Defaulting and then settling debts vs bankruptcy

[Jnbmom]

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@ProbsBroke wrote:

Gotcha, that makes sense.  Very quick googling suggests possibility of getting new cards maybe 1-2 years after the charge offs settle down.

Also some of these could settle pre charge off. But given the number and three lenders I expect at least one to go CO. But in theory some possibility they all just end up showing 90 day late then settled for partial balance. No idea how that would impact getting credit.

Do you know if existing lenders would 100% shut me down? Just keeping one thing open with $500 limit would of course be huge

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@Brian_Earl_Spilner wrote:

The biggest difference is when you file bk you're able to start rebuilding after discharge or during the payment plan. Charge offs will severely limit you for years. 

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If you start defaulting it's like a domino effect once other creditors see this most all will shut you down. 

Is there a reason why you can't do a BK 7 or 13? 

90 days lates, chargeoffs and settling for less will hurt your credit for quite some time .

[ProbsBroke]

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@Jnbmom wrote:

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@ProbsBroke wrote:

Gotcha, that makes sense.  Very quick googling suggests possibility of getting new cards maybe 1-2 years after the charge offs settle down.

Also some of these could settle pre charge off. But given the number and three lenders I expect at least one to go CO. But in theory some possibility they all just end up showing 90 day late then settled for partial balance. No idea how that would impact getting credit.

Do you know if existing lenders would 100% shut me down? Just keeping one thing open with $500 limit would of course be huge

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@Brian_Earl_Spilner wrote:

The biggest difference is when you file bk you're able to start rebuilding after discharge or during the payment plan. Charge offs will severely limit you for years. 

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If you start defaulting it's like a domino effect once other creditors see this most all will shut you down. 

Is there a reason why you can't do a BK 7 or 13? 

90 days lates, chargeoffs and settling for less will hurt your credit for quite some time .

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BK7 is not an option because of income, not remotely close 

BK13 is not an option down to very specific circumstances. Prefer not to put out in public for fear of it being identifiable. Happy to share in PM if that is an option on here. However all the attorneys I spoke with said given my set of circumstances, BK doesn't seem viable. It just does not alway work

[ProbsBroke]

I do have two auto loans. I just read through the loan agreements and I don't see how either of those could be closed. They do both have language that they are in default if I start BK proceedings. But nothing about my credit status or behavior with other lenders. So I can at least keep those going

[CreditCuriosity]

I think what mentioned up thread is what bugs me most about BK you can rebuild a heck of a lot quicker than CO's.  Sounds like you have the means to settle for less and not involve the courts and creditors are certainly going to take some vs. nothing or will in time.  You will certainly on a lot of creditor be given tax forms you mentioned once you start to settle and be responsible for reporting to the IRS though.  Sounds like you have a partial plan.  I wish you the all luck was in a similar solution back when started to rebuild and just buckled my belt and paid off some huge charge-offs and within a year or a bit after they were all gone, but as mentioned felt like i was punished a lot more for it and also had to pay it back vs. someone that could do a BK.  I know people will disagree with me, but can care less.  Most people on this forum has either filed BK's or are/were rebuilders and will get some good advise either way.

Best of luck to you.

[Brian_Earl_Spilner]

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@ProbsBroke wrote:

Gotcha, that makes sense.  Very quick googling suggests possibility of getting new cards maybe 1-2 years after the charge offs settle down.

Also some of these could settle pre charge off. But given the number and three lenders I expect at least one to go CO. But in theory some possibility they all just end up showing 90 day late then settled for partial balance. No idea how that would impact getting credit.

Do you know if existing lenders would 100% shut me down? Just keeping one thing open with $500 limit would of course be huge

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@Brian_Earl_Spilner wrote:

The biggest difference is when you file bk you're able to start rebuilding after discharge or during the payment plan. Charge offs will severely limit you for years. 

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1-2 years is best case scenario. Significant derogatories as in 60+ days late tend to hold their strength for up to 5 years. The other thing is the card limits you would get. If you had 2 people defaulting on cap1, the one with bk could open a card with 3k limit as soon as bk discharged or payments started. The other person that let it charge off would be looking at a 300 limit maybe a couple of years after charge off if lucky. 

[ProbsBroke]

So just following up on this. I spoke to the Bovee guy who I think is a good guy and super helpful. He said that in his experience not all lenders will cancel all cards when they see other cards going late / co. Specifically he mentioned that Capital One won't even reduce your credit limit. This is really helpful as I have one Capital One card so plan to keep that safely to help the recovey. And as mentioned my auto loans will be ok. His view was also that at 1-2 years past the settlement dates I'd be able to go for FHA mortgages.

Anyway we are going to find out. I've given this a lot of serious thought, and done a lot of research, and in my own unique circumstances I am pretty sure this is the best path for me to take. I will provide an update at the end!

[MileHigh96]

Just something I haven't seen mentioned yet. Why wait to go into default/charge off before trying to negotiate? There is a chance that if you call the individual creditors that you could negotiate a reduction in interest (sometimes to zero) if you set up a plan, or maybe see how much they will accept to settle and close your account in lieu of having it defaulted on and charged off.

[ProbsBroke]

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@MileHigh96 wrote:
Just something I haven't seen mentioned yet. Why wait to go into default/charge off before trying to negotiate? There is a chance that if you call the individual creditors that you could negotiate a reduction in interest (sometimes to zero) if you set up a plan, or maybe see how much they will accept to settle and close your account in lieu of having it defaulted on and charged off.

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I did discuss this with Bovee guy. He said that was an option, and you can also call most lenders and get them to accept 90% of the balance without ever going into default. However the end result on your credit is the same - the account will eventually show zero balance and settled for less than amount owed. So you may as well try to minimize the amount you pay to get to that point

[NeroStar]

The difference being that there are no late payments / charge-offs shown in the data. You would think that your score will take a much bigger hit with the delinquent data posting than a comment stating settled.

 I do agree with you that you have more bargaining chips after the lates/COs. If you have no immediate plans for attaining new credit it may be worth the money saved. Guess you just have decide if posted DQs for several to potentially seven years is worth the possibly thousands saved.

Best of luck no matter which direction you choose to go. 

[ProbsBroke]

Yeah on this I am not sure. However I am not able to come up with the cash to settle in full or at 90%. And if I even get them to accept zero interest, I feel I will be dragging it out over years to get this down. I am basically around $200k underwater. I think I can hustle and come up with $75-80k to settle this stuff and take the credit hit and move on. Given it looks like I will keep a Cap One account open, along with two auto loans, I genuinely think my credit will recover well after a year or two. Of course risk is it doesn't, but I just feel it is the path that looks most likely to get me out of the mess