Has Anyone Successfully Settled w/Discover? (4 discharges vs BK?)

[Anonymous]

My wife was considering a Ch 7 because she owes just under 100k in credit card debt and 7k in medical expenses. We had several years of bad luck that lead to those large balances, but we were paying them until the medical issue. We had an ER visit that was not covered by our insurance. Several months later, we lost our car in an accident. That's when things really went sideways and we consulted a BK attorney.

At his advice, we stopped making payments on her cards. We had some employment concerns and postponed the BK because we thought it might affect our chances if prospective employers  requested a background check.

Fast forward 1 year--my wife now has a new job and we are reevaluating our options. A credit check was not requested. We have not paid anything on her 4 cards for a year or more. 3 of the card companies have offered substantial settlement offers. Ex: we owe Amex $39k, they are willing to settle for $12k.

The one card who hasn't mailed us settlement offers is Discover. We owe them $18k.

If we could arrive at a settlement with Discover, our thinking is we should pay off the cards at the settlement amounts. But if Discover opts to recover the full amount, it looks like a BK might be our only realistic option of getting back on our feet. We are both around 50 and need to settle this debt issue and start saving for retirement while we are able.

Has anyone had any success negotiating a settlement with Discover?

Are 4 discharges of this size better than a BK, or is the damage about same?

Thanks in advance for help or suggestions.

[Anonymous]

I never received a settlement offer through the mail from Discover. I called in to discuss what my options were including a settlement but the settlement amount offered at that time was still to high for me to pay (I was attempting to settle with multiple accounts). The settlement offer was around $18,000 and the total debt owed was $20,000. I also had a 1099 prn flex position so I was ok at that point with the remaining debt with my taxes. Remember when it comes to settlements on debt owed, you will be required to pay taxes on the difference over I believe $600 as it will appear as income. I was finally successful with a small monthly payment plan that I have continued to pay. Unfortunately,  on 12/13/2020 I lost my FT status at work and now I am PT no more than 20 hrs a week. It's disheartening to know I was able to work these plans out with Disover, Amex on three cards, Citi etc and now I am having to meet with a bankruptcy attorney because my salary wont support these arrangements along with necessary bills.

I wish you the best and a Happy New Year (better)

[Espresso]

First, go talk with the BK attorney. They are experts and will be on your side. 

That said, it depends on your goals. Based on what you have shared, I would recommend strongly considering Ch7 and getting it all discharged. If you pursue that, I would stop pursuing settlements. 

Go chat with an attorney for next steps. This will get better with help.

[Anonymous]

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@Anonymous wrote:

I never received a settlement offer through the mail from Discover. 

I wish you the best and a Happy New Year (better)

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Thanks for taking the time to respond and to share your experience. Through a little research, I've gathered that Discover is one of the tougher creditors in terms of litigation, and it sounds like they are also tough negotiators. Our debt amount to Discover is about the same as yours, and I'm little surprised the settlement offer was just $2,000 from the full balance. 

If we expereience the same, I think our only viable option will be to consider a BK. The other 3 creditors in our situation all came in with much more substantial settlement offers, so we were considering trying to pay them all off. But if Discover holds firm, we may not have any other option.

Our case has been referred to an attorney and there is a court date in 3 months. My next step will be to call the attorney to explain our situation. Not sure how realistic this is, but I'm hopeful that they might consider settling for 40-60% of the original debt if they knew our other obligations and that we are teetering towards bankruptcy. I would think 50% of the original debt would be preferred to 0% if it were discharged through a bk.

Anyway, that's my thinking and I'll update this thread with the results in case it helps anyone else.

Thanks again for sharing and here's wishing you a happy 2021 as well.

[Anonymous]

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@Espresso wrote:

First, go talk with the BK attorney. They are experts and will be on your side. 

That said, it depends on your goals. Based on what you have shared, I would recommend strongly considering Ch7 and getting it all discharged. If you pursue that, I would stop pursuing settlements. 

Go chat with an attorney for next steps. This will get better with help.

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Thanks for your advice @Espresso. After looking at all the numbers, I'm leaning in this direction myself. My wife wanted us to consider repayment a final time before taking the plunge since a few of the other creditors have recently offered pretty substantial settlements. 

Excluding Discover, we could settle 70k worth of debt for $23,600. But if Discover holds firm, the total settlement jumps from 23k to 41k...and that we couldn't do. We are 51, and barely have any retirement to speak of. In fact, we were going to cash in her 401k  (totalling 40k) to pay this off. 

A year ago we retained an attorney. He has a good reputation but not the best personality. We were really scared when all of this was new and I think I asked him too many questions.  I think he's tired of us being on the fence and wants us to file or go away. We stopped paying my wife's bills and his suggestion and we are able to barely limp along by paying mine. We're trying to make our final decision in the next month or so. 

We would like to file a ch 7. We don't pass the median income test for our state, but he thinks we have a shot of passing the secondary means test because our debt obligations are so high. We make an ok living, but most of it goes out the door to pay debt we have accumlated over the years. We stopped paying her cards, but we're still paying mine until we decide if we are both filing together, separately, or I might consider a debt management plan.

I was going to create a separate thread for this next question, but do you happen to know the requirements to pass the secondary means test?

Thanks again for your helpful suggestions and for taking the time to respond. 

Here's wishing you a happy new year.

[angelofmusic86]

Please don't take your retirement money to settle debts. 

From my understanding, the second part of the means test involves looking at your cash flow monthly, but I'll leave it to someone with more knowledge to give you a better answer.

[Anonymous]

Hi, I'm in similar situation and was wondering:  since you haven't paid in over a year, has any credit card company file lawsuit? 

[Anonymous]

@Anonymous While I will allow the OP to respond with their experience, I do want to say that it depends. This is truly one of those YMMV situations.

Some lenders are known as sue happy (Discover, Cap One, Amex), but there are folks who have never been sued. 

Unfortunately, there is no particular pattern to determine whether or not your creditors will take legal action. Even owing a relatively small amount does not protect you from the creditor seeking a default judgement.

Sorry I know this isn't exactly what you want to hear.

Good luck with your situation! Seriously consider seeking a bk once it becomes clear that you will not be able to repay what you owe. 

At least seek a consultation with a few bk attorneys (the consultations are usually free). 

[angelofmusic86]

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@Anonymous wrote:

@Anonymous While I will allow the OP to respond with their experience, I do want to say that it depends. This is truly one of those YMMV situations.

Some lenders are known as sue happy (Discover, Cap One, Amex), but there are folks who have never been sued. 

Unfortunately, there is no particular pattern to determine whether or not your creditors will take legal action. Even owing a relatively small amount does not protect you from the creditor seeking a default judgement.

Sorry I know this isn't exactly what you want to hear.

Good luck with your situation! Seriously consider seeking a bk once it becomes clear that you will not be able to repay what you owe. 

At least seek a consultation with a few bk attorneys (the consultations are usually free). 

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Going to share my own experiences too, but I definitely recommend the bolded&underlined too @Anonymous 

When I was 20/21 I let my $750 CapitalOne chargeoff, they sued me and got a default judgement by the time I was 23 (I wish I could remember more details, but it was long ago lol).  I settled and paid off the balance when I was 23 and ended up having another CapitalOne card opened a few years later.  Fast forward many years of good credit decisions, life happened, and I found myself over my head.

Last year In 2019, I stopped paying my cards as filing BK was going to be my best solution at that point, but got sidelined with medical problems and didn't file until about 12 months after I stopped paying.  I owed CapitalOne around 3k this time, and they charged me off November/December 2019.    In the span of those five months between chargeoff and filing, they did not sue me. 

HOWEVER, Citi/Home Depot did.  (Though I can't tell you exactly when they charged me off, but I'm assuming the same time frame since I stopped paying all my cards at the same time.  Also, their balance was about 2.5x higher, so that probably contributed to them suing me. lol)  

So really, it is a YMMV situation, but at least you can see all my varied experiences in my life with creditors suing.