Debt Settlement for endless debt? Advice?

Anonymous · ‎11-30-2020

Good morning everyone! This is my first post and I cant wait to be an active member of this forum and work towards debt freedom! I'll be posting my finances here and hoping to get some advice on how to fix this.

My Debts Are as follows

Auto Loan 1: $34,500 (Car Value $18,000) (Mini Pmt: $687)

Auto Loan 2: $20,500 (Car Value $ 9,000) (Mini Pmt: $569)

Auto Loan 3: $ 6,500 (Car Value $ 4,000) (Mini Pmt: $193)

Credit Cards: $11,365 (Mini Pmt: $328)

Pers. Loans: $2,555 (Mini Pmt: $135)

IRS Debt: $2,000 (Mini Pmt: $100)

My FICO: 568 (a few 30 day late payments and a high DTI)

My monthly living expenses including food and other misc should be right around $3,200 (not including doing anything fun)

I am a comissioned employee. My monthly (take home) income fluxuates between $4,500 and $8,500 a month.

Currently Auto 3 is a family member's car and she's paying for it and keeping the vehicle. Auto 1 is being paid for and driven by a friend but there's no telling when that will end.

Considering a bad month (COVID19 making most of my months that way), I am left with $168 after everything which is easily taken by misc things that can come up such as a vet bill or simply wanting to go out once or twice a month and IM TIRED OF IT!!!

My Plan so far:

At this point, I'm considering letting Auto 2 go into reposession and stopping all payments on my credit cards and personal loans. This would open up a little over $1,000 a month that would be able to go into savings + anything I make on a good month. Between the auto loan deficiency and the unsecured items, I would have slightly over $25,000 in bad unsecured debt. Overtime with the savings, I would hope to settle each of these debts for a max of 50% of their original owed amounts which would be $12,000 to $13,000 which means I could kill this in a year or less.

Any thoughts, advice or, adjustments I could make to this plan?

Thanks everyone!!!

ccquest · ‎11-30-2020

I'd just say don't unless you have no plans to take out additional credit in the next 5-10 years because you're credit report will be absolutely destroyed by doing that.

If you really want to be done with everything, go about it the proper way and file for bankruptcy.

You could also look into voluntary repossession and if that would help at all. It may sting to be paying for something you don't have at all, but it would bring the payments down and not destroy your credit.

as of 1/1/23
Current Cards:

Anonymous · ‎11-30-2020

@ccquest wrote:
I'd just say don't unless you have no plans to take out additional credit in the next 5-10 years because you're credit report will be absolutely destroyed by doing that.

If you really want to be done with everything, go about it the proper way and file for bankruptcy.

You could also look into voluntary repossession and if that would help at all. It may sting to be paying for something you don't have at all, but it would bring the payments down and not destroy your credit.

I appreciate the info however, a voluntary and involuntary repo will have the same effect on your score. It may only affect a lender's heart upon a manual review.

I've evaluated the option of bankruptcy and due to my income, I probably don't qualify for Chapter 7. Chapter 13 would probably have a worse effect on my credit not to mention I don't like the idea of being owned by a trustee.

I plan to negotiate for lump sum in exchange for settlement in full and pay to delete. After this, I can definitely work on repairing my credit.

Anonymous · ‎11-30-2020

@Anonymous wrote:
@ccquest wrote:
I'd just say don't unless you have no plans to take out additional credit in the next 5-10 years because you're credit report will be absolutely destroyed by doing that.

If you really want to be done with everything, go about it the proper way and file for bankruptcy.

You could also look into voluntary repossession and if that would help at all. It may sting to be paying for something you don't have at all, but it would bring the payments down and not destroy your credit.

I appreciate the info however, a voluntary and involuntary repo will have the same effect on your score. It may only affect a lender's heart upon a manual review.

I've evaluated the option of bankruptcy and due to my income, I probably don't qualify for Chapter 7. Chapter 13 would probably have a worse effect on my credit not to mention I don't like the idea of being owned by a trustee.

I plan to negotiate for lump sum in exchange for settlement in full and pay to delete. After this, I can definitely work on repairing my credit.

Problem with that idea is that original creditors don't do PFD. You may get a collections agency to do it, but some of them refuse as well. In order to try and get deletions, these accounts would go into collections, you'd have two reportings per bad debt, and any PFD you get will only concern the CA. The OC's reporting of the debt will remain. Also, many CAs will only offer to delete if paid in full - counting on them to accept half the debt AND delete is setting yourself up for disappointment. Some will just hang up the phone and start court proceedings to sue you, get a judgment, and collect the full amount.

After a few years you might have luck getting some removed with a goodwill letter campaign, but there is no guarantee of that.

Can you look into overtime at work, a side gig, or any other way to raise money?

Anonymous · ‎11-30-2020

@Anonymous wrote:
@ccquest wrote:
I'd just say don't unless you have no plans to take out additional credit in the next 5-10 years because you're credit report will be absolutely destroyed by doing that.

If you really want to be done with everything, go about it the proper way and file for bankruptcy.

You could also look into voluntary repossession and if that would help at all. It may sting to be paying for something you don't have at all, but it would bring the payments down and not destroy your credit.

I appreciate the info however, a voluntary and involuntary repo will have the same effect on your score. It may only affect a lender's heart upon a manual review.

I've evaluated the option of bankruptcy and due to my income, I probably don't qualify for Chapter 7. Chapter 13 would probably have a worse effect on my credit not to mention I don't like the idea of being owned by a trustee.

I plan to negotiate for lump sum in exchange for settlement in full and pay to delete. After this, I can definitely work on repairing my credit.

I agree totally with what has been said so far.

People have a much easier time rebuilding after filing BK than letting everything go south and waiting it out. Original creditors will not under almost any circumstance do PFD. As said, this is only for CAs (which will come knocking in short order) and you will still be stuck at square one with the original creditors reporting.

Not only all of what has been said is true, the biggest thing missed is getting sued for these debts. It is very real and can happen even with smaller debts. I got sued over an $800 cc balance, successfully, they got a judgment, and I was subsequently garnished for about $2500. So does that sound better? I would rather be owned by a trustee than be garnished ever again. They continue to garnish you paycheck after paycheck until your payments have been accounted for, which took an addition 6 weeks or so after I had already paid the balance. Then I got the refund check another month after that. It is quite painful. They will calculate what funds you can "afford" and trust me, there will be much less "fun time". Creditors are back in full swing to litigate debts.

I really think letting it all go is not wise. This is basically how I have lived my life and have lived a fairly fruitless life. Getting paid to prepaid debit cards to avoid being found and garnished or levied.....yikes! Hiding out using old addresses while living elsewhere. Does that sound like a good time? It certainly has not been for me or SO.

In the end, what I have learned now is that I should have just grabbed the bull by the horns, worried less about having a good time or gadgets, and buckled down and feverishly paid my debts.

I am in another year 6 of 7 of waiting out my debts to age off, and let me tell you everytime around year 5 you get the itch to buy a car or a home (rent or buy) or finance something. You can't get far without credit. While it is possible to pay cash for a car or emergencies or find someone that doesnt check your credit for housing (to rent), it usually at the least opportune times that you need something and don't have the funds or can find the right place that doesn't require credit.

I am tired of that existence, but sometimes you really have to find that out yourself and hit rock bottom to figure it out.

You can always try to work with each creditor and work out a hardship arramgememt for lowered interest or payments, get a second job, sell your belongings, or find some other creative way to deal with this. You did rack up this debt after all and when it becomes overwhelming, it may have been a sign that you lived beyond your means or something expensive came up and should have had a better back up plan. Hinestly $4500-$8500 a month take home should certainly be something manageable to tackle this debt, you just have to live without frill for a bit (like get rid of any extra that is not a requirent to live or work), but only you can decide if you can live without *any* excess for a short time.

I wish you the best and can only hope you decide to try and handle this debt one way or the other and not subject yourself to what many of us had to go through and living in shadows to avoid being found until the SOL runs out (which is like forever for the IRS - I am still hiding from them, they are next on my to-do list).

Good luck!

Anonymous · ‎11-30-2020

^^^ all that. Very well-stated @Anonymous. I've followed your progress on here and have seen the hell you've fought back through. I agree, it's no way to live.

OP, there is some great advice here and it would be well worth your time to do a couple of initial consultations with a BK attorney or two just to see where you stand if you were to go down that road. At the same time, look at all other avenues of increasing income - you can do the above with a side gig, selling things, OT at work if you're hourly, you can sell plasma, or anything else you can think of.

We have a living icon of industrious and creative dedication to raising money to pay off a huge debt here on the forum. I'll page @Anonymous in the hopes that he sees this. He pops in occasionally to give us an update on his so-far-very-successful quest to pay off something like $110,000-120,000 in personal debt in a few years' time. In the meantime, click on his screen name to bring up his profile and read some of his posts. It may help put your situation in context.

Anonymous · ‎11-30-2020

@Anonymous wrote:
^^^ all that. Very well-stated @Anonymous. I've followed your progress on here and have seen the hell you've fought back through. I agree, it's no way to live.

OP, there is some great advice here and it would be well worth your time to do a couple of initial consultations with a BK attorney or two just to see where you stand if you were to go down that road. At the same time, look at all other avenues of increasing income - you can do the above with a side gig, selling things, OT at work if you're hourly, you can sell plasma, or anything else you can think of.

We have a living icon of industrious and creative dedication to raising money to pay off a huge debt here on the forum. I'll page @Anonymous in the hopes that he sees this. He pops in occasionally to give us an update on his so-far-very-successful quest to pay off something like $110,000-120,000 in personal debt in a few years' time. In the meantime, click on his screen name to bring up his profile and read some of his posts. It may help put your situation in context.

I appreciate your as well as @Anonymous 's advice and insights. I've consulted with a good bankruptcy attorney and I would be required to pay $500 up front to start proceedings followed by $4500 over the life of a Chapter 13. His recommendation was to use the bankruptcy to eliminate Auto Loan 1 and "Cram Down" (Reduce the Lien amount to asset value) of Loans 2 and 3 and work out a payment plan on the settlement of all of the remaining unsecured debt. Not a fun process but possibly worth the while taking into consideration the insight I'm getting.

I am a car salesman and work 60+ hours a week. I barely have any time as it is with my wife and refuse to sacrifice any more of that precious time for a side gig that would probably pay me at a rate of 1/3rd or less of what I earn at work.

krielly · ‎12-01-2020

$4500 seems expensive to file a 13, but WDIK, it's been 15 years since we filed ours

At any rate, looking back, Chapter 13 is probably one of the best decisions we made at the time. We did it to get out from under the suffocating debt, but I must admit I got SO much more out of it than that.

Today life is much different. I learned over those 5 long years how to live within my means. How to budget, and set aside $$ for unexpected expenses (it is all about submitting a plan with a realistic budget). I carry $0.00 credit card debt. I only use my cards for cash rewards, and pay the balance in full every month.

I purchased a new motorcycle and car in 2017. Both are paid off. My husband also purchased a truck (new to him) and a new Harley as well in 2017 and 2018. We took out a personal loan to pay off his high rate credit card debt about a year ago, and I am proud to say that we will be debt free (aside from the mortgage) in 11 more months.

He is looking to retire next year (at 61). What a difference in our life these days.

I suggest getting more than one attorney consult. We had a pretty crappy one, and I had to self educate and self advocate for sure, but we made it through.

Best of luck to you. It's not a bad option for sure!

You can't have your cake and eat it too. But you can dip your finger in the bowl and lick the icing!

Doodlebug30 · ‎12-03-2020

I have to say this is prob the first time i have heard someone planning to purposely destroy their profile. With that being said, Im praying you are willing to find a diff way! I have to echo what others have said. BK has to be better than that option. I have no experience with bk but thats bc i went the "just forget it" route and have suffered in credit hell ever since. I can assure you that you may think it sounds easy but its not and it might not go as planned. This post is in no way a judgement i just wanted to stop in and tell you that this myfico group is great and you should listen to the advice of these great folks!

Good luck on your journey!

Sbrooks1 · ‎12-03-2020

Wow, you just described my life before 10 years ago when I confronted it all and finally was accountable. I was a notorious ostrich with my head in the sands. But now, I own my home, have a great car and over 250,000 in CC limits with all over 800 scores across all ranges. You guys can do it to. Thanks LaHossBoss for reminding me of where I came from. The hiding and shame will eat you alive, so stop the cycle and move forward. Best of luck to you both.