My Debt Settlement Progression

Sometimes people can't take this stress and thus take the help of a settlement firm. However, I'm sure that you'll be able to come out of it with flying colors. Just hang tight and keep us posted.

Another tough situation. Much as I have advocated in other threads, please be sure you are now living within your means. Do not incur more debt and compound the problem. If a lesson is learned, then we are all better off for it. Hopefully, you will be able to find reasonable settlements. Years of living high takes years of living low to get back to the baseline. Best wishes.

word of advice kaylee since im going through it to, if you want a settlement do not make any payment to them no matter how small it is! i got a call from discover just this morning saying that if i make a $16 payment (i owe $225ish as a minimum now) that it will prevent me from reporting to the credit report. if you do that you will more than likely start the process over since you made a payment.

oh, and stick to your story. don't stray each time and don't give info unless you are asked about it. and then make it short and sweet :)

just out of curiosity do you have the cash on hand to pay a 30% settlement?

Thanks everyone!

Stavos, just so you know, I wasn't exacly living high on the hog. My debt of 60k spiralled to over 90k just since last summer with all that detailed above but the original debt I incurred due to a catastrophic medical situation in 2005 that I was still crawling out from.

Blackbeast, I see now that not paying any is the way to do it and won't be making any more payments, originally I thought that I would try to juggle them since I could not figure out how if they all settled at same time I would be able to pay it.

Cash reserves---No, I have $4000 cash now and $1500-2000 to put towards it every month.
I have my 401k of $40k and I am debating whether to cash it in or not. Did you?
It is still kind of early in my game. Thanks again.
Kaylee

well at least you have your 401k as reserve. it sucks but i think thats the only way you will be able to pay off the settlements. doesn't seem to add up that you will have enough otherwise.

not sure if you saw one of my latest posts describing my situation, but i was going to rob peter (use my wifes good credit and put on one of her cards) to pay paul (my debt settlements). we are now thinking thats not smart and considering talking to an attorney about bk.

kaylee, don't forget, or if you didn't know, that whatever % you settle at the remaining % you will get a 1099 from the CC company and you will have to report that as "income". so if you get a 30% settlement across the board you are looking at reporting 70% which is almost $70k at tax time.

just a heads up!

But if you are insolvent per the IRS rules at the time of the settlement you don't have to pay tax on the 1099. Talk to a tax professional about this and make sure you keep the bank statements, investment statements and home value information for the month you settled so that you can prove you were insolvent at the time of the settlement.

As for taking money out of the 401(k). If it's a hardship loan that is not that big of a deal. Your monthly contributions into the 401 will just go to pay back the loan you made to yourself. But if you do a withdrawal, then you would have to pay tax and penalties on the amount withdrawn which can dramatically reduce the amount you get depending on your tax bracket. Again I suggest you talk to a tax professional for a better picture of how this will affect you.

I will keep watching and hope your journey goes super well!

very true DFTB. im guessing that only CC debt is considered in the insolvency equation? house and car doesn't affect does it?

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No. All debts and assets are considered So if you have a lot of equity in your home for instance or a high balance in your 401(k) then you may have to pay tax on the forgiven debt. The definition of insolvent is that you owe more to creditors than your assets are worth. That's why it's important to talk to your tax professional and see if you are actually going to have to pay tax on it.

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I just came home to find a UPS 2nd day air delivery and it is settlement offeer from Citi. I am only 39 days late!!

the offer says 'you were preselected for this offer'.

It says debt: $17,961

Offer: $8,082

Says I have until May 27th to accept.

I know I want it to be lower but I was just really excited after some people saying they would not budge. Maybe I should grab it. it says it can be paid in installments.??

Kaylee

not bad kaylee! 45% at 39 days! you should be sitting pretty come 90-120 days :)

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I wouldnt take it. They will go lower. Dont ever take their first offer!!

You have to hold out. It can and will go lower!! Trust me. Dont take the first offer.

Hey congrats! Make sure that 30% at 90 to 120 days is actually a lower dollar amount than 45% now. It will depend on what your interest rates and late fees are.

[QUOTE=Chitown33ac;692279]You have to hold out. It can and will go lower!! Trust me. Dont take the first offer.[/QUOTE]

I didn't even have to ask for this one (it just came in mail) so I think you are right.

Wondering if I should send a counter letter or just wait for the next one from them or the 90 days to elapse.

I am going to call them today and ask about if they will put my other Citi account on there.

thanks!

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kaylee what kind of conversations have you had with citi when they called? did you ever hint at wanting to settle?

Hi,

Thats wonderful!! try out for good settlement companies,they sometimes work wonders and come up with very good settlement offers for a very short span of time.

I was offer 45% at 120 days but at 150 they up it to 53% :(
I only have 30 %

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Today I called citi and thanked them for there offer and said I was thinking about it and would get back to them before their deadline.

I said I had a couple of questions: would they combine my other account which is also 18k and the answer was no they do not do that.

It is only 22 days late and the offer is 70%. The guy was nice and I think he wanted to hint to me that if I wait a little on that one it will also be 45%.

Another thing I learned is that the new law makes it that they can take only 3 installments at most.

OK, I have been reading as much as I can and 40% to cash in my 401k is terribly discouraging.

I read that you can take a loan up to 50% of it and this makes more sense to me --it doesn't add up to what I need to settle but I could settle 2 of them and maybe pay installments on the other two.

I will call them on Monday.

With regards to the 1099---I also read about this and most people are insolvent (this gives you an exception) and it is a simple worksheet to prove it. Not sure yet if I would qualify but the article I read says even if you don't qualify it isn't near as bad as the interest one would have paid on the credit cards, in other words better to do it.

By my estimate it would tack 50k onto my income so does anyone know how much tax that is?

I would love to hear from someone who has actually done this and can discuss the tax ramifications. thanks...Maybe I should post that as a question? think I will...thanks

Kaylee

As far as what the tax will be, it will depend on what your deductions are on your tax return, if you have kids, homes with mortgage deductions, business expenses, medical expenses etc. So what I would do is ask a tax professional and have them run the worksheet for you.

Now in all reality you are most likely insolvent. A simple way to figure it (not the tax way just a simple way) is to add up the value of your assets (cars, homes, investments etc) then in a separate column add up your debts (credit card balances, mortgages, car loans etc). Then look at them - which column has the higher number? If the debts column is bigger than you are insolvent.

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Most of you know I have been researching borrowing or cashing in 401k. Well, dummie me, it isn't even a 401k cause I left that employer years ago and rolled it over to a IRA. You can't borrow from an IRA I found out but there is a loophole where you can borrow it temporarily--60 days and you must put it back.
If I did that I could settle all my debts at 30%---I haven't been offered that 30% settlement yet but that is my hope and plan.
But paying back the money is a risk? and I have some things that could happen but it is like 5 things that could or should happen but may not so it is a big risk.
Kaylee

"Another thing I learned is that the new law makes it that they can take only 3 installments at most."

No such law exists. I just settled a Cap1 account over 6 payments. Discover has online offers to settle over 9-10 months. I don't know why they make the claim about the 90 day thing, seems they'd pull more $ and people would be able to settle easier if they'd give more time, yet they make the claim. It could be internal accounting or just their business practice.

thanks Maggie, yes, it was Citi that told me that and I asked them again because I was pretty sure he said 'new law' rather than company policy and sure enough he said Federal Law!! Wish I had recorded it, I think they just sometimes say whatever trying to get a pymt.
Funny thing is that if you read these posts they also DO WHATEVER it seems as people's settlements or lack thereof are just all over the place with no predictablity!

It just cracks me up sometimes that we think we have to be honest with them but they lie through their teeth to us. They count on the fact that most people are honest about their situation. They know most debtors are afraid to lie that they might get caught and something bad will happen. I just don't get why it is okay for them to lie to us - shouldn't there be reprecussions?

You know how at the beginning when you call them it says this call may be recorded or monitored for training purposes....wonder if we could request a copy of that. LOL.
Cause I really think the only answer is to record them and then catch them in their little tricks!

Kaylee

I went out and bought cheap tape recorder and put on my phone. Start taping their calls and let them know up front you are doing so.

Yes I thought of that but as of yet I haven't had anyone be nasty. But you could tell them that you are recording the conversation to send to their mother. Everyone is more afraid of their mother than their employer. LOL

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PS: this was with a third party today, everyone was nice at citi but one guy.
Guess citi don't want to settle, I had talk to 26 people in 6 months at citibank, got no where! What's up with that?

Regarding the 1099 insolvency, you must be careful and honest. However, I read that you don't need a full blown appraisal and can use values like Zillow to get your approximate value for the insolvency form. In my case, my home's value dropped from $600k to $250 maybe, so that changes me from $300k positive to insolvent.

Dan, I'm not concerned with home values cause I have 3 and they are all upside down.
What I am concerned about is having 96k in unsecured cc debt and when I do the insolvency sheet I come up 21k insolvent but I have 4 cc and once I settle the first 2 which are citi I will then not be insolvent, according to experts on this forum you do the sheet with each debt you settle so I don't know how to do this and neither does my accountant but so far no one can tell me....bummer.
Kaylee

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Kaylee - find a tax cpa in your area. They are the ones that know exactly how to do this. If you have discharged that much debt you will absolutely need to go to a specialist. Not doing so could cost you thousands of dollars in taxes that you might otherwise not have to pay. This type of professional will more than pay for themselves. I'm all for diy when I can, but there are just certain things that I won't do and figuring out complicated tax forms with big consequences is one of them.

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Kaylee,
What are the rest of your numbers. I'll do your calculation for you on this post:

Assets?
Negative Value in your 3 homes?
List out each CC separately.

Thanks Debt Free!

Credit cards:

Citi (1) 18k
Citi (2) 18k
Chase 21k
Bank of A 40k

So CC liability = 97k

House liablity (what I owe)

House 1 = 80k

House 2 = 85k

House 3 = 100k

Assets:

House (what it would sell for)

House 1 = 95k

House 2 = 75k

House 3 = 120k

IRA = 40k

My checking is very fluid, from 1k to 5k, lots going thru there. No savings. Car is 18 years old.
I believe you only want the numbers and don't care about income but the first house had steady tenants until recently so that puts me in a hole and the second house I am trying to sell which is when/how I found out I was upside down on it. It has a very high mortgage due to getting a 10 yr. mortgage.
the 3rd home I live in and mortgage is very low.

Thanks so much!
Kaylee

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