No. of Recommendations: 6
C- your credit will be trashed and you will have to NOT live beyond your means

how long

Your credit being trashed? The derogatory marks will stay on your credit for up to 7 years and 180 days after the initial missed payment that leads to a write-off or settlement. A Chap 7 bankruptcy will remain for up to 10 years. A Chap 13 bankruptcy can actually help your credit a little initially, as the debts are put into a 'repayment' status, but you will need to keep to your repayment plan.

NOT living beyond your means? Probably the rest of your life, if you don't want to get into a cycle of being a serial BK declarant. Assuming you declare Chap 7, you are allowed to declare BK again 8 years after your case is dismissed. Assuming the first case takes 6 months - 2 years from the initial filing to dismissal, you can get into a cycle of declaring BK every 8 1/2 - 10 years if you want to continue to live above your means. However, each time you declare BK, you will probably find it harder and more expensive to find someone who will lend you money.

A/B - until you quit making payments, the CC companies won't negotiate with you AT.ALL.
You have to STOP paying for 3-6 months (and trash your credit) in order for them to pay attention.


really typical??

If you are paying, what incentive does the CC company have to negotiate a deal with you? They are happy to let you continue paying. It's generally only after they see that they are likely to not get their money back from you (because you've stopped paying) that they will start to make deals with you. It might not take a full 3 - 6 months of not paying, but coming to a settlement on the debt will also trash your credit, as the debt was "settled", not "paid as agreed".

You can offer to settle for about 20-30% of your total.

have you seen percentages before in the 10-15%???

I've seen stories with settlement percentages like that, but I don't know how reliable the sources are. It's more likely that you will end up paying closer to 50% of the current balance, including fees and interest.

(example- you settle your ~$45K balance for $20k, you will get a 1099 for $25k)

therefore my earned income will increase by 25,000 for that calendar year???

Well, if you get 50% of your $45k in CC debt forgiven in one year, your unearned income would increase by $22.5k. (Earned income comes from employment - forgiven debt is not employment. However, all income - earned or unearned - must be declared on your tax return.) At a 25% Federal marginal rate, that would mean you will owe the IRS an additional $5,625. In addition, if your state has an income tax, you will owe them more money, too. In the unlikely event that you get the 10% settlement you are hoping for, your income would increase by $40.5k. At a 25% marginal rate, that's an extra $10,125 you owe to the IRS. At a 28% marginal rate, it's an extra $11,340.

AJ
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