Settling with Creditors During Chapter 13 with Goal of Dismissal, Possible? How does it work?

[Anonymous]

I am currently in month 20 of a 60 month plan. With the required alimony payments, my plan actually steps up at months 30 and again at month 48. In addition, the court is requiring me to surrender bonuses and future stock options. While my payments don't reach 100%, if the the other assets mature I will easily hit a 100% plan. My plan is very back loaded, so it seems logical I should try to settle these debts if at all possible, once secured tax debts are paid.

I initially filed Chapter 13 because my former divorce attorney required me to sign a confession of judgement to complete the trial. I had no choice, given the future of my children was on the line. He was very aggressive in collections, pushing me into Chapter 13. I did not have sufficient cash flow to make min payments on my debt. Fast forward a few years, and I can see a place where I could generate some cash to settle these debts at lower amounts, assuming the credit card companies will play ball. A few questions:

1) Will creditors even talk to me, given the automatic stay?
2) For those that have successfully navigated this endeavor, did you make all the deals and then move to dismiss? Or did you have to move to dismiss first? If the deal is in writing, is it binding? Would a Ch 13 dismissal affect those deals?
3) In the eyes of the trustee, is it acceptable to have these discussions with creditors?
4) What if most settle, but not all. Does the trustee see this as preferential treatment? Will trustee move to dismiss?
5) Does it matter what funds I use? I've heard that this could be done with exempt funds. such as a retirement loan. I've also heard the Trustee might try to take all your money if they get wind of it.
6) Any other watch outs?

Thanks in advance for any perspective.

[krielly]

This seems like a precarious plan to me.

I do not think that the creditors will even be willing to discuss anything with you, given that they would be in violation of the stay.

You are close to being halfway through your plan.....I know it's a long long 60 mos. I've been there, done that. You have mentioned that "fastforwarding" things have changed, and it sounds like for the better, however keep in mind that a few months or so down the road you could find yourself headed the other way.

Once you filed the 13, discharged or dismissed it will remain on your credit report for the next 7 to 10 years. 7 if you complete the plan, and 10 if your case is dismissed. Even if this dismissal is voluntary....

I won't pretend to know the legalities of what you are suggesting, however my instinct tells me you would have to have your case dismissed before you could even begin these discussions with creditors. It seems best IMHO to leave things alone.....

PS: if you DO hit a 100% plan, the good news is you will complete sooner than the 60 months.....

K