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Settling/threatening BK...with assets...


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Hello,

My husband and I have been running a construction/development biz for about 5 years now.

We ran into some problems a year ago after living rather austerely to grow the biz. We had a contract fall through, and that pretty much did us in after holding onto 5 employees in order to get said contract.

We had a total of about $77K in CC's, some in the biz name, most in personal, but all personally guaranteed anyway. (Now about $80k w/ all the junk fees, etc)

We haven't made any payments in about 12 months.

Some of the accounts do not appear on my husband's credit report (never did, even when they were paid on time)

We own a few (mortgaged to the hilt right now) investment properties. We also happen to RENT our actual residence. However, when we refied our mortgages and placed properties in trust in 2002, the new bank never reported the mortgages on his CR. So, it looks like we have no assets (besides our 1986 car & 1991 work van, worth about $1500 total & paid for). CA's believe it when I tell them I sold house in 2002.

I am working to settle w/ perfect pay ratings right now with lots of success on the $$ amounts, but no success w/ ratings yet. I have lightly threatened to go BK to the CA's.

We are both self-employed. (w/ 1099's) We are getting some money this week that we can use to pay off (settled) debts in lump sums.

My questions are:

1-Should I bother for perfect pays from the non-reporting CC's (or CA's)? Can they come back later (after payment) and add it to CR?

2-Is it wise to threaten BK when, of course, I would never do it?

3-We have 4 cards that have since become Chase cards due to mergers. Chase has also bought the bank where we have our checking account. Do they look at our banking activity? They may be able to see our rent deposits and mortgage pmts. :oops:

Thank you in advance, this forum is wonderful!

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Excuse me for being naive, but what's the point of having investment properties if you're suffering personal economic demise?

It doesn't matter if they're reporting or not - a simple asset search will provide any OC or CA with any information they need, so threatening BK is pretty much moot.

Further, if you haven't made any payments in 12 months, the accounts are already charged off. And being they're Chase, I'm surprised they haven't served you with papers by now. Something in your question isn't clicking the way it's supposed to.

But, to answer your question, yes - you should always negotiate a pay for delete, and get this agreement in writing before sending any funds.

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Excuse me for being naive, but what's the point of having investment properties if you're suffering personal economic demise?

We have one of the properties (a vacant, single family house that we rehabbed) up for sale.

One other property is a small apt. bldg. that has a nice cash flow. Right now, it generates $$ for the payments on the first (non-producing, vacant) house and it's own payments.

Thus, selling the former will eliminate those payments. We don't want to sell then apt. bldg. b/c then it will cash flow nicely. The third one is a project under construction (vacant-no $$ coming in) that will get us out of this mess (and out of construction and into a less volatile biz- a coffee shop)

There is a method to my madness. They cannot see any of these because they are not in our names but in trust. The third one is in trust, then owned by a company, of which we own part. All are mortgaged 100% anyway.

Trust me, after this, I will never use CC's to finance a business. We had almost 10 years of PERFECT credit history. Some of these cards are 7-8 years old.

We thought we were doing the right thing to pay the employees before ourselves. We had a big contract in the pipeline. They kept promising..."After Feb 1st...then "after Valentines Day," then "March 1st" and we kept paying those 5-6 guys...

A mistake in retrospect, but they have families. I didn't want to just drop them and expect them to come back in one month.

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That makes more sense now.

You can request a pay for delete, but don't expect it to happen. In my opinion, protecting these assets from leins (since they are the source of your financial picture) is key, so paying off the charged-off accounts before it goes to judgment status should be priority.

After this hurdle is cleared, you can then work on improving your personal credit profiles.

Have you looked into incorporating to ease the personal liabilities? There are others who are far more versed in that area than I that may be able to help you make sure this kind of event doesn't happen again.

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In the book I read "how to be invisible" it mentioned owning RE in a trust/Corp as a better form of asset protection. An asset search with a SSN *shouldn't* turn up the properties, especially if they aren't reporting to the credit reports.

Further, even if they do, they are protected under the corp name (please tell me you did a LLC and not a more complicated C corp)

What sort of trust did you from, btw? Revocable? Was it expensive?

I would not want to have a creditor the same company as my bank. Granted, they probably don't readily see the accounts there, but could easily do an internal SSN search to find them.

Some have said a small bank in a far away state is best, although a skip trace would likely find that.

I would definately put the other properties in a trust+LLC combo ASAP.

I would offer pay for deletes only. A paid collection is almost as bad as a collection.

I am fairly savvy on the business credit side of the house. Have you registered with DnB? Are any of the cards reporting there?

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:wink: Thanks for the replies...

Trust cost a few hundred bucks: BTW don't have your bank (or mortgage holder) do it. I did, but don't recommend it. Northstar Trust Co. is used by people in-the-know. I'll use it next time.

From now on I always use an LLC. The last bldg. is owned by the trust, whose beneficial interest is the LLC. We own part of the LLC.

Our construction co. is (or was?) an S-Corp. But since we personally guaranteed the debts, it means they'll come after us eventually, so we are just going into in headfirst. Unfortunately, the house and apt. bldg. are just in trust, not also the additional layer of an LLC.

Does anybody know if it is difficult to get Chase to agree to a perfect pay?

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It's next to impossible to get anyone to agree to go from a charge off to paid as agreed... especially Chase.

This doesn't mean you should never try though. Make sure you get your requests to somebody at the executive level. General Correspondence and 1-800 Phone Reps are not capable or authorized to enter into such an agreement.

You should also check to make sure Chase still in fact owns these accounts. Once it is charged off, it's often sold.

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Companies are SOOOOO Stupid about changing the status of a charged off account.

Hmm, let's see...I could take a reasonable offer of some hundreds or even thousands to shuffle some paperwork...I could turn all these near worthless accounts into actual money...far better than any collection agency could...Naaah, screw it, let's just leave them as bad debts.

I just don't get it. I tried to negotiate some stuff with my mortgage co, but then again they are the worst of the worst servicers.

They would rather a loan go into foreclosure and eat a 10-20% loss, than shuffle some paperwork.

One guy even tried to suggest it was fraud of some sort to change a credit report. "Well, it says the fair credit reporting act, so that means the info we have to report is true"

Hey, seems to me if they feel the debt is satisfied, then it is satisfied.

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That's because businesses are there to protect businesses. We are here only to feed the corporate machine.

A charge off is a company's "warning" to other lenders. Has nothing to do with your relationship with them, since reporting to the CRA's is voluntary....

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I suppose, but still I wouldn't eat a loss to save my future business opponent.

I think the thing is that we have to pay higher fees and such for the next 7 years.

As far as trusts go, there is this debate over putting a Texas homestead in a trust. Some lawyers say that a Tx homestead may lose the all important creditor protection, which is apparently rock solid against attachments and forced sales from a creditor.

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Exactly... "we".... "we" don't count.

Actually, I heard the opposite about most lenders - they aren't in the real estate business and use foreclosure as a last resort. This does not include all those great predatory companies out there that help comprise "our economy".

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Doc,

I'd be inclined to agree about MOST companies, but my loans are being serviced by Litton and EMC mortgage, the toxic waste dumps of the industry. Did you know at EMC mortgage to be a call center supervisor it only takes a high school diploma? Check out msfraud.org if you ever get bored.

Litton especially is so stupid, it is almost funny. From what I garner, they stand to lose about 100k, but are giving me the circle jerk, run around because my loan isn't in foreclosure with them yet.

At the end of the day, though it isn't their money. They are just servicing the loans.

I do have JP Morgan on the horn and I am going to make sure they know they are going to get screwed because their servicer won't play ball with me.

You shoulda heard the surprise at Wells fargo when I called their mortgage backed securities area, heh. Ok back on topic now. :)

Is this the trust company, btw? http://www.northstartrust.com/perstrust.asp?serv_id=personal_trust

I had an offer from a lawyer to do me a favor and form a trust for 2500, and I have legal zoom, which might cost 200.

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