BK or try to settle?

[tinat]

We have met with a lawyer and our only BK option is to file chpt 13. It has been really hard for me. We were current on all of our payments when we met with him but dying making them every month. He told us to quit making our payments for 3 months then he would file and get us into the 50% plan. I believe he is a very good BK attorney.

We did as he said and the creditors starting calling. I sent the little coupons out that said to contact .... (attorney). Now that I am completing the paperwork to go in and file, I am really doubting if it is the right thing to do. I was going to look into debt settlement today and found this site. Now I am wondering if I can settle most myself. I won't get into the circumstances of how we got into this situation, but I have never before been late on one payment (ever) until our attorney told us to stop making payments. However, I am not sure how long we could have kept "hanging on." If we are going to go into a 50% payment plan monitored by the courts it seems that it might be better to just try to resolve this ourself. Our credit is already ruined, for the first time ever in our 17 years of marriage. Would it be easier to repair with a Chpt 3 BK or with settling. If they won't settle, what are our options without BK. It is not an option to pay any of the creditors off - we need a negotiated payment plan if that is what we do.

We would file for repayment of our unsecured debt only, however, that is pushing $100k. If it matters, I live in Colorado.

Any advice from people who have been on either side of the fence would be greatly appreciated. I don't like this situation, but it is where we are so I just want to make an educated decision and feel like I have asked the right questions to make the best decision.

Thank you.

[rella5]

There is no easy answer for you. If you have assets to protect, no funds available to negotiate settlements with and don't have the fortitude to deal with creditors then BK may be right for you. My DH and I just dismissed a CH 13 because our circumstances improved, we no longer needed to protect assets and I now feel ready to negotiate with creditors. All we have left now are credit cards, approx 60k. My DH is self-employed and wants to have the freedom to explore new business opportunities without dealing with the trustee over every financial move. We will soon have some money to negotiate settlements.

This may sound strange but I think one of the main factors in your decision should be the state of your marriage (or domestic relationship if you will). My DH and I have made a pact that we will not let money destroy us, we are the "islands in the stream" and it is important that you are pulling together and not in different directions. Whatever you choose, be sure you can both live with it so there is no blame later on. Really sit down and talk about how you each feel about the emotional or mental impact you think a BK may have .You should do a lot of research and ask your atty a lot of questions. Be aware that the BK trustee has a lot of control over your financial life for the duration.

In addition, you need to be certain that you will be able to make the monthly payments to the trustee; that your jobs and paychecks are stable enough . Someone on this board once said that she was amazed that folks could sign a 5 year auto loan but had a hard time with a 5 yr BK plan. There is some wisdom there; that is a very good way to approach it.

For a lot of folks, the BK has been the saving grace that gave them a fresh start. In my personal situation, I wish that I had tried negotiating with the creditors first and not just jumped into BK. Good Luck whatever you decide!

[tinat]

Rella,

Thanks. We have huge assets to protect and that is why I was thinking that BK might not be an option for us. Am I mixed up on this, maybe? Not just a house... but a ranch that my family loves, which includes all our cattle, stock trailer, 4-wheelers (used on the ranch), etc., then of course our vehicles (all but one are paid for), a boat ... This is why I was thinking maybe we should settle. Also, it might sound odd, but we live in a very small town & I am worried about the impact on my boys at school and also my husband's job. He works locally as a teacher/coach. I know I have to just worry about what is best for us at this point...but there is no way I can't think about this. I think it might even be published in the local paper. I see BKs in there all the time and wonder if they have to be posted by law in the county where the person filing lives.

I am self-employed, like your DH, and up until last year my income was great. Then the housing market tanked in CO and we were not prepared for that like we should have been. My income is very volatile right now - some months great and some not. This month will be a good month ... next month, who knows. This also concerns me because it is my understanding that my payments to the courts could be near $2000 per month.

If we could file Chpt 7 and be rid of the unsecured debt for a true new 'fresh start' I might feel different ... but since we are still going to have to make payments to the court that is why I started thinking I should explore my options.

My marriage is fine ... very 'normal' as I would look at it. Not great, but I am not "on the way out" either. We have been married 17 years and have 2 kids, 15 and 12. The decision to file the BK has been hard on me emotionally ... remember I have never made one late payment ever and I also take care of all of our finances. I have ALWAYS protected our credit. He doesn't say much. However, it has to be hard on him, too. We are not so great at communication.

Where are you at in the process now and what would you do differently? Maybe this information helps you see a bit more into my world for a few more thoughts.

Thank you.

[rella5]

I am not the all around BK expert here and the new BK rules are a little tricky. So, having said that, I believe that having all those assets to protect would be a good reason to file a CH 13, but I'm not sure about that 50% plan. A CH 13 will "stay" the creditors from coming after you and give you the breathing room you may need. If you are "drowning" in the debt and having unbearable anxiety then the BK may be the right thing to do. Just remember you will have to list all those assets, income etc. in your filing. If you have any funds or liquid assets to work with AND you have the "fight " in you, then settlements may be worth a try. A lot of your decision will depend on that. Also, I understand that most creditors won't even consider settlement unless you are delinquent at least 3 months. Search the debt settlement forum here, it may help you in your decision process.

Our monthly pmnt was $2100. My Dh's business is construction/housing related so that was our problem too. Some months it was hard to make that pmnt and the mtg. and utilites too. Also, in our case, the trustee was supposed to approve any transaction over $500.00, which made it difficult for him with business equipment.

The turning point for us is that we have a modest inheritance on the horizon which will allow us to negotiate some settlements and after crunching the numbers I figured that I could probably take half of the pmnt I would have made to the trustee and make pmnts to some credtors too. I think it probably won't be any longer or more money than paying out the trustee. Now, some folks will say that a dismissed BK is worse than a fully discharged one on your credit rating, but really that is not an issue for us now. We already have a house, good cars that are paid for etc.

We were in the BK for 2 yrs (just recently dismissed it voluntarily)and paid approx 45k to the trustee. We have another 40k in claims, add interest etc that they may add on and I think about 60k. I can set aside 30k to try to settle some outright and will have a little more to work out pmnt plans if necessary. I know very well that I have a long hard road ahead but I am ready. If I had to do it all over again I would have tried to settle with as many as I could and save the BK for the last resort. But that is just my personality, I have a lot of grit and outlaw in me!

Obviously there is no right answer, only what is right for you. I get the feeling that you really don't want to file. Only you know if you really don't have a choice. Hopefully you and DH can sit down and seriously communicate about this. It may be less painful for you to refi or sell an asset or 2 than to have the "stigma" of BK. I wish the best for you. You are welcome to PM me if you like.

[Worried]

If you don't mind I am going chime in..We just filed BK 13 last week. I am feeling really bad about it. But, let me start from the begining. Last June I joined a DS Co. and was very mislead and lied to. Before joining them I had never been late on anything...The rule is with these kind of companies you need to stop all payments to your creditors. We did, by September we had 2 judgements against us...everything was spinning out of control, the harassing phone calls, etc.

I canceled in December with them and thought we can do this, we can settle on our own. But, the question was how?? Now, by then we are having to make enormous payments to the law firm that had our judgements otherwise they would have tried to garnish our wages...not a good thing for my husband and his job.

To make this story short we are in the same boat as you...it being published in the local paper. We were not going to file because of this reason. But, it was our only choice. The CA starting calling us at work, I was stressng like you would not believe. It has not hit the paper as of yet...we worry though about my husband's job. This was our only option though. I am happy with the payments..I think we are actually going to be able to live for the first time in a long time.

Good luck to you and trust me I know how you feel...but, with us it was our only option.

[LadynRed]

If we are going to go into a 50% payment plan monitored by the courts it seems that it might be better to just try to resolve this ourself.

Unfortunately, unless you have the ready cash immediately to negotiate settlements, you'd be better off filing the Ch 13. There is NO guarantee at all that you'd be in a "50% plan", what you pay back in Ch 13 is based on your disposable income and the number of Unsecured creditors that file a proof of claim. With out the POC, those unsecured creditors get NOTHING. So, there's no way to know EXACTLY what amount you'd be paying back or how much because until you start the process, you won't know what creditors will be filing claims to be paid. Many never bother at all and those debts are discharged at the end of your plan. No matter how good he may be, no lawyer can whip out that 50% number w/o going thru the WHOLE process and paperwork of your income, assets, expenses, etc., it's just too general. It could be far, far less that you pay back.

You cannot exclude ANY debts, EVERYTHING goes into bankruptcy. SEcured debts, like a mortgage and car payment, get paid back at 100%, so your payments on those things would not change, but you can't leave them out of the bankruptcy.

With settlements and major assets to protect, you run the serious risk of a 'blood in the water' situation - where you settle with one creditor and the other(s) see that there's money to be had and they redouble their efforts to collect from you. You could be sued and wind up with multiple judgments against you trying to settle yourself. A Ch 13 would protect you from ALL collection actions and creditors would have to take what they get, they cannot ever demand more.

Your husband's employer would have no reason to know that you've filed for bankruptcy and they certainly can NOT discriminate against you for filing either. I'd make a bet more of your neighbors have filed bankruptcy than you would believe. Kids don't understand bankruptcy, it should have no impact on them whatsoever. Not all newspapers bother to publish bankruptcy filings these days, but it's definitely NOT the public shame it once was even if it was published.

Recovering from a bankruptcy is actually EASIER than trying to recover from other bad debts or settlements.

CH 13 is not easy, but it is far better to go thru the BK courts and have that protection than to live with the stress of circling creditors who would be looking to sue you and spending years and years deflecting and/or dealing with lawsuits. Once a judgment lien is attached to your home, it's there until the property is put up for sale, probably something you don't want.

[LadynRed]

You might want to read this bankruptcy attorney's perspective on bankruptcy vs. settlements.

http://mcleodlawoffices.com/2007/06/debt_settlement.html

[tinat]

Thanks everyone for your kind words and support ... and sharing. You are right - there is no easy answer and I am done beating myself up over the situation. When we met with the BK Attorney, I sat and cried. It was terrible for me. I know this probably does not make a lot of sense, but I am most worried about all the people finding out because we are "leaders" in our community - a very very small community.

Please clarify for me if you can - If we file "everything" goes into BK; however, we would keep everything "out" of the BK meaning we are only claiming our unsecured debt (that is our plan with our attorney) for repayment. We have way too many assets to file Chpt 7. Rella - how do you dismiss a Ch 13 when you still have $60k in credit card debt?

Also, as for the monthly payments, once we reach that point ... you say to be sure we can make those. Without knowing the monthly amount it is hard to say for sure. What happens if one month we can only make a partial payment?

I don't feel BK will give us a fresh start because with filing Ch 13 we still have the debt - or at least a lot of it - hanging over us. Am I missing something on this, too?

As for my "unbearable anxiety", I feel it is coming from filing BK ... again, because of the small town thing. I am sorry to keep bringing that up ... I know it is going in our local paper that EVERYONE reads. It shouldn't matter, but it does. Worried ... you feel the BK is your only option. Did you consider trying settlement on your own first? I keep reading such conflicting information ... even here on these boards. Some say try it first, others say don't bother - especially if you can't "settle" in a lump sum. Is there a way to "settle" on a payment plan? I would have to negotiate with about 12 creditors or so. Do you know how long it takes to hit the local paper since you haven't seen it in yours yet? How do I find out if it would for sure go into the paper - how do you know for sure?

As for knowing we will go into the 50% plan, we do know that because we have given our attorney all of our assets, etc. and he told us that is what we would qualify for. We have already met with him extensively. Our attorney told us that the plan you file for is based on your assets, including disposable income - not how much debt you are "writing off." What is POC? I am understanding that we cannot exclude any debts ... however, it is my understanding that the debts we choose to keep will not be put into the plan and those accounts will not be affected. Do I have this right? It is also my understanding that we can protect our assets ... they cannot be repossessed in Chpt 13 ... is this also correct?

I understand that my husband's employer cannot discriminate with us filing ... but that is not the point. Anyone who has ever been ingrained in a small town understands my huge concern with this. If we lived a in a city where you barely know your next door neighbor and the paper is read by 10's of 1000's of people it would be different ... instead of being read by several hundred where people's birthdays are published and everyone knows that person, etc. Also, along these same lines, I am understanding that "everything" is filed in BK ... several of our loans are with creditors we know on a personal level ... our cattle for example. We won't put them into the 50% plan ... we will just keep making those payments. However, they will be contacted and know that we filed, right? I am sure that is what our attorney told us. He wanted us to put those into the plan and we said absolutely not. Just another complication we are dealing with - these people we know that will recieve notice. I wish we could settle ... now I am getting scared to try that ....

Lastly, if we make small payments can we put this off to see if we can somehow dig out of the hole over several years? Can they sue us if we are making payments? Our credit is already ruined .... it happened so fast. Just a few months ago I was in the low 700's ... can't even look now. But I keep hearing about lawsuits and all and that is worrying me. I am so new to this ... I never saw myself here but that doesn't matter now ... I have to deal with it. I have a friend who filed 3 years ago and had Veracity work on her credit for her and as of last week her BK does not even show on any of her 3 credit reports. She told me that 2 of the agencies didn't show the BK quite some time ago ... but the 3rd agency fought tooth and nail to keep it on there ... but they finally removed it for her. I thought it was amazing.

Thanks for the replies ... maybe you can help with even a bit more clarification. I think I am really confused now.

[rella5]

I understand your confusion and it does seem like there is a lot of conflicting information. I will try to go point by point.

You cannot pick and choose what you file on. You are required to list and reveal all assets and debts. You can't omit the people you owe for the cattle just because you know them personally. Even if you had a loan from your mother you are supposed to list it. Some secured debt, like your mortgage, would still be paid outside the bk, i.e. by you, and not by the trustee but it would still be listed in the bk so that the mtg co would not be able to foreclose w/out going thru the court if you defaulted on pmnt.

Anyone can voluntarily dismiss a CH13 at any time, which everyone will tell you is a bad thing to do because now we no longer have the protection. But we decided it was best for us. We did it with eyes wide open AND the liquid assets to pay off that 60k if necessary. We could just as easily hand our $ over to the trustee and let him pay it out or do it ourselves. BTW, we are NOT even considering a debt settlement or credit repair co.

You indicated in an earlier post that the atty told you your pmnts may be around $2,000. We filed on 100k of unsecured debt for 5yrs and our pmnts were $2100 . Statistics show that some large % (like 80%) I think , of CH13's never go to completion mostly because people can't or don't make the monthly pmnts to the trustee. The trustee does not take partial pmnts. You can be dismissed from the plan for defaulting on those pmnts.

Only a CH7 "wipes out" your debt. A CH13 is basically a payment plan with the added protection of the federal court system. BTW, the trustee makes a percentage on your payment. Ours got 10% of everything we paid.

I really don't know anything about the 50% plan and if that allows you to exclude some of your debt or not. I have not heard of that. It has been my understanding that you have to include ALL creditors and all debt. Then when they are notified that you are filing, they submit a POC (proof of claim) which is simply them telling the court what you owe them and what they want to be paid for. Sometimes creditors don't even bother to file a POC.

I can certainly understand the anxiety this is causing for you. The small town thing is making this even tougher. What does DH think? You know, if you don't have the ability to work with the creditors either financially or mentally then your neighbors are going to know it when you start selling off assets or getting things repossessed. You have to decide which is worse, the bk or the sherriff coming to sell off your property down the road because you couldn't make pmnts to your creditors and they finally sue you. You have to know that is a possibility. Only you know how bad your situation is.

I am not trying to give you legal or any other kind of advice, I am just trying to be a bit of a sounding board. I think you need another session with your atty even if you have to pay extra for it. I take it from your post that you have not contacted the creditors at all, just stopped paying based on your attys instruction. My atty is one of the best in my area and he wasn't sure we should file bk but we insisted. When we wanted to dismiss he didn't argue because he knows us both financially and personally and he agreed that our decision was ok for us. You need to trust and listen to your atty, provided you have told him everything, even your fears and anxiety.

[LadynRed]

First of all, being upset is pretty normal. NONE of us who have filed WANTED to go there, it's NOT fun and it definitely is EMOTIONAL !!

If we file "everything" goes into BK; however, we would keep everything "out" of the BK meaning we are only claiming our unsecured debt (that is our plan with our attorney) for repayment.

You cannot do that, ALL debts, secured and unsecured MUST be included in the bankruptcy. You cannot claim JUST your unsecured debts, it doesnt' work that way. Your secured debts get paid back at 100%, meaning your current house and car payments get paid the same as they do today. Some people arrange to pay their secured creditors 'outside' the plan, but all that means is that YOU pay those creditors directly rather than the payments going to the Trustee first.

Rella - how do you dismiss a Ch 13 when you still have $60k in credit card debt?

There is no requirement to pay off creditors to DISMISS a bankruptcy. All a dismissal does is put you back to square one as if you'd never filed for bankruptcy and you're back on the firing line with creditors.

Also, as for the monthly payments, once we reach that point ... you say to be sure we can make those. Without knowing the monthly amount it is hard to say for sure. What happens if one month we can only make a partial payment?

If you do not keep up your payments to the Trustee, you risk having your case dismissed for non-payment, or insufficient payment. Your lawyer can tell you how tolerant your local Trustees are on missed payments. If you miss one or can only make a partial, you WILL have to make up the difference with the next payment.

I don't feel BK will give us a fresh start because with filing Ch 13 we still have the debt - or at least a lot of it - hanging over us. Am I missing something on this, too?

What you don't know yet is which creditors will file a proof of claim to get paid. Those that don't file the proof of claim don't get paid - period. So it's very likely that you will be relieved of a good part of your unsecured debt. Ch 13, for those above the median income, is meant for paying back some portion of your debts while providing you with protection from your creditors. Ch 13 isn't as 'fresh' as a Ch 7, but few people have to pay back ALL of their unsecured debts.

Is there a way to "settle" on a payment plan?

Maybe, but most creditors, when they hear 'settlement' will insist on a lump sum payment. If they wanted to wait years, they'd just keep taking your regular payments. When you really think about it, Ch 13 IS a settlement with a payment plan, one the creditor cannot renege on !

How do I find out if it would for sure go into the paper - how do you know for sure?

Check your local paper. Not all papers still list bankruptcies. You can always call the paper.. call from a pay phone . Another possibility would be to get a PO box in another nearby town and use that address as your filing address, THAT address would go in the papers. I would suggest you ask your lawyer about that though, not all courts will allow it.

What is POC?

Proof of Claim. In order for unsecured creditors to get ANY money in a Ch 13, they must file a Proof of Claim. If they fail to file a Claim, they get NOTHING and that debt gets discharged. I still don't see how your lawyer can say '50% plan' at this stage since there's no way to know which creditors will file Claims.

it is my understanding that the debts we choose to keep will not be put into the plan and those accounts will not be affected. Do I have this right?

Not exactly. As I explained above, your lawyer may be referring to paying secured creditors 'outside' the plan and not have payments go to the Trustee first. That does not EXCLUDE them from anything.

It is also my understanding that we can protect our assets ... they cannot be repossessed in Chpt 13 ... is this also correct?

Ch 13 is used primarly to PROTECT assests, that's how it works. A creditor can do NOTHING to repo property while you are in bankruptcy UNLESS they file for a 'relief from stay' and if they're getting paid it's unlikely the court will grant such a motion. This is the protection of the BK court that you will NOT get by trying to settle things yourself.

We won't put them into the 50% plan ... we will just keep making those payments. However, they will be contacted and know that we filed, right?

Is this creditor a SECURED creditor ? If not, you cannot exclude them from the plan, that is the law. Yes, all creditors are notified so that they may file a Proof of Claim and be notified of all the proceedings.

if we make small payments can we put this off to see if we can somehow dig out of the hole over several years?

Let me be blunt.. you will waste your efforts and cause yourself undue stress for a longer period of time. Everyone I know who has filed for BK, including myself, put it off for far too long thinking that we could 'dig out' as you suggest. The fact is, you're already on a slippery slope and the mud ain't drying up any time soon unless you win the lottery.

Can they sue us if we are making payments?

Oh, they surely can. If you're not making payments exactly per your agreements, they can and they will sue you.

I understand the stress and the anxiety, any of us who have been there know exactly how you feel. I understand the small town thing too, I'm from a small town. However, as I said before, I'd be willing to bet more of your neighbors have filed bankruptcy than you might imagine. There are plenty of people who have the attitude that 'it'll never happen to me' and 'you should be ashamed' but they have not yet faced the debt monster, loss of a job, loss of a spouse, divorce, or catastrophic illness. Farming these days is even tougher than ever financially. Bankruptcy gives you the breathing room and the chance to get your financial house back in order, and Ch 13 has you paying back your creditors. Forgiveness of debts is even mentioned in the Bible, so it's hardly something anyone should be judgmental about !

[eyeball]

I have to agree with some of the other posts, I am getting ready to file a 7 or 13,because my business failed. I have tried to slowly pay off everyone but the creditors make it impossable, calling all the time, judgements, etc. The system makes it impossable to repay, they all want lump sums. I know BK is bad but staying up and worrying ti worse.

[eyeball]

I myself am in the same situation, I feel depressed about going 13, but I had to close my business. I TRIED to settle with people but I settled one and the other one put a judgment on me . I allready have two judgments on me and its expensive to hire attorneys to defend you.The calls are harrasing and I can't sleep at night. I decided to file because there is no way out. Debt settelement is ok but not for those of us that are deep in it. Its not like iut used to be where you could"work things out" with the creditors. The judgments just doesn't stay on your record, these attorneys are "enforcing the judgments", making me go to depos. I can'y wait to get this over I am sorry I every applied for credit, its made my life and my familys ife miserable.Eyeball]