First let me explain my situation.
I have two credit cards that were used for a LLC, a construction company I had. After six years, I was forced to close it in 2014. My largest customer, 85% of my business, left the property management company he represented, he gave us 90% of his jobs. I was unable to make up the business.
I was left with two very large bills.
I can not afford to pay either settlement at this time. Both have offered hardship programs at very low interest for 60 months that can still be settled at any time.
I am trying to decide if I am better off filing for bankruptsy or leave them as charge offs and try repaying the debt. My biggest concern is how either will reflect on my credit report. Is one less damaging than the other? Until this, I've always had a great credit, no lates, two of my accounts have a length of credit of 39+ years. I have also had car loans and a morgage that were all paid as agreed.
Any insight would be greatly appreciated. Thank you.
Well they are both going to hurt your credit.
If you BK, you will essentially wipe out the debt, but it will remain on your report for 10 years. You can start rebuilding right after discharge and should be able to get your scores in the 700s within a couple of years.
If you settle the debt, it will impact your score less and less once it is paid off and the older it gets. However, the debts will fall off your report 7 years after the date of first delinquency. So if the first late payment happened in 2013 that caused the account to get charged off, it would fall off your reports in 2020. (Just an example since you didn't list the DOFD, but sounds like they are more recent). It also might be hard to get additional credit until the debts are reported as paid or settled.
Basically, settling on the debts will get them off your reports sooner, but you will have to pay them. BK will get you out of debt, but will be on your report longer.
You will have to decide which is best for you, and if you can set up a plan and afford to pay the debts back. You'll also have to make sure you meet income requirements if you want to file Ch. 7. A Ch. 13 would essentially be a payment plan to pay back a portion of the debts, similar to settling them.
If these were consumer related , you could have used arbitration route. Not sure this is option with commercial.
I would not BK at this point. Let them age, you will get better settlement terms as they get older. Some OC's sue some don't.
Chase sued me on a 17k cc debt, i settled for 20% after they got into trouble. They did not even go after a 20k credit line i defaulted on.
Its hit or miss. BK is last resort option when you backed into corner. They have to sue and go to court to get judgment, then they can levy accounts or garnish pay. You are a while a way.
You may be able to settle and get pay for delete. BK is serious. If follows you around for long time. Some applications ask "Have you ever filed BK ? " You want to be able to say no.
one other point - those payment plans reset the SOL i believe from a FCRA and legal perspective so I would avoid them. Lump sums are best.
go out and just google JAMS arbitration for starters and see where that takes you. Arbitration has allowed me to use leverage to get favorable settlements. But your debts are commercial so I don't think arb is path for you.
No sure how you can cherry pick accounts to exclude, I think you would need to reaffirm the debts if you did file, I don't know.
I would personally use an attorney. Not something you want to screw up.
I would go to (mod deleted name of company) and just settle for a fraction of what is owed. As long as you have positive trade lines such as a mortgage or car payment and you never mis a beat you should rebound after 6 months of settlement. You don't want to lump your home and auto and every other personal creditor into business matters. If you can seperate them, then do it. What you are describing can be resolved pretty quickly. if you have the ability to settle.
I would go to (mod deleted name of company ) and just settle for a fraction of what is owed. As long as you have positive trade lines such as a mortgage or car payment and you never mis a beat you should rebound after 6 months of settlement. You don't want to lump your home and auto and every other personal creditor into business matters. If you can seperate them, then do it. What you are describing can be resolved pretty quickly. if you have the ability to settle.
You can't exlude things from BK, so everything you have would fall into the BK. You can look as SIF, however if you make payments and the account isn't past statute in your state it will restart the stature from the last payment date. SO if you do SIF I would do a lump sum, not payments. Remember that if you do SIF you will most likely have to claim the difference owed as income on your taxes.
The creditor will send a 1099 for the difference between what is owed and what is paid if it exceeds $600. So if you owe 10k and settle for 6k, 4k must be includable in income.
If the person is insolvent at the time, they can file form 982 and exclude the 1099 income to the extent they are insolvent. Insolvent being debts exceeding assets.