Im greedy now I should have done it your way Tom...Originally Posted by TomEason
Im greedy now I should have done it your way Tom...
Hi intoodeep
You might set a settlement goal price of about 5 percent on your 2nd. Depending on the size of that debt, that settlement alone could make up for what you've spent on the others.
If you haven't already, you might visit this thread and read the settlement guide at post #1. Good luck!
Strategy for Settling Your 2nd
Thanks Tom I have been following the strategy religiously since my last payment in Oct 2011 I get calls about once a month from the original creditor Which I ignore. The debt is about $49,000. I am not going anywhere and do have the funds available when the tim comes to settle. For now I am just living life and not stressing about the 2nd. I cant wait to post in the "Success story" thread.
intoodeep
Thanks for your post. I'm glad you're following the strategy. I also look forward to seeing your success story posted!
Was the credit union any tougher to negotiate with than a commercial bank?
I'm wondering how it might be to try to settle a credit card debit with Navy Federal Credit Union (NFCU)....
No different same strategy.
OverandDone
If there are no obvious Affirmative Defenses to plead in the answer, I recommend he simply answer the complaint with a General Denial. The lawsuit can be dragged out for quite a while, using discovery and other legal moves.
I recommend he not speak with the plaintiff, and definitely not disclose financials!
I wouldn't advise seeing a BK lawyer, as those lawyers typically try to steer their prospective clients into filing. The usually limit their practices to BKs. And no BK, no fee.
IMHO, if speaks with a lawyer (or lawyers), it should be with a litigation lawyer on the subject defending the lawsuit . He's a long way from needing a BK lawyer.
Last edited by TomEason; 05-20-2012 at 10:02 PM.
This is probably obvious but: I would respond to the suit, and keep negotiating w/ Discover. Discover might win a judgment against him, but then they have to take action to collect, which takes time & effort (e.g., filing for wage garnishment). In the mean time, I recommend getting an initial consultation with one or two bankruptcy attorneys (usually free), so that he understands whether/how that is an option. My understanding is that a bankruptcy can eliminate many (most?) judgments against you. So he can use that option at any time along the whole process -- most would say save it as your last option.
HTH.
OverandDone
If there are no obvious affirmative defenses to plead in the answer, I recommend he simply answer the complaint with a General Denial. The lawsuit can be dragged out for quite a while, using discovery and other legal moves.
I recommend he not speak with the plaintiff, and definitely not disclose financials!
I disagree with the advice posted by loansafe91745. I wouldn't advise seeing a BK lawyer, as those lawyers typically try to steer their prospective clients into filing. The usually limit their practices to BKs. And no BK, no fee.
IMHO, if speaks with a lawyer (or lawyers), it should be with a litigation lawyer on the subject defending the lawsuit . He's a long way from needing a BK lawyer.
TomEason,
What should someone expect to pay a litigation type lawyer, to defend/stall something like an $8k CC debt? (I've never had to pay a lawyer for anything). I've just started a game with 2 of my cc's (~$30k) and am trying to figure out my options if they want to play hardball later, instead of settling for pennies.
As I understand it, there is time to negotiate a settlement all the way up to judgement day, and with a lawyer, can be a very long time away.
I guess the obvious reason to get a lawyer to help defend/stall/negotiate a CC debt, would be to reduce your chances of having to file BK...but at what cost? Thanks.
walkin
Thanks for your question.
I have no idea what fee a lawyer might charge in your locale.
There are different arrangements a defendant could use. If it were me, I'd initially go pro se, and if I subsequently needed the legal help of a lawyer, I'd stay in pro per and use the lawyer's advice and help in an "unbundled" arrangement where the lawyer remains in the background as a "coach."
And I wouldn't worry about a defense strategy until the CC company sued me.
Thanks TomEason...as I continue to read, I continue to learn more, which provokes more questions and ideas.
I.E. In my state, the SOL is 3 years. The question I would ask myself, is what is the point of trying to settle the debt, if the SOL will run out in 3 years? The only obvious answer I can think of, would be to avoid a lawsuit...however, if that lawsuit does start, THEN I guess would be a good time to actively get engaged in trying to settle, get an attorney, etc...
The more I read, the more I am understanding the big picture of "not wanting to BK" and "use it as a last resort". If I can tough it out for 3 years, sure, I'll have bad credit, but I get to start over. If I can't tough it out, and have to pull the BK card, I'm going to have some bean counter over my shoulder every month, telling me what I can and can't buy, for 5 years. I think I see the tradeoff.
The good news is, I think, that the biggest debt (HELOC) will reach the SOL 6 months before the smaller CC debts. How that works out will undoubtedly adjust my strategy...for better or worse. This game is getting more interesting, as I learn more about it...depending on what happens to the 1st will dictate what I should consider with the 2nd...depending on what happens with the 2nd will dictate what I should consider with the cc's...etc.
walkin
If you do pull the BK card and are required to file Ch13, you won't need to worry about finding a bean counter because you'll have one - the BK trustee. You'll have to ask permission for any expense that deviates from the Ch13 plan.I'm going to have some bean counter over my shoulder every month, telling me what I can and can't buy, for 5 years
I am a success story and have my credit score back to 850 after my two year nightmare with BOA. I am very lucky to have received the 2 percent for 5 years, 3 for year six and 4 for life of loan. BUT, I was left in cc debt of over $50K which were ALL cash advances paying my mortgage while they were "getting my mod" handled which was a bunch of crap. I fell for their deceit for too long. I am very grateful that I have my house but the 1700 a month cc debt is killing me. Any suggestions? In one view I can't complain as I got the 200K down to 20,000 paid which was my second and now have equity which I can't touch (in the mod rules) you can't refi. Thank you and if it wasn't for this place I never would have been a success story.
Yes, that. I was referring to the trustee as a bean counter. I assume that if a 13 is filed, that the trustee pretty much micromanages our finances with a magnifying glass. Get a $.25/hr raise, forget about upgrading from chicken to beef at the dinner table, the creditor gets that quarter per hour! Get a pay cut or less hours, deal with it... I assume this, I really have no clue.
From my understanding, that's the way it is. Ch13 is truly an onerous experience!
Any advise??? I sure would appreciate any ideas you might have. My cc payments are more than my mortgage. I am truly afraid to be late for fear of losing my house, somehow BOA could come in and take my mod back? That is how damaged this whole experience has left me.
whiteface
Thanks for your post. Since you have some equity in your property, why not do a buy 'n bail? It's a very savvy move that many members are unable to attempt.
Once you close on your new place, immediately stop paying your CCs, along with mortgage, property taxes, etc on your existing home.
And, were it me, after you've moved into your replacement property, I'd immediately rent out your existing place. You'll enjoy immediate positive cash flow rental income and will likely enjoy that recurring revenue stream for many many months.
Good luck.
Tom -- I value your opinions but am totally lost here. You are suggesting I leave my current home which I am paying a 2 percent interest on and have $1500/month mortgage payments which include T/I, and stop paying my mortgage, purchase another home and then go back and rent it out??? I am in the Bay Area and you can't even rent an apt. for $1500/month. What am I missing here as this seems like a dangerous move because there is no way even with equity I will get another 2 percent loan anytime soon.
My issues was that because I took cash advances and was misled by BOA I am in cc debt. None of these debts were retail purchases only cash advances while paying my loan thinking if I paid they would continue to work with me and it wasn't until I didn't pay the mortgage I got results but now am left with 2000 month cc debt because of this.
Yikes, that was a scary answer Tom can you explain this please? Thanks
Hi whiteface
Thanks for your post.
Although a Buy 'n Bail may not work you, I mention it as a possibility to consider. If you're happy with your house and cannot imagine finding a bigger, better place for possibly less $$, this won't work for you.
Although your modified loan's interest rate of 2 percent is desirable, if you're on a HAMP step rate loan mod, that rate will increase. At present, purchase loans are offered at anywhere from 2.66 to 3.75 percent.
You would need sufficient DP cash. You get pre-qualified for a new purchase loan. You locate, purchase and close on the replacement home. If the property owner decides to bail and stops paying the loan(s), and other expenses on the property, the lender will, of course, eventually FC. A FC, although a distressed sale, is still considered a sale. If, on the loan app for the new purchase money loan, the buy 'n bailer has listed the existing home as PS (pending sale) he won't have stated an untruth.
You would then rent out that property pending an eventual FC by the lender, who'll likely take many months to finally FC. Since the owner won't be paying mortgage, property taxes, utilities, etc, he/she will enjoy immediate positive cash flow rental income and will likely enjoy that recurring revenue stream for many many months. This would allow you to augment your income and save a bunch of $$.
This statement is immaterialRegardless, that debt is valid. I suppose you can justify that CC debt because it bought you a favorable loan mod.My issues was that because I took cash advances and was misled by BOA I am in cc debt
Last edited by TomEason; 05-23-2012 at 10:29 AM.
About to take the leap and not pay the mortgage next month. Severely underwater on a $1+million property in Chicago suburbs. Scared to death but can't keep throwing money after something that will never ever come up to loan amount. Need to stay in house for 15 more months to get daughter out of high school. We also have credit card debt of about 65K. Do I gradually stop payments on these cards after the mortgage non-payment hits? Or just do it all at once.... or wait 6 months... or WHAT? Any way to lessen blow to credit? Just want to be prepared for the lack of credit to come. Husband is purchasing car now so we won't have to qualify for that when his lease runs out. This thread has been a real eye-opener and very empowering. Could use some coaching though!
I think it depends a lot on the particulars of your situation, including:
- whether IL is a non-recourse state,
- how many loans of what type you have,
- who the lenders are,
- who exactly the borrowers are (you vs. spouse vs. both),
- your incomes & assets,
- your tax scenarios,
- type & level of risk you can tolerate,
- what kind of damage to your credit you can tolerate and for how long, and
- which way the wind is blowing.
It can get complicated, so I recommend sketching out possible scenarios, and walking through them. In terms of timing, think about whether you'll have enough cash to settle a credit card debt after several months of waiting; if you get a 1099 for the forgiven debt, will that be taxable for you or not; and how soon do you want your credit to recover, or you just don't care.
At least that's what I tried to do. One strategy is to stop paying everything at once, and hold out for as long as possible. The risk is that a) you might get foreclosed & evicted from your house before 15 months; and b) some/all of your lender(s) will sue you, forcing you into bankruptcy. But many would argue these are highly unlikely. Can you tolerate that level of risk? If so, stop paying all and save your cash!
Some posters are saying they held on to at least one credit card (i.e., keep paying).
I, myself, don't want this to drag on for years, so I'm trying to get things resolved within a year. I think it'd be helpful to get a good accountant's opinion too, if you can afford it.
Last edited by loansafe91745; 06-05-2012 at 03:11 PM.
I would just get the car and pull the plug on all of them at once. That way the clock starts ticking all at once for recovery. Expect a lot of calls ignore them for 5-6 months and be prepared to settle at that time if that is your desire. Thats what I did and have no regrets whatsoever.
I have a friend who decided to just try to stiff them completly, he got sued yesterday. I wanted to avoid that hassle and I did.
I am saving more money than ever without those pesky cards. Good luck to you
Thanks for the prompt input. We have a single mortgage on the house with ING direct. All the rest is typical CC debt (Target, Citibank, Chase, Discover, AmEx and Dept stores) Already consulted with one BK attorney-said we are not eligible for Ch.7 since we earn too much) For credit cards-How do we know if we will get a 1099 for the forgiven debt? Is this part of the negotiation? Right now we are living on husbands pension and a small part-time job of mine. Son in college and daughter going (with Grandma's help) Definitely can't pay the property taxes this year but am wondering if it might make sense to pay mortgage and stop CC payments to get them off our books before we default on house (guarantees us longer time in property?) Thoughts? Willing to take the risk and tolerate the insistent phone calls because I'm tired of the insomnia that comes from worrying about this!
Im with intoodeep. Save all the payments for settlement if that is your intention.
They will give you a 1099 only if you settle for less than you owe, you do not say what your plan is.
If you havent done so and want to keep some sanity, get a google voice #, inform every creditor of your new phone #(the google voice one) and get a new phone # at home. This took the edge off a stressfull situation.
I'm jumping off the cliff, gambling that some good settlements will happen by the end of year.
I stopped paying 2 big CC's a little over a month ago (~$30,000), and am continuing to pay a couple small ones. The 2 small ones are ~$5,000 balance, monthly payments are doable. The goal is to be able to settle the 2 big ones for cheap, by the end of the year, and hopefully have no problem showing insolvency when I get 1099'd, because of our major underwater house. The fantasy I have about continuing with the 2 small ones, is to keep some revolving balances current, in hopes of recovering my credit score after the 2 big ones charge off/get settled, etc., and also after the foreclosure on the house happens (hoping to delay that until 2013 sometime). Although I've read of some CC companies freezing/closing your accounts once they catch wind that you aren't paying your other ones...We'll see.
I'm paycheck to paycheck just like the next guy, so I sure don't have a lot for these banks to come after, if they decide to sue me.
Hopefully I'll have the success like a few others have had in here. I'm hoping for 5-10% max though, maybe the kids will have a decent Christmas for once :- ).
I think IL is a recourse state. So ING can come after you. I don't know what the odds are. May depend on your assets.
I believe 1099's are supposed to be given by law, and is non-negotiable -- I suppose some lenders fail to. I think it's best to expect them. If you are insolvent at the time the debt is forgiven, you don't have to pay the tax.
Re: paying property tax -- a short sale realtor told me that if I'm going to default on mortgage payments, then DON'T pay the tax either. The bank will pay it since it's in their interest to do so. He did advise me to make sure the home owners insurance is paid up, since that protects your stuff inside the house.
It seems to me that it's unlikely for the bank to foreclose and kick you out before 15 months -- but that's just a wild guess, based on what I've been hearing about other people who foreclosed. You probably should be prepared for the worst case, i.e., be willing to rent someone near enough that you can drive your girl to school every day.
HTH.
p.s. I would get a Google Voice number (free), so that all calls can go there. There's a way to set up Google Voice so that certain numbers go straight to voicemail. You can do the same w/ Ooma.
Can you elaborate on that? Did your friend have no desire at all trying to settle, and just completely blew them off, or what?
Also, what kind of time frame was his 1st late payment to when he was served with papers?
My buddy started his about the same time as me ( oct 2011 or so) He intends to try to completly stiff them but he has no assets, owes the IRS etc. He has a big possible deficiency judgement hanging over his head and feels he is going chapter 7 anyway so hes just dodging everyone trying not to get served. When he started this he was unemployed and living off cash he has saved. It was a sound plan at the inception but now he just got a very good paying job and if sued could have his wages garnished. Furthermore after 6 mo of this good job he wont qualify for the protection of Chapter 7 and will have to pay up or quit his good job. His approach assumed he was always going to be unemployed and on a low income.
I still feel that it is best to settle with the original creditor so you arent looking over your shoulder later on when things start to turn around.
In my case I had about 2,000 a month in CC payments that I managed to make. I originally was planning on going chapter 7 but found out I made too much money and didny pass the means test. I was very close to filing chapter 13 but decided I didnt want to be that fixed of an income for 5 years. (found out because of my income 5 years was probable).
I started this shenanagan in Oct and I dont really have any problem saving money now I just got a credit card yesterday with a low limit and no interest for a year. I still have a dept store card and another low limit visa I pay off each month.
My stuff is mostly settled except a Kohls card $1900.00 and my second mort just waiting for the opportunity to settle them both.
I let them repo my BMW and bought a new car cash. I have a house payment and utilities period.
I faced my stuff and dealt with it while I had the means to do it.
For me I am way better off than if I would have gone 13 or kept paying.
once I settle my second(which I eventually will) 3 or so years down the road I see smooth sailing. If I would have stayed on the minimum payment plan and making the big car payment I would have been a broke old man LOL.
I was kidding myself for a long time and glad I made the decision to make a run for it.
intoodeep,
Thanks for replying. Your situation sounds very similar to mine, minus the BMW. I have a manageable car payment, on a very reliable vehicle.
I wish I had discovered this forum over a year ago. Since I didn't, I blew through almost $20k cash (the only cash I had) "doing the right thing", and ended up with nothing but borrowed time. In the mean time, I was making the ridiculous credit card payments, that yes, I set myself up for. My "honorable intentions" took away from my kids, in more ways than I care to describe in here. I made the decision, after finding this forum, that because of my income, my kids deserve to eat good, and enroll in sports and other extra curricular activities, instead of spending all the money on bad debts. I'm in the game now, got my seatbelt on, and am ready for whatever happens....and I'm reckless and feel that I have nothing to lose. My new life started a month or so ago, and so far I am enjoying it. Planning to get over it all in the next few years, and start the 2nd half of my life from scratch....hopefully cash only, with no relying on credit.
It was an interesting learning experience to say the least. I never imagined that it was even possible NOT to pay your monthly mortgage/credit card debts...LOL. Foolish me.
^^^^^ THAT, exactly.
Awesome attitude. I feel you'll come out fine. I know I did.
You might check out this thread: How Long Before Missed Payment and Foreclosure?
We sound like we are both in very similar situations. I was going to start off with the 2 largest (33k combined) and continue making minimums on the others so we'd have some open credit. Until I stop paying the mortgage-there will some, but not a lot of extra cash to put towards the settlement price -I'm striving for close to 20% if possible.So if I understand this correctly we will get a 1099 on the remaining part of the debt that we are not paying off (i.e. 30k cc balance settle for 10k pay-off -get 1099 for 20K? right??) But if we prove we are not making ends meet the IRS will forgive it?
I, too, do not want to get out of the house until mid 2013 at the earliest. Have heard in this area they are backed up until almost 2 years but hate to count on that. Probably depends on the lender as much as the courts.
Please keep me posted--this really helps to know what others have learned along the way.
I can't answer your questions about how to offset the 1099's that we might get. I still have a lot more reading to do, or perhaps quit being cheap, and pay an accountant to do my taxes for once. LOL. From what I gather (could be wrong), it seems that the insolvency claim when filing taxes is pretty easy to do for us "paycheck to paycheck" types, and basically means that you have more debt than you do assets (i.e. $0 cash, house loan for $300k and house is worth $200k, credit cards, etc.). I am going to do my 2011 taxes on my own, like I normally do (I filed extension), but next year, I'll definitely have to pay someone to do my 2012 taxes, because a lot of tricky stuff is going to be happening to me this year, and I don't want to screw myself.
The only CC's I'm making the payments on are small, 0 percent; cc's, that were used for furniture purchases. The credit lines are revolving, but I have no plans of buying anymore furniture. However, payoff is like 2-3 years away, so I'm hoping this will count for something later on. Also have a very small bank CC (credit limit was reduced once the mortgage lates started hitting) that I plan to make the monthly minimums on, and maybe use it here and there for small purchases, to show a little activity. It might not work in the end, but I don't mind the minimum payments for now, just in case there is a small chance that by keeping these cards current, it will help me later.
Yes and yes. I've done a fair amount of researching online on these two questions, and what you say agrees with my understanding.
The part that is a little unclear is how the IRS determines your insolvency. In particular, there are some different views on EXACTLY for which point in time they calculate your insolvency. The most popular view appears to be that it's when your final settlement payment is made. Another question that I've seen differing views on is how they calculate the value of retirement and pension funds.
I will probably get an accountant, like you folks, to deal with my taxes for the year(s) my debts are settled. Hopefully this year!
I did 3 settlements last year and used TurboTax. I filled the forms and insolvency worksheets out for each date I completed a settlement and was insolvent for the first 2 1099's and partially for the last.
All retirement funds are an asset, there are no exemptions when filling out insolvency forms. Be sure to include the insolvency worksheet and include it with your tax returns or the IRS will come calling, they did it to a friend who paid an accountant to do this for him, the accountant left out the worksheet, the IRS came looking about a year later.
Any updates intoodeep?
I'm at 2 months no payments on a couple big ones. Kids are eating better. I answered the very first call from each one, and briefly explained my hardship, and haven't answered another call since. Then, they started calling excessively. I saved their numbers in my address book, so when they call it will automatically go to voicemail. Of course they started blocking their numbers, and calling about 5-10 times per day. I would quickly hit ignore when they called, but it was just such a pita. It was starting to become a headache, because I couldn't figure out how to get my phone to ignore "unknown" "blocked" "private" numbers. Just discovered an android app today, "call filter", which does an excellent job. I can choose 1 of 2 options- immediately ignore the blocked number, and send to VM, or I can choose to have my phone answer the call, and hang up, so they don't even have a choice to leave a VM, lol. While this is going on, my phone doesn't ring at all...blissfully quite
I chose the option to send them straight to VM, maybe one day they will leave a message and try to sell me something cheap
I was actually considering changing my number, but thanks to these techie gadgets, and apps, I can keep my number and not be disturbed again....
I'm generally very much a do-it-yourself advocate ... I think most of us who come to this forum are.
Insolvency calculations CAN be simple for some, and complicated for others. For example, if you have a pension plan.
Many accountants will give a free initial consultation. If your situation is complicated, I suggest you try talking to one. You can always choose to DIY. And of course you should weigh the potential gain vs. cost of using an accountant. For example, if you're in the 15% tax bracket and your 1099-C is for $10k, then you might potentially pay $1500 in taxes. Weigh that vs. paying an accountant $500 (or whatever).
The accountant I'm talking to says insolvency is a murky area, and can depend on how you argue your case, which federal district court you're in, which court precedents there are, and which IRS agent you're dealing with.
Based on all my own research, I concluded that I can't claim insolvency. But the accountant is suggesting otherwise.
loansafe91745
Thanks for your post.
As you know, lots of tax stuff is in a grey area. It behooves the taxpayer to interpret those in the taxpayer's favor. As such, I might suggest you heed that accountant's advice. FWIW, I would. But you'll do whatever you think is best for you.
Good luck!
Personally, I would take the advice of the accountant, but check with one who is familiar with insolvency, Im wondering why they would say its a murky area, and there is nothing to argue unless you get audited. If audited and you cant prove your numbers, the IRS will most likely only hit you up for the tax and interest unless you willfully tried to evade taxes. The IRS is the lesser evil compared to the creditors.
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