natona asked:
Would it make sense to do this instead of filing Ch 7 bankruptcy?
My friend told me she stopped paying her credit card bill and they finally negotiated her balance down to $1200 from $8000.
I’m considering filing ch 7 bankruptcy anyway which would obliterate my credit..
Would this be a BETTER option?
Is it worse or better for your credit?
Would it make sense to do this instead of filing Ch 7 bankruptcy?
My friend told me she stopped paying her credit card bill and they finally negotiated her balance down to $1200 from $8000.
I’m considering filing ch 7 bankruptcy anyway which would obliterate my credit..
Would this be a BETTER option?
Is it worse or better for your credit?
#1 by jlf - December 30th, 2009 at 04:36
Don’t count on it. And it will severely damage your credit record.
#2 by Steph - January 2nd, 2010 at 10:59
When companies do that, they have to “write off” what you didn’t pay as a loss. They turn all that information into the IRS. If it is more than a certain amount (I think 5000, but I’m not sure), then you have to report that as income on your taxes. If you don’t, you can be audited and end up owing the government a lot of money.
Anytime a debt is negotiated down, it’s on your credit report for 7 years.
#3 by twoXofXhearts - January 5th, 2010 at 16:06
It depends on the company and if you are in collections. Normally, yes. But often, no. It can hurt your credit score but I had the same issue with HSBC I took a lower payment and took out a 200$ card to rebuild my credit. Making only 20$ purchases a week, I paid 40 a month plus the interest and stabilized my credit in a little over a year
#4 by bdancer222 - January 7th, 2010 at 17:38
The actual credit card company is not likely to accept less than full balance unless you have some permanent change of status, like medical disability. But even if you do, negotiate settlement, the account will be report to the credit bureau as charge off/settled — a negative. You will also be sent a 1099 for the forgiven portion (anything more than $600) which will have to be included on your income tax return.
Now if the account gets sold off to a collection agency, you will have a much better chance of settling for less than full balance.
As far as what’s better for your credit, it’s all bad. Late payments and charge offs stay on your credit report for 7-1/2 years from the date of first deficiency, whether paid, settled, or unpaid.
Have you considered credit counseling? Check here for a NFCC member: . These are legit, non-profit companies that offer debt management plans for a nominal fee. They negotiate lower interest rates and payments so you can pay off your debt.
While in the program, it is noted on your credit. However, upon completion, that notation is removed and you will have decent credit.
You will probably be required to seek credit counseling before filing chapter 7 bankrutpcy anyway.