our debts we had to handle differently than the rest of the accounts. I have logs and logs of calls that we have received over the past 7 months.

On January 15, 2007 I received a fed-ex package from one of our credit accounts for an Arbitration Hearing. I called our settlement company to inquire about this and they sent me paperwork and guidelines to follow, however, they basically told me I'm on my own. This account was suppose to be an "easy" settlement account; however, now it has turned into Arbitration which could end up with a judgement that would not be included in the program.
I guess, basically, I fear going through this settlement program and ending up with judgement that they "don't handle". I am tired of the endless harassment and tired of always struggling and being behind in our bills.
We have a house with no/little equity to speak of and two cars that we have a balance on which is pretty equal to the amount of the blue book value. My husband and I have decent incomes; however, our debts exceed what we bring home every month so we are always behind on something. We are going to catch up this February with our tax refund but will probably again fall behind towards the end of the year.

What do you think our best avenue is? To stick out the settlement or to file bk? We've consulted a bk attorney - she advised that we file bk. She can guarantee results. Although we make "too much" to file Chapter 7 we would have to file Chapter 13 and I have no idea what the monthly payment would be.

Thank you for your time.


Both debt consolidation and settlement can be looked upon as bankruptcy alternatives but the payments in the consolidation plan are higher than settlement followed by BK. Chapter 13 is allowing you repay the debts under a certain payment plan fixed by the trustee in the presence of your creditors. Speak with your bk attorney and get all your queries answered.

Your assets would have been liquidated if you went the chapter 7 route. In chapter 13, you don't lose anything. If you are interested in the consolidation route, go ahead. BK will stay in your credit for 7 years. Consolidation will be shown in your file until you are using the program.

No one other than you knows better about your financial condition. The consultant or your bk attorney will also suggest you the same thing if you can afford the payments in the consolidation. If this doesn't work, chapter 13 is the next best thing for you.


Submitted by Steg on Tue, 02/20/2007 - 14:56

Steg

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I owe about $50,000.00 on credit cards and I have not been able to pay the minimum monthly payments. Should I go with a debt settement company or file for bankruptcy. Is settlement as alternative to bk?


Submitted by on Sat, 02/21/2009 - 17:10

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with my personal debt issue i used settlement to avoid bankruptcy , and yes, settlement can be a bk alternative. But if they told you its easy, it is far from. settlement stinks while your in the program but its well worth it in the end and in my opinion better than bk. For the most part it takes 6 mo to a year for those first settlements to come in. So you must have patience.

Also if you are using a company or considering one (maria ana) please research and do the homework that you need to know how it works. settlement is a great tool, but it is far from easy.

I think to many people sign up thinking its a easy quick ride. but its not. Its hard, and it has consequences too, like you can be sued. That is why you must dedicate yourself to your settlement no matter what it takes to get it done as fast as possible so that you dont get sued. Your life may not be easy for that year or two, but it will be worth it in the end.

In my opinion bk, should be the last resort after you have tired out all other options.

good luck!


Submitted by love_my_things on Mon, 02/23/2009 - 06:45

love_my_things

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Just want to comment on the above statement - but I don't want to hijack this thread.

[SIZE=2][COLOR=#0000ff]Bankruptcy greatly hinders your ability to get new credit [/COLOR][/SIZE]- you are high risk, I'm sure DS does as well and someone may comment on which has the most or longest impact. After you carefully evaluate what is best, it wll take several years to rebuild. But rebuild you can, and will, and life goes on. Happily.


Submitted by roxo on Fri, 08/06/2010 - 22:21

roxo

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[QUOTE=roxo;732541]Just want to comment on the above statement - but I don't want to hijack this thread.

[SIZE=2][COLOR=#0000ff]Bankruptcy greatly hinders your ability to get new credit [/COLOR][/SIZE]- you are high risk, I'm sure DS does as well and someone may comment on which has the most or longest impact. After you carefully evaluate what is best, it wll take several years to rebuild. But rebuild you can, and will, and life goes on. Happily.[/QUOTE]


Bankruptcy does not hinder your ability to get new credit. I started getting new credit offers within 6 months and I started rebuilding. Debt settlement is a longer and riskier (IMHO) path as the creditors can still sue you while you are trying to put the funds together.


Submitted by SOAPLADY on Fri, 08/27/2010 - 04:11

SOAPLADY

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I agree on the debt settlement, there is risk to it. If you back out mid way trough, you lost that time that you could have recovered in BK.

I also don't like Debt settlement compnaies; better off on your own.

So what wouls payments be on 180K in unsecured debt in a chapter 13?


Submitted by on Tue, 09/07/2010 - 17:11

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I am considering settlement, as I now have access to my 401k funds for liqudation. The questions is, does settlement make sense at all? If I pull money from my 401k then I pay 10% penalty and taxes. I then have to settle the debt and anything forgiven is a potential tax burden unless I can demonstrate insolvency to the IRS.

If I file Bankruptcy, then I get to keep my home, car, some cash and all of my 401k. My debts are cleared.

Yes the BK is on your credit report for 10 years, but all the rest of the negatives are on for 7 years.

I can start rebuilding immediately. I dont need to buy a home or car, and I expect I will have some form of credit within 6 months.

So is there an advantage to settling??


Submitted by on Wed, 12/15/2010 - 09:58

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It is true that if you take out money from your 401k, you'll be liable for paying 10% penalty. Also, it is true that if your debts are forgiven, you'll be liable for paying taxes on the forgiven amount. However, I personally feel that debt settlement is better than bankruptcy filing.

A bankruptcy filing may reduce your credit score by 200-250 points and may stay in your credit report for up to 10 years whereas a debt settlement may reduce your credit score by 70-120 points depending upon your existing credit score and other negative items. Moreover, a debt settlement will remain on your credit report only for the next 7 years.

After a debt settlement, you may be able to qualify for new loans but after a bankruptcy filing you'll have to wait for around 2-4 years in order to qualify for new loans.


Submitted by Anna Sweeting on Thu, 12/16/2010 - 01:14

Anna Sweeting

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Im in debt as well and im seeking assistance for debt consolidation or chapter 7 because im sseem to be younger than the other ive read so i dont have anything they can take or make me sell i aleardy have a lawsuit with the credit card copmpany......


Submitted by on Mon, 03/07/2011 - 18:19

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i am in my 50s i don't own anything..i have about 25,000 in debt credit card and 11,000 debt on a car that will be reposed at any day. some cc company have called and i tried to settle and make payment on the settlement but now i am in debt with my checking account..i will never do auto debit again. :) because if the monies isn't there you will be paying nsf /od charges and that adds up fast i also owe state and federal.
i think bankruptcy is my only way ...i know the fed and state cannot be in the bankruptcy.
i know it last up to 10 yrs...i tried working a second job ...but i just wore myself out and was being less effective with my full time job...
do you have any suggestions?.


Submitted by on Wed, 03/09/2011 - 06:33

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You can file bankruptcy in order to get rid of your debts. You will be able to get your debts discharged and can start your life afresh. I will suggest you to contact a bankruptcy attorney and discuss your situation with him. He will let you know which chapter of the bankruptcy filing will be well-suited for you.


Submitted by Anna Sweeting on Thu, 03/10/2011 - 02:23

Anna Sweeting

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if you file ch 13, you shouldnt lose anything... as far as paying back 100% of cc bills, you will not pay that, you will only pay a %. if you have any car that is not paid for, it will be included in the ch 13 repayment plan... 13 allows 3 to 5 years (depending on the amount being repaid) to pay.. a friend of mine recently filed ch 13 & had huge cc debt, and only repaid 1% of the total, and the balance of their car note was included in their monthly payment. i had another friend filed ch 13 about a year ago, same situation, and due to income and left over funds paid back 0% of their cc debt, only set up to pay car note thru ch 13.. every case is different...


Submitted by generallee on Sat, 03/12/2011 - 20:46

generallee

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I filed Ch 13 several years ago, and I paid every last one of my creditors the full amount I owed them. (Except Sears, which was dismissed from the ch 13 since they continued to hound me for payment).


Submitted by mommatocharlie on Wed, 08/03/2011 - 14:58

mommatocharlie

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