I ran up a lot of debt supporting my sister and her family of 6. Her husband’s payday was always around the corner. Finally, despite having a good salary, I filed bankruptcy, Chapter 11.
After several months, I realized the professional damage that could cause me, and I petitioned to have it dismissed. Since the bankruptcy was dismissed, only two creditors have reached out and I have settled with them. My car loan and the house payment are current. I have several other credit card debts and an unsecured loan of several thousand dollars.
My question is – should I reach out to the creditors and attempt to settle or wait until they contact me?
I think you probably filed a Chapter 13 bankruptcy. This is where you would make monthly payments to the trustee and they would then pay the creditor.
But I’m curious how you think the current path is going to be less harmful now that you previously filed. All the professional situations I’ve seen ask if you have ever filed bankruptcy. That ship sailed and you did.
The same professional issues for bankers and securities brokers would also apply if you defaulted on your remaining debts in an effort to settle them.
For a military or government security clearance, bankruptcy is less of an issue that showing you have current obligations that are past due.
When it comes to settling your debt you have two choices. You can either attempt to do it yourself or hire a company to do it for you. If you want to do it yourself you should read Debt Settlement Pros and Cons. My No BS Guide to Settling Your Debt.
If you want to hire someone to help you then these guides will help you find a company to work with.
So to answer your question, if your professional concerns surround the impact of your debt you should resolve it now than let it linger on your credit report.
Keep in mind that when you settle a debt the amount of debt forgiven will be reported on your credit report as a bad debt, you may owe tax on the forgiven debt, and it still demonstrates you were unable to meet your financial agreements.
Honestly, I think you’d get a lot of clarity and a better game plan in place by talking with a professional Debt Coach like my friend Damon Day than guessing and assuming what is the right approach. Damon can talk to you, come up with an overall plan based on your specific situation and concern, and then get you pointed in the right direction.