Instead of filing for bankruptcy, shouldI try to work out settlements with my creditors?
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Instead of filing for bankruptcy, shouldI try to work out settlements with my creditors?
I owe over $170,000 in debt. I researched on-line regarding Chapter 13 bankruptcy but husband really doesn’t want to do this. I now may be able to borrow $25,000 to do 10-15% settlements if the credit card companies and and collectection agencies will accept this. One collection agency called and did tell me that usually any accounts that were charged off will accept a 10-20% settlement at this point. Sure all except one has charged off. Not sure what to believe anymore with these companies. I just would like to know if you feel this is a possible solution to this situation before retaining a lawyer and filing?
Asked on January 13, 2011 under Bankruptcy Law, Ohio
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 13 years ago | Contributor
It's possible to settle with creditors, but bear in mind the following:
1) Creditors don't have to settle--it's voluntary. So you can't count on doing this, and a creditor may refuse for any reason.
2) If an account has already been charged off in full, they can't ask for any money--including a partial settlement. On the other hand, if it's still open at this time, they can, if they choose, take a partial settlement and charge off the rest.
3) Having charged off and partially paid accounts on your credit record will hurt your credit almost as much as filing bankruptcy according to most information--and you'll have paid $25k to do that, and will still be obligated to the firm you borrowed that money from.
If the debt is unsecured, and if you owe that much, then declaring bankruptcy may be in your best interest. Still, it's a complicated issue; if possible, consult with a bankruptcy attorney.
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