Can you settle on some credit card debtsand then file a bankruptcy for the rest?

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Can you settle on some credit card debtsand then file a bankruptcy for the rest?

If all creditors don’t accept settlements is this an option? Want to file Chapter 13 but have $160,000 in debt which os too high.  Only other option is a Chapter 7.

Asked on February 2, 2011 under Bankruptcy Law, Ohio

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

You can't make someone settle a debt if they don't want to--creditors have a right to insist on full payment. Also, while in theory, if you can find creditors who will settle part of the debt, you can settle that, then file bankruptcy for the balance, you may run into a problem: if some creditors get paid more than others during the months right before the bankruptcy, that could be seen as giving those creditors preferential treatment. Preferential payments can often be voided and recovered by the bankruptcy estate, meaning the settlement would be undone; the idea is that creditors must be treated more or less evenly. Therefore depending on timing, it may not be possible to do this, even if you found some creditors who'd go along. You should consult with a bankruptcy attorney, given how much is at stake, but I suspect the answer will be that you should file Ch. 7.


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