topic Re: Tough Choice - Filing Chapter 7 or Waiting for Charge offs. Which one is better for the time af in Rebuilding Your Credit

Tough Choice - Filing Chapter 7 or Waiting for Charge offs. Which one is better for the time after?

MGM — Sat, 07 Feb 2026 05:18:48 GMT

I trying to answer the following question for me, but I sure can use all the insights you guys might have since I never been there before:

When choosing to file for Chapter 7 or waiting for the unsecured debt to age out of my credit history, which route would be better/faster to get back to a 620+ FICO score after the event so I can qualify again for a mortgage (the only credit line I will need in the future)?

Background:
I have 120k in unsecured credit (bank cards) with a perfect payment history for the last 35+ years and no derogatory notes. 2/3 of that was accumulated during the last two years, when the repayment of an investment I had made 8 years ago (limited partnership unit) was extended by 2 years and I was running out of all other assets to cover the cashflow gap and drew on all credit lines I could get.

Current self-employment income covers expenses and is safe as long as I can walk and drive, but I am no longer able to service the unsecured debt. Secured debt consists of two cars with negative equity, which we need to generate our income with (and the home we rent). In 15 months I can draw social security which will put us over the hill in any case.

Now by end of Jan 2026 the investment was to be repaid and we had planned to eliminate all unsecured and some secured debt so we can start the mortgage hunting process (building a new home on our own lot). Now they delayed repayment for another 6 months due to follow up effects of COVID and hurricane Helene; and I give it a fair chance that it could be 12 or 18 months until they finally can do the repayment (I am one of about 400 investors with a total in excess of $220 Mio. at risk). The investment is illiquid (real estate) and there is no market for it so it can not be resold (not even by the bankruptcy trustee, but nothing is 100% certain in life except death).

I have three options now:
1) file for chapter 7 asap which stays on the report for 10 years

2) let most accounts go to collection which will drop off after 7 1/2 years, keeping only the ones relevant for me (like oldest card, bank card that might do the mortgage and has the secured debt) for the next 15 months with the help of friends (new debt)

3) keep all accounts current for 6 months with the help of friends, and if the investment isn't repaid then, let all accounts go to collection.

Since I have to expect that the delay in repayment will be more than 6 months, any account I stop paying now will be charged off by then.

Once the investment is finally paid back, I am judgment proof since the funds will be held in a joint acct with my wife (she will file chapter 7 on her own debt), the future home is exempt as it will be our homestead (we're in Florida) and any non-exempt employment income will be . I currently hesitate on chapter 7 because I can not 100% ensure that a trustee will not try to sell the investment to someone eligible for a fraction of a penny on the dollar (would have to be a foreign natural person and they would have to get the consent of the partnership) .

I would like to pick the option which allows the FICO score to recover the fastest within 24 months. I don't know if this happens in a linear way or if it is event driven (assuming I can get new credit during that time and stay current, or in case of option 2 I stay current on all the cards I keep.)

Currently I am at 687 (Fico 8), looking at ~510 with bankruptcy and -560 when I stop payment on all accounts. The FICO simulator indicates ~610 if an account goes to collection, no idea where it would be if multiple (but not all accts) go there. (Fico 9 will exclude paid collection accounts so I can tweak the score there).

There you have it. Which choice should I make? Oh, btw, the equity partners in the investment are all individual families with a total net worth of $1bn+. "Their" payment delay now becomes my payment default, and I pass it on to the banks, who pass it on to ..... And the way it seems to play out, I will end up with more cash in hand because of it - just crazy.

Re: Tough Choice - Filing Chapter 7 or Waiting for Charge offs. Which one is better for the time af

FicoMike0 — Sat, 07 Feb 2026 18:11:35 GMT

Wow, that's quite a situation.

You seem to know a lot about bk7 ins and outs, id be very careful that it's all correct. You mention homestead exemption, but don't seem to own a home, I hope this is all based on competent legal advice.

So, you have $120k in card debt and an investment which seems to have required ongoing contribution. This investment sounds like a loser to me. If it requires additional contributions, the bk7 might get you out of it.

You seem to be fixed on a goal of getting a mortgage in two years. I see that as being doubtful. I wouldn't count on owning the land after bk7 either.

I hope I'm wrong about my negative impression, obviously I don't know the details.

Re: Tough Choice - Filing Chapter 7 or Waiting for Charge offs. Which one is better for the time af

Patient957 — Sat, 07 Feb 2026 18:43:09 GMT

If you default on 120k in unsecured credit (bank cards), chances are near certain that one or more banks will sue you. How does that factor into your thinking about your options? You seem to have thought this all through, so I'm thinking you considered this factor, but you didn't mention it in your post.

Hope I'm wrong, but your "investment" sounds more like a scam. If it's not a scam it's about the riskiest "investment" imaginable. Borrowing on credit cards to cover "the cashflow gap" of a so called investment is downright nuts, especially given you acknowledged yourself the iinvestment is illiquid. That road leads to only one place, which is where you are now.

I hope it all works out for you in the end according to your plan. I really do. But unfortunately, I have no great advice for you. Sounds like Ch 7 might be a good option, but who knows, given the uncertainties of the situation you're juggling.

Re: Tough Choice - Filing Chapter 7 or Waiting for Charge offs. Which one is better for the time af

pizzadude — Sat, 07 Feb 2026 18:53:38 GMT

Assuming this isn't some kind of pyramid scheme, you should consider the timing of filing BK as it relates to your "investment", which would likely be scrutizied as part of a look-back review.

Re: Tough Choice - Filing Chapter 7 or Waiting for Charge offs. Which one is better for the time af

MGM — Sat, 07 Feb 2026 20:21:27 GMT

Need to shut down the focus on the investment - it's a one time investment in a new economic enterprise that creates jobs in the US - and allows you to become resident here. Some are scams out there, but they fail early. This one is fully succeeding (created almost 5'000 jobs and is fully operating and has plenty of value (if sold). And due to the nature of it, it is regulary reviewed by the fed govt - I would say it is more scrutinized at most times than any public securities offering (and no, these are not shares in WeWork It's just the nature of the beast that sometimes business plans don't follow time plans, hurricane Helene delayed some development of residential lots that will be used to repay the investors.

The investors have a lien on mosf of the property, but it makes no sense to pull the trigger there and end up with undevelopped land - much less value than if you if develop all 700+ lots and sell them for 1 mio each

Yes I have looked into everything deeply and will double check my analysis with an experienced bankruptcy attorney - who will not have the same knowledge about impact on FICO scores that have the people who went through it themselves. And I have no problem with potential lawsuits - they can be settled too. But if you have no blood, then squeezing the turnip just costs you more money.

Re: Tough Choice - Filing Chapter 7 or Waiting for Charge offs. Which one is better for the time af

MGM — Sat, 07 Feb 2026 20:25:25 GMT

Anytime you lend money to another party with the promise to be paid back on day x is frought with risk. So is putting the money in a bank account . You might not get it back at the time YOU need it! I am old enough to have gone through the S&L mess in the 80's.

Re: Tough Choice - Filing Chapter 7 or Waiting for Charge offs. Which one is better for the time af

FicoMike0 — Wed, 11 Feb 2026 20:33:12 GMT

You are correct that bk attorney may not understand, or even care, about credit score risk. Hes focused on the finance side, not fico. You probably can get better advice here on the score impact of, say a bunch of lates and charge offs vs. A bk7.

I also think trying to game an upcoming default situation to minimize score impact could be a fools errand. You probably should go with the best decisions for finance outcome and live with the fico impact.

Re: Tough Choice - Filing Chapter 7 or Waiting for Charge offs. Which one is better for the time af

E36 — Wed, 18 Feb 2026 18:57:06 GMT

@MGM wrote:
I would like to pick the option which allows the FICO score to recover the fastest within 24 months. I don't know if this happens in a linear way or if it is event driven (assuming I can get new credit during that time and stay current, or in case of option 2 I stay current on all the cards I keep.)

My personal experience with charging off in August 2022.
Once the lates and charge off started, my FICO dropped to low 500s in July 2023. The accounts closed and I started setting up payment plans for settling for less. I did not apply for new credit because I thought it would be weird to apply for credit while telling these companies I can't pay. Once most of the payment plans were set and I felt ready, I started to look to rebuild.

(I wish I tracked my FICO from 2022 to 2023, but I was to overwhelmed and depressed to even look at my credit reports and score.)
August 2022 -Sept 2022 - DOFD. I had 7 Chargeoffs 2 Citi, 1 Capital one, 2 Chase, 1 Synchrony, 1 Local Bank. Citi doesn't show up in my credit report after I settled with the creditor so my report only shows 5 Derogotaries. Chase keeps their debts. Amex does too from what I read. What this means is you can't Pay For Delete. Charge Offs are Major Derogatories. It's affects lessen over time.

Even though I settled, zero I have $0 balance debt, pay my cc in full every month and keep my reported utilization less than 9% of my 29.8K CL, my FICO is 690-710. It's almost 4 years from my DOFD. The 5 major derogatories are holding my score back. I sometimes wonder if I kept two in good standing, and had only 3 derogratories if that.

Your Option 2
If you have over $100K in debt and you plan to charge off and not pay them in 7 years. There are several issues.

$100K+ will continue to stay on your report. And every month, they will report CO (Charge Off) until you settle. This will hold your FICO down.
Depending how big the debt is, you risk getting sued. I never got letters, but I didn't want to wait to find out, hence started the negotiations and start payment plans from 2022-2023. Also did not apply for new credit. If you declare significant income creditors watch when you apply for credit, what does that tell the creditors? To me having $30K+ Debt, while trying to build up CL and trying to settle would not look good.
Who did you Burn?
- When you CO, How would you rebuild? Chase, Citi, Amex have internal black list. It takes people 7, sometimes 10 years to get back in. Who will you burn? Chase? Amex? Wells? Citi? US Bank? Your Credit Union? The ones that have let me back in is Capital One and Synchrony.
- Banks that you burn will may not even allow you to apply for a secured card, no matter how willing you are to give a deposit. Again how can you apply for a credit card from a bank you owe money too (and they still can collect and sue - check your statutes of limitation laws), they would just want you to pay them first.
- The more you burn, the choices get limited:
  - I've never burned BofA, Wells Fargo, and US Bank, but they don't want me. BofA won't even give me a secured card. Wells doesn't offer a secured card. (Chase doesn't either BTW). I may be able to try with US Bank with a secured card.
  - So you are left with: Discover, CapitalOne, Credit Unions or Regional Banks
  - If that doesn't work, you are left with Merrick/Ollo, Mission Lane, Mercury (less predatory than the major fee harvesters)
  - If that doesn't work you are left with FinTech Builder Cards.
  - If that doesn't work you are left with "fee harvesters" like Credit One

Here's a BIG ONE: If a lender cancels a debt you owe, the IRS may treat that forgiven amount as taxable income. Which is why some people go the Bankruptcy Route. In Bankruptcy, it's not taxable. If I'm not mistaken.

Your Option 3

Let's say you keep monthly payments current with $100K debt at average 20% APR, thats $20K a year. That's $1,667 in interest alone a month. That's $10K in interest in 6 months. Granted I'm assuming you will be paying the minimum payments, which I have to guess is higher than $1K a month. You may have to decide if it's worth it to you if you think the investments will pay out by then. If you send to collections after 6 months, it's basically option 1 or 2, just delayed after 6 months.

I personally went with the Charge Off Settlement Route, wait 7 years for derogs to fall off. And it's taking time.

Aug 2022 DOFD
July 2023 (11 Months) First Credit Line reported $1.5K (Fake CL) - FICO 508
Nov 2023 (1 Year 3 months) First Unsecured CC Ally $1K - FICO 547
Mar 2024 (1 year 7 months) Second Unsecured CC CapitalOne SavorOne $3k - FICO 605
Mar 2025 (2 years 8 months) Paid off all my settlements. $0 Balance Debt - FICO 686 (FICO increased, the more I paid down my settlements and it showed as settled or paid as agreed.
2025 - Applied for more cards and CLIs.
Jan 2026 (3 years 6 months) 29.8K TCL, <9% Utilization, Statement Balance Paid In Full every month, No Lates since July 2023, 691/709/689
I'll gardne and increase CLI, no new hard inquiries, keep utilizaiton low, but honestly I don't think I'll hit 740 for a while. I read that the derogs fade, but the score plateus until it's removed off my report completely, with people reporting major jumps after that.

Someone that's gone through Chapter 7 Bankruptcy can chime in, it may be faster (and more beneficial in your case). When I read success stories of being let back in or rebuilding. Bankruptcy seems to be faster and better.

Re: Tough Choice - Filing Chapter 7 or Waiting for Charge offs. Which one is better for the time af

MGM — Thu, 19 Feb 2026 02:55:37 GMT

@E36 Thanks for sharing your experience - that's what I was looking for in this forum. I can answer a few of your questions, as of today I am not late on any bills - but that will change tomorrow.

All major banks have granted credit lines over the years (BofA, Citi, WF, Amexco, Synchrony, Discover, Goldman Sachs and a local CU). At the high point my credit line topped 180k, for 30 years+ I had a Citicard with a limit above 30k.

My statue of limitations is generally 5 years and the time-barred claims will drop off after 7 years from the credit report, 10 yrs for Chapter 7.

However according to https://www.consumerfinance.gov/ask-cfpb/how-long-does-information-stay-on-my-credit-report-en-323/
the following applies:
There are also certain instances where credit reporting companies may nevertheless report negative information outside these time limits. Time limits on reporting negative information do not apply if the credit report will be used in connection with:

Your application for a job that pays more than $75,000 a year
Your application for more than $150,000 worth of credit or life insurance

I don't mind the lawsuits as my income can not be garnished (too low or exempt), and if the investment is eventually repaid, it will be held in a joint acct (TBE = tenancy by the entirety defense in Florida), up to 190k can be rolled into equity when buying a new home (creates capped homestead exemption, after 40 Months of ownership the amount is unlimited). I can always go Chapter 7 to get rid of them as well.

I don't need credit in the future except for the mortgage.

I had some initial discussions with bankruptcy lawyers here in Florida, they all pointed out that with the 7 steps to 720 model (Philip Tirone) it is possible to get to a 720 FICO within 12-24 months.

I am now starting to inform my creditors about the impending late payments and asking for loan modifications. Will post the results here to shed some light on that - basically I am asking to convert the CC's to 0% cards for 12 months and for the secured debt to extend the maturities to lower the minimum payments. If everyone agrees, I have a chance to pay off these debts on time and keep my credit score intact. I have an idea how this will go but will post how it really goes

Re: Tough Choice - Filing Chapter 7 or Waiting for Charge offs. Which one is better for the time af

E36 — Thu, 19 Feb 2026 06:29:11 GMT

@MGM wrote:
@E36 Thanks for sharing your experience - that's what I was looking for in this forum. I can answer a few of your questions, as of today I am not late on any bills - but that will change tomorrow.

All major banks have granted credit lines over the years (BofA, Citi, WF, Amexco, Synchrony, Discover, Goldman Sachs and a local CU). At the high point my credit line topped 180k, for 30 years+ I had a Citicard with a limit above 30k.

I had some initial discussions with bankruptcy lawyers here in Florida, they all pointed out that with the 7 steps to 720 model (Philip Tirone) it is possible to get to a 720 FICO within 12-24 months.

I am now starting to inform my creditors about the impending late payments and asking for loan modifications. Will post the results here to shed some light on that - basically I am asking to convert the CC's to 0% cards for 12 months and for the secured debt to extend the maturities to lower the minimum payments. If everyone agrees, I have a chance to pay off these debts on time and keep my credit score intact. I have an idea how this will go but will post how it really goes

Yes. Ch 7 would be faster because it zeros out the balance and you save a ton of money that you can use to bank, build relationships, build up savings so you keep your balances low and pay no interest.

I read the reason why it's fast is because lenders know you can't file bankruptcy again for 8 years. you zero out balances. It shows discharged vs settled for less. Also maybe less number of serous.

BofA, Citi, WF, Amexco, Synchrony, Discover, Goldman Sachs. Do you have a balance with all of them?

Amex has long memories. Usually their deal is to setup a payment plan for the full balance, they'll stop the interest. And afterwards they'll allow you to apply for Amex Optima before getting back their regular offering.

if you pay for less, discharge etc. I read it takes a while to get back in.

you didn't list Chase which is great because they are another one with a long memory.

Synchrony let me back in for cobranded Venmo.

Capitalone and Comenity are friendly for rebuild.

NavyFed is also friendly.

It's great that you are working with bankruptcy lawyers. If I could go back, I would probably talk to non profit counseling to give options.

Re: Tough Choice - Filing Chapter 7 or Waiting for Charge offs. Which one is better for the time af

MGM — Fri, 20 Feb 2026 21:34:35 GMT

Opps, forgot Chase I did spread the risk evenly across all of them, and now I am finding out how THEY deal with the situation. I keep this thread running with updates, should be quite useful for any reader. It looks like I should use the Chapter 7 route - clean, hard and quick and a lot less emotions. But I would need to delay it until next year - the corporate landlord of our rental home does not accept new renters with an open bankruptcy; renewal offers can be impacted in case they soft-pull your credit score before sending out the offer. I will sign a 2 year lease which gives me more time before that risk could materialize.

So here are my current experiences trying to get my creditors to work with me (I am current with all of them):

Credit Union - you talk to people who actually listen, ask questions, indicate that they do offer assistance and request that you document your situation with full disclosure. COOL - they want ME to propose a payment plan that would work for me, but it is limited for a 6 month period. Their workout dept. will evalute the proposal and if they think it flies, would send it to senior mgmt for approval. They state they want to keep the relationship ongoing and help where they can to allow this to happen. Allows me to do a voluntary car repo in the form of a "short sale" to a third party (Carvana, CarMax) to minimize the deficiency payment because it has negative equity. A++ response in my book.

Wells Fargo - I used the chat function (no hold time!!!) to people who read but don't pay much attention to what you actually wrote, ask only the questions their system tells them to ask, indicate that the system decides if and what kind of hardship payment WF can offer and then want to know "do you want to proceed??". Ok black hole, tell we what you offer The deal is actually good for me: 12 month payment plan during which time you pay 1% of the balance per month at 1 % p.a. interest. No late fees and account stays current during that time. Pushes the point of no return right into next year, perfect for me. I give them an A-, just because I had to retype my answer twice in a different form so they understood that my income has not been reduced, but that I have a liquidity event due to a payment default!!

Citibank - tried the old phone route, 45 min hold time and three inter-connections later I am in Southeast Asia (??), having a bit difficulty with the accent but get the msg that I am at the right place but at the wrong time. They CAN NOT offer assistance until you actually are past due!

Mind you that I am a 38 yr customer of Citi and never had a late payment (any late), just paid 4x the monthly min amount before the due date to have some credit available, they reduced the limit within 24 hours to the balance plus change for the second time in 6 months. Never mind, they were so kind to tell me that once I am late, they will offer me a hardship plan that once it is completed, will result in the account being CLOSED. My grading is an UF - as in utter failure.

Taking a break for this weekend after the Citi call - I knew that's how it works these days. The bigger they get, the more AI they got and the smaller the brain. I can play that game too, so its monthly minimums for now until they stop too.

Re: Tough Choice - Filing Chapter 7 or Waiting for Charge offs. Which one is better for the time af

MGM — Wed, 18 Mar 2026 17:56:48 GMT

Final update:

Chase (Amazon):  Simple process, got an automated proposal online. Didn't take it right away, waited a couple of days and the proposal went down from $298@12% to $259@6%, resulting in account closure and 60 mth payment plan to eliminate the balance. Found out that if you can't maintain the payment plan, the account goes into collection at 120-150 days instead of the normal 180 days. Current minimum was $410.

Synchrony (Sam's Club):  Simple process, calling the right number and getting two choices. I took the long-term one which resulted in account closure, 60 mth payment plan at 0% interest to eliminate the balance. They indicated it should be fine to get a new card once the payment plan has been completed.

I actually applied right after entering into the payment plan for a Synchrony Amazon Store Card online to replace the Chase card, got approved with a $500 credit line.

Discovery:  Simple process, calling the right number and getting two choices. 12 month proposal would lower interest rate by 3% (duh), 6 month proposal lowered the rate by almost 6% to 9.99%, reduced the minimum monthly capital repayment amount from 1% of balance to 2/3% of balance.

Amexco:  Odd process, initially got two options online while logged into the account. To be able to find that page, I first had to call and talk to a human operator, who offered me the same two choices and told me to log into my online amex account and go to "https://global.americanexpress.com/financial-relief" any time I wanted to accept it. You need to fill out a survey first, then you get the options. They change over time, even if give the same respones to the survey. 12 month was quoted at $268@8%, 48 month was $351@10% and account closure (balance paid off). Current minimum is $411.

BofA:  Play the lottery. Their system dynamically update your choices several times a day - so they say. So far the only choice I had was to go to debt counselling, an normally insulting proposition given the circumstances but since they are taking to a computer, the humans are excused. My last attempt was using the chat function in the "can't pay the bill" section, the result was an offering to pay an amount that corresponds to my minimum amount to make the account "current". It is currently 23 days late.

Credit Union Update:  Working with humans to find a mutual beneficial solution does not guarantee that the other side has the intellectual capability to understand your situation (we have our rules and regulations!). I'll get it to their mgmt committee eventually to decide if they like to hit their loan loss reserves with 40k or maintain a relationship with the chance to avoid a loss alltogether and allow for new business!

I'll post my conclusion later, first I got to walk the dog....

Re: Tough Choice - Filing Chapter 7 or Waiting for Charge offs. Which one is better for the time af

MGM — Wed, 18 Mar 2026 18:52:43 GMT

My final thoughts at this stage are simple. Almost no one is interested or even capable of working with a debtor to find a mutually beneficial solution. A debt is ledger entry on a balance sheet, and employees can follow only "rules and regulations". So if anyone finds themselves in a similar situation, first analyze if you can file for chapter 7 (means test!) or 13 (work out). If either works for you and you can afford the lawyers fee (my case about 3k), take it - UNLESS you have a good reason to just abandon the debt and take the heat. Btw, you can always file for bankruptcy later

Stay away from debt counseling (BofA mandates it) and the likes - they just get over-paid to do something you can do yourself. And you will owe taxes on "forgiven debt" which you CAN NOT GET RID OF IN BANKRUPTCY. In my case, I run the number with Money Management International and ended up with a ready to sign agreement online without ever talking to a human being. For the change of cutting my CC debt in half (or more or less, no guarantee given), they want 15% of the ORIGINAL debt balance . In my case, that would be 18k for a chance to save maybe 60k in debt payments which I will be taxed on. And I would have to pay 1.4k (or more or less) for 60 months. Chapter 7 costs 3k and I pay nothing.

For those wondering, I have a legal background in american financial and banking law and I did spend 30+ years working in the financial world, including Wall Street. There is a simple saying you can take to heart: If you owe a lot of money to a bank, the bank has a problem. If you only owe a little money to the bank, YOU have a problem. Until you use the exit door called bankruptcy.