Accumulated a lot of Debt - What should I do?

[Reyaj]

Chapter 13 is a type of bankruptcy. Settlement is not a bankruptcy; it is a settlement. The former is governed by law; the latter is a negotiated. Though, in some bankruptcies, settlement negotiations can ensue policed by a judiciary.

I would encourage you to stay away from companies that settle debt. Most operate outside of the law. Most cannot represent you if you are served with a Complaint, as these companies have no in-house counsel, and if they do, often counsel is out-of-state unable to represent you in your state.

You are a W2 employee with garnishable wages. Essentially, you are "fresh meat," ripe for the picking.

Accordingly, if you elect to proceed with settlements, exercise due diligence and do it yourself, or hire a local attorney not to exceed $5,000 in fees for full service of your debt including negotiating, settling, answering complaints, discovery, serving and opposing motions, and trial. If you have less than five creditors, quite a few debt-settlement attorneys would be willing to engage under such terms.

Both hurt your credit. Bankruptcy lowers your credit score more in most instances:

If you have creditors that you don't settle and continue to pay on time such as auto, real-estate, student loans, and you are behind only in credit cards, debt settlement will not impact your credit anywhere near a bankruptcy.

Alternatively, if your credit comprises only credit cards and you fall delinquent on all cards, then debt settlement will likely impact your credit score similarly to a bankruptcy.

Interest rates will increase to the top percentage allowed by law as well as other fees. Nonetheless, you will settle anywhere between 20-50% on the original principal balance.

In 95% of cases if you are trying to settle, you will settle before trial. Debt buyers who sue will likely order the contract or billing statements from the original creditor before trial. Notwithstanding whether they have evidence or not, debt buyers will still settle with you, as (1) They buy debt for 2-5% on the dollar; (2) They don't know if you have other judgments that will be or have been entered before theirs (they have to stand in line until other judgments have been paid in full before garnishing your wages); (3) They don't know if you are employed (some do); (4) They have no guarantee on continued employment for wage garnishment; (5) They don't know if you will file a bankruptcy post-judgment.

Hey Guru thanks for all the info and educating us. I was re-reading this today and I think debt settlement is probably the way to go... You said it doesn't hurt my credit report as much as bankruptcy as I am able to pay my rent and car lease. I think what I am going to do is continue to pay the minimum payments until next year. If I am not in a better financial situation I will then look at debt settlement. Am I better served in using a company (I know you advised against it but there must be some good reputable ones?) or just calling each of my credit cards directly and negotiating?

 

[marmel75]

If you are in that deep vs. that income level, consult with a good bankruptcy attorney. He will give you your options per the state or country you live I've. Any advise from the Internet is useless to you at this point.
If indeed you have to file, you can regain good credit after 7 years, and use those intervening years to do some spending introspection.
Probably not what you want to hear, but that is what I would do under that financial condition.
At some point the money juggling act has to stop and seek a good long term solution.

Yeah, honestly that might be the best bet. Sh!t happens, it will give you a chance to get your life back in order, but unless you've learned a lesson from this you likely will find yourself right back in the same boat in a few years time.