Stategic Default, Settlement or BK? Please help me

[daisyduke]

HopeMission,

authorized users are not responsible legally for any debt incurred on the card.  Joint users are however. There's a difference!! a big one! Call the bank and cancel her if she is an au don't even give her the benefit of having that TL on her credit report!! 

Let me ask you something, you have a pretty darn good fico at 730. Have you ever had credit issues before? From my point of view, credit is so very important, had i known what I know now, I would have made different decisions.  I guess what I am saying is coming from blemished credit, it's hard to recover from....it's not a place where I want you to be!

PS you are on the right boards and will get the best advice from a lot of experts here....keep reading and learning and you will be able to make the best decision for you!!

[HopeMission]

A,B or C?  Based on the answers and guidance I have received here… I think C is the wisest decision.  C)  “A strategic settlement.”  Does anyone agree w/ me? 

I don’t know.. maybe the ex can call and take herself off by herself.  Im going to Keep the ex on as AU… might give me some leverage to get her actually to pay the lil bit I was awarded in court over this 40K, otherwise the amt she owes will end up just being a tax write off for me… and even that’s hard enough to do considering im 11yrs self employed and on a weird tax schedule.  Anyone agree w/ that?

If indeed a strategic settlement is the smartest direction to deal with this 40K, I will need to somehow figure out the smartest ways to settle while trying to get the 40K down as low as possible and still being mindful of the pending derogatory on my future report.  Does anyone have any suggestions?

Again, im afraid of sitting down with more biased program pushers.  For example:  Lawyers push BK.  1-800’s offer only offer their deal with no guarantees. etc.

I had a cold call from a firm in some other state that said they will negotiate on my behalf with BofA.  Am I getting the cart in front of the horse?  Should I stop paying BofA then try negotiating with them myself?  Remember I have saved 7K extra cash to let them know im serious and hopefully bring down that 40K.

Thank you all soooo much for your guidance… I really think im getting some great suggestions and direction.  I know I will sleep better tonight.

Steven

[Travis-84]

Also, don't forget that strategic settlements have issues with them as well.

Lets say you settle the 40k debt for 15,000.  In January, you are going to get a 1099 form from your credit card company.  That 25,000 in debt that was forgiven is considered income, since after all, you spent the money, and never paid it back.  If you are in the 28% tax bracket, that's 7,000 in taxes, you might owe.  Its still a savings, but important to know. 

When the debt is forgiven, if you are insolvent (net worth <0), then you can avoid the taxes (w/o having to declare bankruptcy).   I would look into that as well before you do any debt settlement, since its good to know what you are getting into. 

[Anonymous]

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@daisyduke wrote:

HopeMission,

authorized users are not responsible legally for any debt incurred on the card.  Joint users are however. There's a difference!! a big one! Call the bank and cancel her if she is an au don't even give her the benefit of having that TL on her credit report!! 

Let me ask you something, you have a pretty darn good fico at 730. Have you ever had credit issues before? From my point of view, credit is so very important, had i known what I know now, I would have made different decisions.  I guess what I am saying is coming from blemished credit, it's hard to recover from....it's not a place where I want you to be!

PS you are on the right boards and will get the best advice from a lot of experts here....keep reading and learning and you will be able to make the best decision for you!!

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Not always so.

If you are an AmEx AU you are legally responsible for anything you have charged to the card.  Also, in some states a spouse is legally responsible for payment of the other's debts -- especially if for basic necessities. 

[Anonymous]

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@HopeMission wrote:

Thank you okstatefan5945.  The future score/ mortgage math projection and advice was very helpful.  By doing a strategic default do you think my 730 would only come down 80 points?  (650)   I think I could even afford a +100 point drop knowing that FHA only requires a 620 today.  Im confident that by using the tools on MyFico, I could easily raise my fallen score.  I would still have some cash to be responsibly/ creatively move around and make score go up even faster.  Cash to present a lender some day.  Not to mention the debt being gone will help my debt ratio and help score over time.  Yes, the derogatory would be tough to explain to a lender however I was awarded a small court judgment against the ex over the 40K. She’ll never pay but it might show that 40K wasn’t all my fault.

?  How do the CA lawsuits usually go? 

?  Anybody think I need an attorney to find out about this?

?  I feel there are more pros than cons in a strategic default.. but wouldn’t some sort of settlement be better (with all things considered)?

?  Of ALL the options and programs out there I have no idea what would fit a circumstance like this the best

?  I wish I knew what kind of score drop to predict based on a default vs. a settlement?

Thx in advance for help and guidance!!

Steven

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From a mortgage underwriter's point of view, a settled account is better than one that has never been paid.  Factor the 1099 from the IRS into your settlement $$.

[HopeMission]

Based on 06’s above comment and reading all great insight and suggestion in this thread, I agree that a strategic settlement is the best choice based on my circumstance. 

I liked how 06 presented a view from an “underwriter’s point of view”  Besides resolving as much of this 40K as possible.. (32 Personal card, 8 Bus card)

I also want to be very mindful of what that looming derogatory is going to do to my chances of getting a 1st home in a few years. 

From this thread I understand my score might go down ~125 simply because BofA wont budge until im 180 late. 

I think having 10K cash to offer BofA will be key. 

I think I understand that I might even be able to pay for a delete in a few years. 

I think the 1099 issue wont hurt as much since Im self employed and will continue reporting a loss as I have for the last 3yrs. 

I think I have said “I think” about 7 times here. 

I just know that I don’t know and could use some suggestions, direction and any number projections/ guestimates would help me sleep better.

Thx in advance 

[thrasher865]

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@HopeMission wrote:

I think having 10K cash to offer BofA will be key. 

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I wonder how willing BofA will be to negotiate when they find out that you defaulted on your debt while having 10k in cash on hand.  Did you save up this 10k before your divorce?  If you saved it up recently, after the divorce, i would question your inability to pay this debt.  If you have the ability to pay it, then not just from a legal standpoint, but from a moral standpoint, I would say you are obligated to pay it.  It might not be the most convenient option, but paying 10k of it off will really increase the amount that you are able to put toward principle with future payments.

[HopeMission]

 Thank you again everybody for knowing I have seriously considered all the options before coming on here for help.  I have just lifted the lid off this terrible can just enough related to this debt and the DW but chose to spare everybody the details and pity party.  I feel blessed I was able to borrow the 10K to hopefully offer BofA and get them to budge and feel blessed for all the help I have received in this thread!!

Does anybody have any 1099 predictions based on being self-employed and reporting a loss before any canceled debts?

Timeline and likelihood of a pay for delete once I can pay the settled amt?

Im still current on everything but understand that BofA wont budge until CO  Hypothetically how might someone consider approaching BofA w great credit and some liquid to let them know they want to work with them? 

Can someone do this on their own or should programs and lawyers be considered?

[Anonymous]

Just my 2 cents regarding BOA, and settlements.

I had a friend who did a strategic default 3 years ago with BOA, and a few other creditors. ALL of the creditors agreed to a settlement with the exception of BOA. They took her to court, and garnished wages. Her credit 3 years later is in WORSE shape than ever. If she had filed bankruptcy, she would be in the rebuilding stages right now. BOA won a judgement last year, and she is now paying them 70.00 per week. The cost of her legal fees  to resolve this matter were higher than what she would have paid to file chapter 7.

[HopeMission]

Thank you Ishmael.  Does anyone else have any BofA predictions?

Based on this thread…ff BofA just wont budge and I have to CO (180 days)… my score (730) will go down ~100pts and my balance will have 3 mons of penalty fees ~100.00.  I would be right back where I am today with the same payments and CL’s continuing to chase my balance as it goes down.  I don’t think there would be any BADDIE after I finish paying off in 4rys.  If there is, I think I might have a very workable PFD.  I think im getting finally figuring out these abbreviations.  Just wish I could figure out how to handle this matter.  Any better more realistic projections?

What do you think?

?  I think my best move would be to go at this alone… no lawyers or DMP services based on the great 411 I have gathered on these forums.

?  On my two BofA cards I should offer to pay off the 8K card in full now…to motivate them to hopefully work with me take some $ off the 32K card.

?  If they don’t budge I think I should continue to try while sitting for 180 days till CO.