Instead of filing for bankruptcy, shouldI try to work out settlements with my creditors?

UPDATED: Jan 13, 2011

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Instead of filing for bankruptcy, shouldI try to work out settlements with my creditors?

I owe over $170,000 in debt. I researched on-line regarding Chapter 13 bankruptcy but husband really doesn’t want to do this. I now may be able to borrow $25,000 to do 10-15% settlements if the credit card companies and and collectection agencies will accept this. One collection agency called and did tell me that usually any accounts that were charged off will accept a 10-20% settlement at this point. Sure all except one has charged off. Not sure what to believe anymore with these companies. I just would like to know if you feel this is a possible solution to this situation before retaining a lawyer and filing?

Asked on January 13, 2011 under Bankruptcy Law, Ohio


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 12 years ago | Contributor

It's possible to settle with creditors, but bear in mind the following:

1) Creditors don't have to settle--it's voluntary. So you can't count on doing this, and a creditor may refuse for any reason.

2) If an account has already been  charged off in full, they can't ask for  any money--including a partial settlement. On the other hand, if it's still open at this time, they can, if they choose, take a partial settlement and charge off the rest.

3) Having charged off and partially paid accounts on your credit record will hurt your credit almost as much as filing bankruptcy according to most information--and you'll have paid $25k to do that, and will still be obligated to the firm you borrowed that money from.

If the debt is unsecured, and if you owe that much, then declaring bankruptcy may be in your best interest. Still, it's a complicated issue; if possible, consult with a bankruptcy attorney.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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