Settle with CA? Go to Court? Declare Bankruptcy?

Recommended Posts

I Live in New Mexico, and have recieved a legal summons from district court on behalf of a local attorney suing for CA(Midland Credit Management out of Denver) on charge off for Sears. I have until June 7th to reply to District Court, but CA would let me settle for less if paid by end of month, possibly split in into two for a little more giving me til end of June.

Would it be a smarter move to bust my hump to borrow money from my father and go ahead and negotiate with CA (they are offering me %2995 for $5400 CC debt if paid by end of May), or respond to summons from district court and follow that route?

History to consider:

Starting in July 2003 after my job loss, my husband and I negotiated with several of our creditors/CA's with charge-offs to pay in full for reduced amounts. However, we kept a few others all but one in my name, (he is Fed Employee, we were worried about security clearance,etc.) but I could not keep up with payments so about one year later they also went into charge off and have been sent to various CA's.

I never DV'd or responded to them, and they often passed from CA to CA for same accounts with differing amounts due. I paid a law firm for OC who filed in our district court to settle it on my husband's credit report one last year (again, to keep it from escalating and affecting my husband's security clearance).

I still have three charge off's (owe on paper @ $15000 on original debts of around $9000) including: this one, one who offered me a credit card to settle the debt (which I just accepted) and one that keeps sending me letters that I am charged off, but then sends me a bill to catch up. We are current (lots of lates, however) on all mortgages, secured loans, and on some other stuff that we owe our credit union (they freeze our checking if we get behind!!!) Otherwise, my husband's individual and our joint credit problems have been settled or paid.

Other Conditions:

-this CC debt is in my name only, not my husband's (although NM is --community property state)

-Husband is sole wage earner in our family of six, 72K/yr, we have LOTS of living expenses esp food and utilities

-SOL in NM is four years, this one will run out spring-summer 2008

-I am a full-time nursing student-dont expect to work for about 2 years

-Credit ratings range from 535-633 for either of us

My dad wants me to just declare bankruptcy, or let them take me to court which scares the hell out of me.

At this stage, would bankruptcy do much good (in terms of improving our credit reports, etc.) after all the history over the past 4 years? We have also been told that, now, in terms of security clearances, they just want to know you are doing something to make good on debts--just no outstanding collections, etc but garnishments are still bad. The sad thing is, we are still paying our VA mortgage and the house is worth 70K more than is due on it, but I can't imagine anyone will give us a cash-out loan we could afford to take care of any of these debts.

We just want to get through this the best we can, and maybe someday be able to move and buy a new house, or a car etc.


Link to post
Share on other sites

Wow...admirable that you've been trying to dig your way out of this, but, I think the numbers are stacked against you. You don't really say how much total debt you have outstanding, but with a family of 6, $72k probably doesn't leave too much left over.

Like your dad, I guess I'd suggest you at least talk with a couple BK lawyers just to see what your options are. With income, you're probably going to get stuck with a BK 13, which means you'll have to pay off most of your debts, but at least you'll have the courts to protect. There might also be a problem with the equity in your house...but again, talk that over with the lawyers.

I wouldn't suggest you just keep throwing more money you don't have at the paying off some of the debt chasers, you've just made the others want their pound of flesh.

Link to post
Share on other sites

Thanks, willingtocope. I really appreciate your taking the time to read my ridiculously long post on a holiday weekend! I am taking your comments into serious consideration.

And you're right, our income almost NEVER pays all the bills on time, and gets the grocieries, clothes, shoes and other stuff bought--we ALWAYS rob Peter to pay Paul, hence the continuing struggle to pay mortgages, etc on time that keeps knocking the crap out of our credit rating. Just the other day my husband's experian "FAKO" dropped from 633 to 574 and the only changes I saw were his application for a $500 overdraft line of credit on our checking, and one 30 day late payment on our mortgage (which we are protesting because it was paid before the date they say it was). It takes NOTHING to destroy months of successes.

In your opinion, how long does it take to crawl out of bad credit ratings after a bankruptcy? Is it shorter to just run out the 7 years or so (which I think would be 2010 and 2011 now) these things stay on our credit report and try to find ways of settling the remaining debts, or would it be quicker to file CH 13?

Thanks again for any advice.

Link to post
Share on other sites

I filed BK7 that was discharged in June 2005. I have had no credit and no bank accounts (I had several bad checks that were included in that BK) until early this year. I want to stress that I didn't TRY to get credit anywhere either, so I don't know what I could have done.

After finding this place in April of this year, my FICO (real) scores are now







When the new credit cards start reporting I think the scores will go up. I would be in a much better position if I had immediately done the Crown Jeweler account and a secured card (none of the ones I have are) earlier - like right after filing.

I filed before the change in laws so not sure how it will affect you in Chapter 13, but there is light at the end of the tunnel. I cannot tell you what a relief it was to know that I wasn't going to lose everything and have wage garnishments. I do have a judgement that occured 5 days before I filed my BK (it was included) that I am working on having vacated - just disputed today - and that seems to hurt me more than the BK does, so I would hesitate to start racking up judgements that you can't get out of.

BK is a highly personal decision - especially now with the change in laws. The bottom line is you need to do what will protect your family. I had my wages garnished with 4 kids and a sick husband - if I had declared BK then, I wouldn't have had to beg, borrow and damn near steal to make it through that time. But I was too proud to admit that I just couldn't keep up anymore. Finally when I was in default on everything - including losing my home (we rented) - I filed. I strongly encourage you to talk it over with someone you trust and see an attorney to at least find out what your options are. You do not want judgements that they can garnish your DH's wages for or clear out your bank account when you least expect it.

Link to post
Share on other sites
In your opinion, how long does it take to crawl out of bad credit ratings after a bankruptcy? Is it shorter to just run out the 7 years or so (which I think would be 2010 and 2011 now) these things stay on our credit report and try to find ways of settling the remaining debts, or would it be quicker to file CH 13?

First...I second what Macwench said.

My opinion is based on filing BK 7 in March 2004...before the laws changed. Our credit ratings are just now beginning to improve...slightly...but, I haven't really done anything to try to hurry that along. Except for an apartment, a car, and a single credit card, we haven't had any need for new credit.

A BK (technically) stays on your credit reports for 10 years. There are people on the board here that claim to have gotten it removed after a couple of years. On the other hand, non-bk "settlements" are supposed to stay for 7 years after the DOFD...the problem is that unless you get the settlement offer in writing and are very careful to word it correctly, CC's have been known to sell the balance to JDB's who, although they shouldn't report past the 7 year limit, can still try to collect.

The point is...with a need to think in terms of putting a halt to your use of credit...period...with the exception of a house and car. On the other hand, use of credit after "settlements" is almost as difficult...

Link to post
Share on other sites
This topic is now closed to further replies.