Debt Negotiation vs Bankruptcy

Discussion in 'Credit Talk' started by topazmoon, Oct 17, 2001.

  1. topazmoon

    topazmoon Well-Known Member

    On the CreditNet board, a member wrote that one of his creditors offered to reaffirm his Capital One debt from $8000 to $2500 at his bankruptcy. On the advice of his lawyer, he turned the offer down.

    I'm wondering if I should contact my creditors and offer to renegotiate or go ahead and file for BK and see if the creditors will make any offers. Since I'm current and have never made a late payment, I really don't have much leverage other than to use the BK card.

    My concerns are if I'm offered a settlement:
    -How will it be reported on my credit report?
    -How will my interest rates be affected?
    -How will I be viewed after I pay off the debt?
    -Will I have to pay the entire amount at once or over time?

    I know using the CCCS is considered one step above a bankruptcy (unfortunately it's not an option for me), but I don't know how debt negotiation is viewed.

    I'm not even sure if debt negotiation/settlement is an option, but I am curious as to anyone's experience.

    Cynthia
     
  2. keepmine

    keepmine Well-Known Member

    Let me add one more concern. If you negoiate debt down the creditor will send you a 1099C and the amount written off is considered taxable income. To avoid taxes, you'll have to prove you were insolvent on the day of the agreement. Also, they'll want the money pretty quick-usually in a few months.
     
  3. Dani

    Dani Well-Known Member

    Cynthia,

    I'm trying to rack my brain for ideas. Have you tried contacting your three credit card companies to acquire about any options they can offer you? If I'm correct you're still paying all your bills on time and have no lates. Could you give them a sob story? Maybe they could reduce the minimum payment due or stop charging you interest for several months. Also, are you working full time right now? Could you move back home for a couple months and save the money you pay in rent to reduce the credit card debt? I'm just throwing out ideas here.

    Dani
     
  4. topazmoon

    topazmoon Well-Known Member

     
  5. bbauer

    bbauer Banned

    Why is it that you think you have to do either one?
     
  6. topazmoon

    topazmoon Well-Known Member

  7. keltexx

    keltexx Well-Known Member

    Have you tried negotiating w/ your creditors on your own? You are not behind on your bills, but you may be able to lower your payments/decrease your interest rates if you choose to stay the course on this. When I ditched CCCS (which I do not recommend participating in) I was able to do this w/some of my creditors. But here is a kicker---in doing so, my credit, almost 2 years later, is no better than if I would have filed for BK.
     
  8. bbauer

    bbauer Banned

    Well, I can understand why you would take the position out of sheer desperation and a lack of resources.

    But let's take a look at some things before you jump off the deep end.

    Bankruptcy is going to cost you somewhere between say $750 and maybe $1200 or more and may or may not get your debts all cleaned up. You may also have to end up paying on a bunch of debts for a long time to come under court situation and you will have a hickey on your credit report for the next 10 years. What the actual outcome will end up being I can't tell you for sure, but it's likely to be something somewhere along those possibilities.

    That's basically what you are looking at.

    There is a better way as far as I am concerned and it isn't going to cost you anywhere near that much money, you will most likely end up with your debts all wiped out and a clean or pretty clean credit record along with it.

    So now why do you want to file bankruptcy?
     
  9. topazmoon

    topazmoon Well-Known Member

    I've researched my options and bankruptcy appears to be the best solution.

    I looked into debt negotiation and the problem is even if my credit card debt was reduced in half from $32,000 to $16,000, I'm still running $700 in the negative each month. The minimum payments on my credit cards run $400, $235 and $100. Even if I were to stop making payments for a few months, I wouldn't be able to stockpile enough money to pay any of the debts off for a very long time.

    Same problem with using credit counseling. Even if my minimum payments were reduced, I still would be in the negative. My interest rates on two of my cards are low and fixed (9.9% and 7.9%), but MBNA is 21.9%. The CCCS counselor I spoke to said MBNA was "very" difficult to work with regarding interest rate reduction.

    I'm caught between a rock and hard place. If I was making my previous salary of $20/hour, I could easily pay my bills or use credit counseling/debt negotiation. However after looking for a new job for the past 18 months, I'm learning to accept the 45% pay cut I took when I accept my new job and the associated consequences of my actions.

    It's more than likely that my credit card debt will be discharged and I will be able to hang on to my car. I realize my credit will take a beating, but I can and will rebuild my life slowly but surely.

    Cynthia
     
  10. bbauer

    bbauer Banned

    The holidays are just around the corner.
    Why not give your creditors the gift of creditwrench for the holidays?

    That way your credit don't take a beating but your creditors do if they violate your rights and the law??
     
  11. topazmoon

    topazmoon Well-Known Member

     
  12. bbauer

    bbauer Banned

    It catches your creditors and their 3rd party debt collectors abusing your rights and violating th e law which they always do. Then we make them pay the bill instead you sueing them for their violations of the law.

    So far, it's never failed because they never learn to keep from breaking the law.
     
  13. topazmoon

    topazmoon Well-Known Member

     

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