Debt settlement or BK
Date: Fri, 04/02/2010 - 15:10
The s*** is starting to hit the fan. A couple of the CC companies called my wife's boss yesterday and the missus is starting to freak out, understandably so.
We stopped making our mortgage and CC payments between 2 and 3 months ago. I have been unemployed for 6 months but have started a consulting project, which pays well and might put us in a position to have enough cash to settle with CC companies in 2 to 3 months.
Here is the dilemma. According to a BK attorney we qualify for Ch 7 based on the means test if we file in April. The "problem" is that I have finally found some work. It is a 2 1/2 month consulting project that will pay about $60K and there is also the possibility that it might get extended, which could mean another $20K. It could also lead to to other projects either with that company or with others. We currently have about $50K in checking/cash/stock. This means we would have over $100K in about 3 months, which could give us enough to settle plus have money to cover our living expenses for a few more months.
We owe $120K in CC debt. $40K of which is in my wife's name. Our home is underwater by about $200K, this includes a $120K HELOC. We also owe $7K in property taxes.
We have looked into a loan modification but I am not optimistic that we will be able to get a principle reduction, so I am turning my attention to getting rid of the CC debt first and then will focus on our home situation.
We have found a BK attorney that also does debt settlement. The cost of using them for debt settlement versus filing BK is about the same. I have considered doing the debt settlement on my own but don't have the stomach for it, although I may divvy up the task with the attorney to minimize costs. I also will not work with a debt settlement company only with an attorney.
My hesitation in filing BK is based on the following concerns:
1. As soon as the trustee finds out we have $60K in income over the next few months plus $50K in cash-equivalent, he will either push us into a Ch 13 or demand that these funds go to the creditors. BTW, in CA, you can exempt $22K in Chapter 7.
2. I will not sign up for a Ch 13. I am 52 years old and am not going to subject myself to having to answer to a trustee for 5 years. If I continue to get consulting work, there is too strong of a possibility that we get placed in a 100% plan, which is worse financially than debt settlement.
3. I am trying to start a business that might potentially require outside investment and I am afraid that having a BK will increase likelihood that potential investor would back off.
4. For this consulting engagement the client did a credit check. I am afraid that most large companies will require credit checks even for contractors. It's competitive enough as it is.
I have checked with CPA and we would be insolvent at the time of debt settlement so would not have to pay taxes on forgiven debt.
I am leaning heavily to hiring the attorney today to start the debt settlement process, initially focused on settling my wife's debt. Since she has a FT job and I don't, she could get her wages garnished. Also, want to relieve her of the pressure at work.
Would really appreciate people's opinion, especially if you have considered or done debt settlement. I am also considering getting another attorney's opinion. I like the attorney we found but only spoke with one other and have found a couple of others that also do BK and DS.
If I didn't have the consulting project and prospect of others, then the answer would be very simple - file Ch 7. If I can hire an attorney to handle the DS, I can focus my energies on trying to make a living and start a business to climb out of this mess.
We stopped making our mortgage and CC payments between 2 and 3 months ago. I have been unemployed for 6 months but have started a consulting project, which pays well and might put us in a position to have enough cash to settle with CC companies in 2 to 3 months.
Here is the dilemma. According to a BK attorney we qualify for Ch 7 based on the means test if we file in April. The "problem" is that I have finally found some work. It is a 2 1/2 month consulting project that will pay about $60K and there is also the possibility that it might get extended, which could mean another $20K. It could also lead to to other projects either with that company or with others. We currently have about $50K in checking/cash/stock. This means we would have over $100K in about 3 months, which could give us enough to settle plus have money to cover our living expenses for a few more months.
We owe $120K in CC debt. $40K of which is in my wife's name. Our home is underwater by about $200K, this includes a $120K HELOC. We also owe $7K in property taxes.
We have looked into a loan modification but I am not optimistic that we will be able to get a principle reduction, so I am turning my attention to getting rid of the CC debt first and then will focus on our home situation.
We have found a BK attorney that also does debt settlement. The cost of using them for debt settlement versus filing BK is about the same. I have considered doing the debt settlement on my own but don't have the stomach for it, although I may divvy up the task with the attorney to minimize costs. I also will not work with a debt settlement company only with an attorney.
My hesitation in filing BK is based on the following concerns:
1. As soon as the trustee finds out we have $60K in income over the next few months plus $50K in cash-equivalent, he will either push us into a Ch 13 or demand that these funds go to the creditors. BTW, in CA, you can exempt $22K in Chapter 7.
2. I will not sign up for a Ch 13. I am 52 years old and am not going to subject myself to having to answer to a trustee for 5 years. If I continue to get consulting work, there is too strong of a possibility that we get placed in a 100% plan, which is worse financially than debt settlement.
3. I am trying to start a business that might potentially require outside investment and I am afraid that having a BK will increase likelihood that potential investor would back off.
4. For this consulting engagement the client did a credit check. I am afraid that most large companies will require credit checks even for contractors. It's competitive enough as it is.
I have checked with CPA and we would be insolvent at the time of debt settlement so would not have to pay taxes on forgiven debt.
I am leaning heavily to hiring the attorney today to start the debt settlement process, initially focused on settling my wife's debt. Since she has a FT job and I don't, she could get her wages garnished. Also, want to relieve her of the pressure at work.
Would really appreciate people's opinion, especially if you have considered or done debt settlement. I am also considering getting another attorney's opinion. I like the attorney we found but only spoke with one other and have found a couple of others that also do BK and DS.
If I didn't have the consulting project and prospect of others, then the answer would be very simple - file Ch 7. If I can hire an attorney to handle the DS, I can focus my energies on trying to make a living and start a business to climb out of this mess.
This is a no brainer. SETTLE. And do it yourself, unless your a
This is a no brainer. SETTLE. And do it yourself, unless your attorney is very cheap. Lose your house if you need to but settle. You have the money and you can do this for .30 on the dollar. You totally avoid public records this way. Nobody even knows I have settled over $150k in cc. They only know I look happier and that (like everyone else) I have a problem with my home value and payment. Good Luck
