Settlement or Bankruptcy?? In a bad spot.

[lobo2005]

Due to unforeseen circumstances:

Our child was diagnosed with a crippling disability in 2006 and the meltdown of the economy have placed me in a position that I have never been in before.

I currently have the following debts:

Chase Business Card (with my personal guarantee): $13,500

Chase Personal Card (now w/Valentine & Kebartsen): $12,000

Wells Fargo Credit Card( now with CA): $9,500

BoA Credit Card (90 days past due): $25,000

BoA LOC (90 days past due): $10,000

Chase Bus. LOC/SBA Guar. (w/ my personal guar.) $65,000

Total Debt outside of mortgage: $135,000

The business line of credit still has $10K remaining that I am still drawing upon in an effort to save my business and my life. I am working day and night to save the business but acquiring new customers is close to impossible.

I was lucky to pick up a job during the last half of 2008 but was laid off in October of 2008, all this while still working the business. Although chase offered me a settlement of 40% on the dollar for the credit cards and BoA offered 25% on the dollar for their debt, I find myself with no cash to pay these settlements. I have not yet defaulted on the Chase/SBA line but if something doesn't change fast I will soon.

The amounts on the CC's are large and I am sure they will prompt a lawsuit. I am concerned as to what will happen next even if I go thru DV.

My family is currently living from my unemployment from my job and my wife's unemployment. Her name is not on any of the debts, not even the home mortgage. My credit score has dropped from 780 at the end of 2005 to a current score of 563.

My question is: Do I file for BK before the collection judgements begin or is it realistic that I can keep delaying lawsuits for another year until things get better and I am in a position to settle?

All answers are greatly appreciated, thank you.

[willingtocope]

Even if you're able to settle the $135k for 25% (unlikely) you're still going to have to come up with almost $30,000. Most of the "settlements" won't allow you to make payments...they're going to want a chunk up front. Under the circumstances, you might qualify for the IRS's "insolvency" criteria so you won't have to pay taxes on the difference...but...that's not a forgone conclusion.

Even if you (and your wife) happen to land great paying job tommorrow, these debts aren't going to get paid.

I'd suggest you go talk with a couple of BK lawyers now. Find one you can work with. With no money coming in but unemployment, you reallly don't have many options. If you put it off, and the creditors do get judgments, those will be wiped out by the BK...but, they'll still be on the court records.