QUESTION
Which path would have a better impact on my credit rating if I have 30k in written off credit card debt?
Asked on Mar 24th, 2014 on Bankruptcy - Michigan
More details to this question:
I have about 30k in written off credit card debt. I haven't heard from a credit collector 1,000 under active collection by a third party collector and 1500 in credit card debt that is in default judgment. All debts were last paid on 1/2010. I am currently uncollectable as I am unemployed and have no savings. I want to get back into real estate flipping with the backing of an investor. My question is which path would have a better impact on my credit rating and subsequent ability to qualify for bank financing. Negotiate a pay for deletion deal with the two credit card debts that are in collection and hope that the 30k runs out the SOL or settle when it comes and hopefully I have more money? Or file Chapter 7 and start with a clean slate. Thanks so much for your time.
7 ANSWERS
Good question! It's almost easier to file and rebuild your credit over the next two years (I think). But I would suggest that you speak with a good, honest, reliable, experienced mortgage broker.
Answered on Mar 27th, 2014 at 10:06 AM
Commercial & Bankruptcy Law Attorney serving Powell, OH
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Ronald K. Nims
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Your $30K in written off credit card debt has probably been purchased by a credit vulture by now. Their business is buying old debts then monitoring your credit report and other media until you're employed then they will start a collection action. The advantage of a bankruptcy is that none of your old debts can come back, they are terminated.
Answered on Mar 26th, 2014 at 6:03 AM
Since you are close to the SOL on most of the debt, you might want to try and wait it out. Anything that is in the form of a judgment might have to eventually be paid if they took the time to reduce it to an Abstract. If so, try and make a deal for less than the total amount when you have the money to do so. Only file BK if some of your major creditors sue you before the expiration of the statute.
Answered on Mar 26th, 2014 at 6:03 AM
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Written off credit card debt does not mean that it is not owed. It means it has either been sold to another creditor or there is a 1099 pending (reportable income to the IRS on which you will be taxed). Depending upon when the debt became due, waiting for the SOL (6 years) could take a while. A bankruptcy filing will guaranty that all debt is wiped out and give you a fresh start. You could begin rebuilding your credit right away, and following your filing you could create an LLC within which to fund and buy your real estate ventures.
Answered on Mar 26th, 2014 at 5:55 AM
Pay to delete is a myth and if you file bankruptcy, any further damage to your credit will be of little consequence. The problem you will face in trying to rebuild your credit is that some creditors will not sell their integrity with the credit reports and those that will, won't come cheap.
Answered on Mar 25th, 2014 at 2:57 PM
If you are "judgment-proof" at this time it is not necessary or even advisable to file bankruptcy. You might as well try to settle with the creditors while you are unemployed, although it is unclear what resources you have to offer them. The creditor with the judgment is likely to prefer to wait until you are employed again and then will try to garnish your wages or your bank account. Regardless, when you have more resources in the future, that is the time to consider bankruptcy because you would have something to lose.
Answered on Mar 25th, 2014 at 2:37 PM
Business Law Attorney serving Bingham Farms, MI
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James T. Weiner, P.C.
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Anyway you look at it your credit rating is probably screwed and it could take years to get a good credit rating. I would check out bankruptcy that would discharge all of your debts and in 5 years or so your credit rating should improve. The alternative is waiting for a 6 year statue of limitation from the last payment/charge to see if your creditors will file suit and each judgment last 10 years from issuance. By then you could be making money not be eligible.
Answered on Mar 25th, 2014 at 2:36 PM