Settle Or Bankruptcy?

[to4raiden]

23yrs old
Single
Own a 5k car
Don't rent or own a house( Would like to buy on in about a year)
Income 5k/mo average

550 Credit Score

3 Credit cards

1. Capital One - $500. I always make payment but always a high balance.

2. Discover - $1250.  I always make payment but always a high balance.

3.Citi

$23k owed. Stopped making payments about 2yrs ago.
Have been making $25/mo payments to the debt collector for about a year now to keep them off my back. Last time I talked to them there offer was $8k to settle.

QUESTION:

I have 10k saved up. Should I pay them all off or should I file Bankruptcy?

Side question since if I pay it I'll owe taxes on the unpaid amount how much do you think I"ll have to pay? I'll make about 45k this year, am single & don't own a house.

 

[racecar]

You could talk to a tax person about being insolvent.

[ArtVandelay]

Even if you qualify I wouldn't file BK over this. At your age you have a lot of life to live and getting your credit straight now will definitely give you a brighter future. BK is something I would save in case you have some serious problems in the future.

 

I would pay off Discover and Cap One. No reason to completely wreck your credit over those small amounts. This is all assuming you are dealing with the banks directly and not collection agencies. 

 

Then see if you can negotiate a lower pay off with Citi. Since the offer is 25% it sounds like they are scared they will not get anything. Its amazing they let someone so young have that kind of credit limit. Not sure if they would offer a pay for delete, but this would also be something to shoot for. Once again just make sure you are still dealing with Citi. If its a JDB then you have other options. By making small payments all you are doing is extending the SOL. This is the worst thing you can do.

 

Just make sure any agreements you sign are reviewed by a licensed professional. Don't let them take some money and then sue you or sell the remaining balances. As Racecar stated you should also ask a tax professional about being insolvent. If you qualify then you shouldn't haven't to pay taxes on the remaining balances. 

 

I am all for fighting if you are in a place where you see no other options. I also believe BK is also an option for some, although only as a last resort. It just sounds like your situation is not that bad. You have a decent job and money in the bank. Not to mention you are very young. Most here do not have that many things going for them.

 

 

Make sure and get more opinions before you make a final decision. Do not rush into anything until you are sure you are doing what is best for you.

 

Good Luck!

[to4raiden]

Discover & Capital one are still open & being used & I keep up on all payments.

 

I called citi & "Alliance One" has taken over the debt, citi has no control over it now.

 

Does anyone have a link to a sample letter that I can use for when I settle the debt to make sure it shows paid, is deleted, & to make sure they won't sue me over any remaining amount.

[VADebtor]

If you file BK you won't be able to get an FHA mortgage until 2 years after discharge.

 

You need to discuss insolvency under the tax laws with a tax professional.  Based on your posting you have $15K in assets (10K savings plus car, assuming you own it free and clear), and about 24K in debt.  I think that constitutes insolvency as the IRS defines it.  If so you get the same exclusion from taxes on settlement as if you filed BK.

 

My advice is to pay off your two active cards from savings then don't let any balances carry over.

 

You don't say what state you live in.  You need to research the SOL.  You need to research whether your $25.00 monthly payments kept the SOL alive - since you never cured the default they might not have.  Find your credit card agreement and see what "choice of law" provision applies - Citibank may use South Dakota, Virginia or another state. 

 

As a JDB Alkliance may be beatable if they sue, or they might let the SOL pass.  Or, if they actually pursue aggressively, hire a BK lawyer to negotiate settlement with them.  Basically have that BK lawyer write them stating you have retained him/her to explore BK and are offering $2,000 to settle.   

[ArtVandelay]

Does Alliance One own the debt or are they acting as a CA for Citi?

[to4raiden]

@ ArtVandelay
I called & Citi will not settle for anything other than the full amount through themAlliance One, I have to go through . Alliance One is just a collection agency trying to collect the debt for Citi, Citi still owns it.

 

I'm In California

 

I just paid off Discover & Capital One Today.

 

Called Alliance One and we agreed  on right under $8k to settle the debt. Still havn't made a full decesion or gotten the agreement from them since they want a post dated check or money order info. Best way seems to be money order sent to them with signature etc.

 

I asked about how it would reflect on my credit but they said most likely as "Settled" but that would be up to citi.

 

I don't know what "JDB" or "SOL" is.

 

For the insolvent matter I'd say I would fall under that since after bills, debts, & settlements my bank account would be a few thousands plus my car which I own is only worth $4-5k.

 

[ArtVandelay]

JDB = Junk Debt Buyer and SOL = Statute of Limitations

It sounds like neither of these currently apply to you. 

 

I have no experience settling anything, so you need to get advice from others if you do this.

 

Just make sure everything is in writing and you have a professional review the paper work. 

[to4raiden]

JDB = Junk Debt Buyer and SOL = Statute of Limitations

It sounds like neither of these currently apply to you. 

 

I have no experience settling anything, so you need to get advice from others if you do this.

 

Just make sure everything is in writing and you have a professional review the paper work. 

K. Thank You for all your help.

[TomnTex]

Here is a rough draft of a settlement letter. I would think hard before I tried to settle!!! Especially with a JDB. They lie even when their lips arn't moving and you CAN NOT TRUST them.

 

Settlement letter:

This agreement is made and entered into this _________________ day of _______, 2013 between XXXXXX and any of its heirs, assigns, predecessors, and/or affiliates ("XXXX"), XXXXXXX, any of its heirs, assigns, predecessors, employees and/or affiliates and XXXXXXX with reference to the following:

I. Certain disputes and controversies have arisen between the parties hereto arising out of and related to a XXXXXXX Agreement previously owned by XXXXXXX. and related account with assigned number XXXXXXXX, previously, allegedly, entered into between the parties and later assigned to XXXXXX, which disputes and controversies have resulted in the filing of a lawsuit titled XXXXXXXXX, in which XXXXXXXX filed a counterclaim against XXXXX and certain XXXX Parties with threats to include more XXXXX Parties, with assigned case number XXXXXX now pending in the XXXXX Court, and this mutual release encompasses all claims in the aforementioned actions as well as any and all claims between the parties concerning or related to the subject matter thereto including but not limited to any and all pending counterclaims and any and all counterclaims which may be brought in said action.

II. It is the intention of the above-named parties to finally and forever settle such disputes and controversies as only between them and release each other from, fully and completely, all claims, demands, and causes of action based upon or relating to the facts related to or arising from the transactions involved in the above-referenced litigation.

III. In consideration of the mutual promises, representations, acknowledgments, releases, covenants and commitments set forth hereinbelow, the parties hereby agree as follows:

1. Each party will bear their own court costs.

2. XXXXXX and XXXXX will dismiss all claims in XXXXX with prejudice.

3. XXXX will not issue a Form 1099 regarding the XXXXXXXX Credit Card Agreement with assigned account number XXXXX.

4. Each party, except as to such rights or claims as may be created by this instrument, hereby releases, remises and forever discharges and holds harmless each other party hereto and each of the party’s present and former agents, attorneys, servants, officers, directors, employees, shareholders, principals, predecessors, alter egos, parents, subsidiaries, sureties, heirs, executors, administrators, trustees, successors and assigns, including but not limited to XXXXX and XXXXX, from any and all claims, demands and causes of action heretofore or hereinafter arising out of, connected with or incidental to the dealing between the parties hereto prior to the effective date hereof, including, without limitation on the generality of the foregoing, any and all claims, demands and causes of action reflected in the facts as described in the aforesaid described transactions and lawsuit.

5. The parties agree to refrain from publicly disseminating this agreement, the settlement terms embodied herein, or any other information regarding any dispute arising from or related to the transactions described above.

6. XXXXX will cause its tradeline regarding the XXXX Credit

7. Card Agreement with assigned account number XXXXX to be deleted from XXXXX credit report.

8. Further, XXXX will forever release, remise and forever discharge and hold harmless XXXX., any of its heirs, assigns, predecessors, employees and/or affiliates, including but not limited XXXXX, individually, as well as and all current and former counsel of XXXXXX who have provided services regarding this matter, including but not limited to XXXXXX and any of its heirs, assigns, predecessors, employees, and/or affiliates, including but not limited to XXXXXXXXX from any and all claims, demands and causes of action heretofore or hereinafter arising out of, connected with or incidental to the deal between the parties hereto prior to the effective date hereof, including without limitation on the generality of the foregoing, any and all claims, demands and causes of action reflected in the facts as described in the aforesaid described transactions and lawsuit.

IV. Each of the parties to this Agreement represents and warrants to, and agrees with each other party hereto, as follows:

1. Each party has had to opportunity to receive independent legal advice from attorneys with respect to the advisability of making the settlement provided for herein, and with respect to the advisability of executing this Agreement.

2. No party (nor any officer, agent, partner, employee, representative or attorney of or for any party) has made any statement or representation to any other party regarding any fact relied upon in entering into this Agreement, and each party does not rely upon any statement, representation or promise of any other party in executing this Agreement, or making the settlement provided for herein, except as expressly stated in this Agreement.

3. Each party has not heretofore assigned, transferred, or granted, or purported to assign, transfer or grant, any of the claims, demands and causes of actions disposed of by this Agreement.

4. No threat, promise or representation of any kind has been made by any other party hereto or anyone acting on behalf of any other party hereto, except as is expressly stated in this Agreement.

5. Each person executing this Agreement on behalf of any party is fully competent and authorized to execute this Agreement on behalf of such party.


V. Each party is aware that it may hereafter discover claims or facts in addition to or different from those it now knows or believes to be true with respect to the matters related herein. Nevertheless, it is the intention of the parties to fully, finally and forever settle and release all such matters, and all claims relative thereto, which do not exist, may exist, or heretofore have existed between them. In furtherance of such intentions, the releases given herein shall be and remain in effect as full and complete mutual releases of all such matters notwithstanding the discovery or existence of any additional or different claims or facts relative thereto.


VI. This Agreement effects the settlement of claims which are denied and contested, and nothing contained herein shall be construed as an admission by any party hereto of any liability of any kind to any other party. Each of the parties hereto denies any liability in connection with any claims and intends hereby solely to terminate and avoid litigation and buy peace.

VII. This Agreement is the entire Agreement between the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous oral and written agreements and discussions.

VIII. The parties hereto agree that this Agreement shall be interpreted according to Ohio Law.

IX. Should any part of this Agreement for any reason be declared by a court of competent jurisdiction to be invalid and not otherwise enforceable, such decision shall not affect the validity of any remaining parts, which remaining parts shall continue in full force and effect.

X. This Agreement may be executed in one or more counterparts and each such counterpart shall for all purposes be deemed to be an original, and all such counterparts shall constitute one and the same Agreement

XI. A facsimile or scanned and electronically transmitted signature on this Agreement shall be deemed to be an original.
IN WITNESS WHEREOF, the undersigned have set their hands:

to be signed by Me and them.
 

[ArtVandelay]

For those who know me I rarely ever suggest anyone consider settling. You just have a very unique situation in that you are young, have the ability to dig your way out and are still dealing with the OC. Hopefully you can clear all of this up without having the black eye of a BK or judgement haunting you forever. Many do not realize that even when something like a BK falls off your CR that it stays on your public record forever.

 

In Today's information society not only do potential employers look at your CR, but most also look at your entire background. Not to mention how this can effect you in other areas of your life like qualifying for various forms of insurance and credit. Even if/when its against the law to discriminate against someone based on their background it still happens. 

 

With all that being said I still can't stress enough how important it is that you consult with a professional before making any final deals. Just make sure that person is experienced in dealing with contracts and has a background in consumer law. 

 

I really wish you the best in whatever you decide. My opinion is coming from someone who has screwed up in the past and it has taken me years to get my head above water. I still have a long way to go like many others that post here. I just hope you can learn from our experiences and get everything straightened out. Some may sound like what we are doing is fun, but I can assure you it is not. 

 

Good Luck!

[admin]

@to4raiden - Don't jump the gun on this.  Wait until you have something (signed) in writing.  

[CG in TX]

@to4raiden - Don't jump the gun on this.  Wait until you have something (signed) in writing.  

This.  Absolutely.  The red flag I saw in the earlier posts is that they wanted a post dated check before the agreement was signed.

[TomnTex]

I would just ignore them. Do not settle or give them a dime. That's just me....fight em.