Can You Settle New/Young Debt?

[DynamiteMan]

Long story short

 

I have $200,000+ in personal Loans and Credit Card Debt. I am about to stop paying and let them default in March. 
 

All the personal loans are new debt and are 6 months old. The credit card I have had for awhile. 
 

I got screwed trying to start a new business, and can't afford to pay these back. I make $78k a year. 

I have access to $150k cash

I don't own a home

 

Here are my debts

Wells Fargo Credit Card $15k

Wells Fargo Personal Loan $40k

Sofi Personal Loan $70k

Amex Personal Loan $9,500

Laurel Road Personal Loan $30k

Lightstream Personal Loan $20k

Discover Personal Loan $35k

I am trying to avoid chapter 13 bankruptcy. 
 

So my questions are..., based on your experiences, do you think I'll be able to settle all these debts with my $150,000? Or will they not budge since the debt is so new?

 

Will they just sue me right away and only take the full amount? 
 

Will they consider this fraud because the debt is only 6 months old? 
 

Please let me know what y'all think. Thanks!  

 

PS. Please don't judge, my life is ruined for awhile so I am looking for serious help. 

[BackFromTheDebt]

Short answer: yes 

Long answer to follow when I have more time. 

[DynamiteMan]

Thanks so much for the reply! I’m looking forward to your post! I’ve been getting mixed answers from all over the internet. Some say yes you’ll be able to do it. Others say no they will NOT negotiate with these big amounts and only paying 6 months. 

[Bulldoger]

Yes but credit will be shot. Less damage if you settle for less than balance with no late payments. 

[DynamiteMan]

Unfortunately I have never heard of anyone settling for less without late payments
 

Yes my credit will be shot, but I don’t plan on owning a home for 10+ years (HCOL area) and have a car that will last me another 8 years. 

I have 8 credit cards in good standing and $0 balance that will be shut down I’m sure. Current score is 790 but expect it to hit about 450 if I’m lucky? 
 

I’ll have to live on cash for awhile which is fine. 

[BackFromTheDebt]

Longer answer now. 

Part I
 

Your debts listed are about $220 k and you have about $150 k.  
 

You are correct. Chapter 13 would be foolish   
They would take all your money and you would still have to pay for a few years   
 

It would be wiser to use the $150 k to pay off the higher interest loans and make payments on the other $70 k instead of Chapter 13   At least you would save your credit rating  

If that is not an option default and settle  

If you are going to stop paying and default, do so now.  Don’t wait until March.  Don’t spend another penny paying off these debts. 
 

As far as settling, it varies.  The best offer I had was 25%.  I snatched that up immediately.  I have seen reports on this site for offers ranging from 10% to about 75%.   Somewhere between 50-60% total for your debts is quite possible.  That would be $110-125 k, which would leave you with some extra money but bad credit for the next 6-7 years.  
 

Part II later 

[DynamiteMan]

Dude you’re the man! Thanks so much for the information! Keep it coming! 
 

So if I stop paying them now, then that’s only 3 months of payments that I’ve done. 😂 does that extra 3 months of paying help at all? 

 

I’m curious if you still think they’ll settle with such new debt? I know it will be harder and I won’t get below 50% settlement, but I would be fine with 60% honestly. 
 

My only real main concern it how they will handle the debt since it’s so new? Any suggestions or advice would be much appreciated! 

[BackFromTheDebt]

Part II

Here is why most if not all will settle.  
Some of your creditors, such as AmEx and Discover, will follow you to the ends of the earth to get their money back.  Even so, if you default there is a risk of not getting all the money back. 
 

Some of these creditors will rack up interest and penalties for 6 months, sometimes doubling the amount owed, and then sell the account to a JDB for 10% or even less.  So settling is in their best interest.  
 

I don’t know how much each of these places will agree to settle.  My usual strategy is to start with a low offer and see what the lowest amount they are willing to go.  You have almost 70% of the debt.  Most if not all will settle. 
 

The earlier you settle the better.  In 6 months that 220 k could balloon to over 400 k.  Very little chance of settling for $150 k.  
 

Start talking to them even before you default.  SOME places will settle before default.  Some make you default first.  
 

Of course once you default you owe more money and the settlement amount goes up.  Still, settlement for a total of $150 k or less is quite likely.  

[BackFromTheDebt]

11 minutes ago, DynamiteMan said:

Dude you’re the man! Thanks so much for the information! Keep it coming! 
 

So if I stop paying them now, then that’s only 3 months of payments that I’ve done. 😂 does that extra 3 months of paying help at all? 

 

I’m curious if you still think they’ll settle with such new debt? I know it will be harder and I won’t get below 50% settlement, but I would be fine with 60% honestly. 
 

My only real main concern it how they will handle the debt since it’s so new? Any suggestions or advice would be much appreciated! 

I really don’t know.  I thought the debt was already 6 months along.  

The only way to find out is to ask  

Thing is, once you ask, your accounts will be frozen and you won’t be able to use the account again.  But it appears that is what you want anyway.  

[DynamiteMan]

Thanks man! 
 

So do I just ask early on if they will settle? 

[BackFromTheDebt]

3 hours ago, DynamiteMan said:

Thanks man! 
 

So do I just ask early on if they will settle? 

Something like that. 

[nobk4me]

20 hours ago, DynamiteMan said:

Will they consider this fraud because the debt is only 6 months old? 

I don't know . . . but I suspect that the longer you pay them at least the minimums, the less likely it would be considered to be fraud.   How long can you pay the minimums?  

[DynamiteMan]

Just now, nobk4me said:

I don't know . . . but I suspect that the longer you pay them at least the minimums, the less likely it would be considered to be fraud.   How long can you pay the minimums?  

Thanks for the info. I plan on making my last payments in March. That will be 6 months of payments. According to my calculations that will be the latest I would want to pay, so I can start saving up more.

[nobk4me]

Another thought: maybe don't default on all of them at once?  Just stop paying some of them?  I agree that Amex and Discover are generally the most aggressive, especially Amex.  

[DynamiteMan]

12 minutes ago, nobk4me said:

Another thought: maybe don't default on all of them at once?  Just stop paying some of them?  I agree that Amex and Discover are generally the most aggressive, especially Amex.  

Hmmm I never thought about this. Can you expand on the reasoning why? 

[nobk4me]

On 1/21/2023 at 3:53 PM, DynamiteMan said:

Hmmm I never thought about this. Can you expand on the reasoning why? 

Maybe start the default with the least aggressive creditors, maybe pay the more aggressive ones as long as you can.  So you can gain experience dealing with creditors while in default - it's a new, and stressful experience for most people.  Rather than defaulting with the creditors most likely to sue you.    It's just a thought.

[DynamiteMan]

1 minute ago, nobk4me said:

Maybe start the default with the least aggressive creditors, maybe pay the more aggressive ones as long as you can.  So you can gain experience dealing with creditors while in default - it's a new, and stressful experience for most people.  Rather than defaulting with the creditors most likely to sue you.    It's just a thought.

Not a bad idea! Thanks!  
 

What makes it so hard? Are they just really mean and threatening? 

[nobk4me]

2 minutes ago, DynamiteMan said:

What makes it so hard? Are they just really mean and threatening? 

Yes.  And since you will be defaulting on a lot of accounts, they will be blowing up your phone.  It gets quite irritating, and could be confusing.  You will need to keep very accurate records, of all correspondence they send you and you send them.  

Sometimes they play dirty tricks.  If there is anyone else in your household who might answer the phone, you need to make sure they DON'T talk to them.  They could strong-arm someone in your family to agree to something you wouldn't want to agree with.

[DynamiteMan]

4 minutes ago, nobk4me said:

Yes.  And since you will be defaulting on a lot of accounts, they will be blowing up your phone.  It gets quite irritating, and could be confusing.  You will need to keep very accurate records, of all correspondence they send you and you send them.  

Sometimes they play dirty tricks.  If there is anyone else in your household who might answer the phone, you need to make sure they DON'T talk to them.  They could strong-arm someone in your family to agree to something you wouldn't want to agree with.

Ok thanks for the info! It’ll just be ma answering the phone. I only have a cell phone number. 

[nobk4me]

@DynamiteMan

One thing I would recommend, before you default on any debts, is that you open a new checking account, with a different bank, and never use it to pay creditors.  This will be an account they don't know about.

You mentioned having access to $150K cash.  Is this in a savings account?  In the same bank as the checking account?  Any linkage between them?  If so, I would advise moving that money to a different bank as well.

Here's why.  I mentioned above that creditors can play dirty tricks.  This happened to me.  An OC did it.  I received a letter from them stating that we had agreed to settle the defaulted account, and I would be making monthly payments, starting at around $50, with escalating payments.  Since I had made no such agreement with them, I did not feel the need to respond to the letter, but I filed it away.  The next checking account statement included an unfamiliar, unauthorized withdrawal, around $50.  I went to my bank, and found that the OC had faked a pay by phone check.  I had to close the checking account to prevent them from taking more.

I did file a complaint with the Office of the Comptroller of the Currency, which regulates banks, and I did get the money back.  

And, never open a checking or savings account in a bank where you have a debt.  Under the Right of Offset, they can take money out of these accounts, without a judgment, to satisfy a debt.  The saying is "Don't bank where you borrow."

[DynamiteMan]

21 hours ago, nobk4me said:

@DynamiteMan

One thing I would recommend, before you default on any debts, is that you open a new checking account, with a different bank, and never use it to pay creditors.  This will be an account they don't know about.

You mentioned having access to $150K cash.  Is this in a savings account?  In the same bank as the checking account?  Any linkage between them?  If so, I would advise moving that money to a different bank as well.

Here's why.  I mentioned above that creditors can play dirty tricks.  This happened to me.  An OC did it.  I received a letter from them stating that we had agreed to settle the defaulted account, and I would be making monthly payments, starting at around $50, with escalating payments.  Since I had made no such agreement with them, I did not feel the need to respond to the letter, but I filed it away.  The next checking account statement included an unfamiliar, unauthorized withdrawal, around $50.  I went to my bank, and found that the OC had faked a pay by phone check.  I had to close the checking account to prevent them from taking more.

I did file a complaint with the Office of the Comptroller of the Currency, which regulates banks, and I did get the money back.  

And, never open a checking or savings account in a bank where you have a debt.  Under the Right of Offset, they can take money out of these accounts, without a judgment, to satisfy a debt.  The saying is "Don't bank where you borrow."

Dude thank you for the info! 
 

Let me know what you think about this…

 

I have 140k in a high yield savings. Never paid anything out of this account.

 

I have 10k in my Chase checking account. I don’t owe any money to chase bank. I currently am using this account to pay EVERYTHING right now (monthly expenses, all loans, food, credit cards, etc) and my work checks are direct deposited there. 

 

I also opened up a local bank account here in town last month that had $100 in it. I opened it because I know I’ll be defaulting soon.

 

So with that information, can you tell me how I should approach this and where to move my money? 
 

How do I pay creditors a settlement when it gets to that point? From what account? 
 

let me know, thanks!  

[BackFromTheDebt]

The banks cannot touch your money without a judgment, because it is all in accounts they don’t control.  
 

So your money should be safe.  For now. 
 

 

[DynamiteMan]

Just now, BackFromTheDebt said:

The banks cannot touch your money without a judgment, because it is all in accounts they don’t control.  
 

So your money should be safe.  For now. 
 

 

Ok cool! I imagine worse comes to worse before suing I can at least settle for 75%. 

[nobk4me]

2 hours ago, BackFromTheDebt said:

The banks cannot touch your money without a judgment, because it is all in accounts they don’t control.  
 

So your money should be safe.  For now. 
 

 

See my post above, regarding a dirty trick pulled by an OC.  If they know the routing numbers on a checking account (because you used it to pay them), they could fake a pay by phone check, which this OC did.

[DynamiteMan]

1 minute ago, nobk4me said:

See my post above, regarding a dirty trick pulled by an OC.  If they know the routing numbers on a checking account (because you used it to pay them), they could fake a pay by phone check, which this OC did.

Ok thx for the info. I’ll move everything into my new checking account since they have never seen that. 
 

How do I pay a settlement though? Check? Won’t they see my account number?