By Kitty J. Lin, Attorney at Law<\/p>\n
Once you start missing payments to your creditors, chances are, after attempting to collect from you, your creditors will sell or transfer your debt to third party collection agency.\u00a0 The objective of these collection agencies is to try to get some sort of payment from you.\u00a0 Most of these agencies try to call you or send you letters indicating that they are willing to settle your debt for less than what you owe to the original creditors.\u00a0 The question then becomes, should you take them up on that offer?\u00a0 The answer is, it depends.\u00a0 Here are some scenarios:<\/p>\n
You are about to file for a Chapter 7 bankruptcy<\/span><\/strong><\/p>\n If you are about to file for a Chapter 7 bankruptcy, which discharges all unsecured debt, then the obvious answer to the question of whether you should take the collection agencies up on their offer to settle the debt is \u201cNO.\u201d\u00a0 There is no point in settling a debt which you intend on discharging through your Chapter 7 bankruptcy case.\u00a0 Additionally, any debt you pay to creditors within 90 days prior to filing your bankruptcy case is considered a preference payment.\u00a0 This means that the trustee may potentially go after the creditor and request the money (paid within 90 days) be paid back to your bankruptcy estate.\u00a0 The trustee will then pay the money to your creditors equally.<\/p>\n You are about to file for a Chapter 13 bankruptcy, and you will pay less than 100%<\/span><\/strong><\/p>\n <\/span><\/strong><\/p>\n If you are about to file for a Chapter 13 bankruptcy, and your monthly Chapter 13 payments will not pay 100% of the debt, the answer will depend on what percentage will be paid to unsecured creditors.\u00a0 If your creditors are offering to settle your debt for 50% of what you owe, and you will only be paying 10% to your unsecured creditors, then the obvious choice is to reject the settlement offer.\u00a0 If you will be paying 50% to your unsecured creditors in your Chapter 13 plan, and the creditor is offering to settle your debt for 25% of your debt, then it may be a good idea to take the creditors up on their offer and settle the debt for less than what you owe.\u00a0 If you do not know approximately what percentage you will be paying to your unsecured creditors in your Chapter 13 plan, then it may be better to err on the side of caution and reject the settlement.\u00a0 Remember, your creditors only get paid if they file a proof of claim in your Chapter 13 bankruptcy case.\u00a0 If they do not file a proof of claim, they will not be paid.<\/p>\n You are about to file for a 100 % Chapter 13 bankruptcy<\/span><\/strong><\/p>\n <\/span><\/strong><\/p>\n If, based on your circumstances, you know you will be paying off 100% of your creditors in your Chapter 13 plan, then your best bet would be to take the creditors up on their offers and settle your debt prior to filing for your Chapter 13 bankruptcy.\u00a0 Chances are, if you are a 100% plan, you will need to pay a little interest on top of the 100% payment as well in the plan.\u00a0 Thus, whatever offer your creditors are giving you would most likely be more favorable than if you were to pay them through your Chapter 13 plan, as you will be paying them over 100% in the plan if they file a proof of claim.\u00a0 The preference payment issue would not come up in a 100% Chapter 13 plan, as all your creditors will be paid at least 100% of the debt<\/p>\n You do not qualify for bankruptcy<\/span><\/strong><\/p>\n <\/span><\/strong><\/p>\n If you do not qualify for bankruptcy, or would like to avoid bankruptcy, then negotiating with these creditors is your best option to settle your debt.\u00a0 Remember, you can always negotiate with these creditors!\u00a0 You do not have to take their first offer!<\/p>\n If you would like to know more about your options, feel free to contact an experienced Fremont bankruptcy attorney<\/a> or San Mateo bankruptcy attorney<\/a> today at 877-9NEW-LIFE or 877-963-9543 for a free consultation.<\/p>\n","protected":false},"excerpt":{"rendered":" Once you start missing payments to your creditors, chances are, after attempting to collect from you, your creditors will sell or transfer your debt to third party collection agencies. The objective of these collection agencies is to try to get some sort of payment from you. Most of these agencies try to call you or send you letters indicating that they are willing to settle your debt for less than what you owe to the original creditors. The question then becomes, should you take them up on that offer? The answer is, it depends.<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[7],"tags":[],"_links":{"self":[{"href":"https:\/\/www.westcoastbk.com\/blog\/wp-json\/wp\/v2\/posts\/255"}],"collection":[{"href":"https:\/\/www.westcoastbk.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.westcoastbk.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.westcoastbk.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.westcoastbk.com\/blog\/wp-json\/wp\/v2\/comments?post=255"}],"version-history":[{"count":4,"href":"https:\/\/www.westcoastbk.com\/blog\/wp-json\/wp\/v2\/posts\/255\/revisions"}],"predecessor-version":[{"id":520,"href":"https:\/\/www.westcoastbk.com\/blog\/wp-json\/wp\/v2\/posts\/255\/revisions\/520"}],"wp:attachment":[{"href":"https:\/\/www.westcoastbk.com\/blog\/wp-json\/wp\/v2\/media?parent=255"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.westcoastbk.com\/blog\/wp-json\/wp\/v2\/categories?post=255"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.westcoastbk.com\/blog\/wp-json\/wp\/v2\/tags?post=255"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}