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I Can Sell a Property to Raise Cash to Settle My Debts. – Carl

“Dear Steve,

i own 3 properties, 2 are owned and one mortgaged . the one with the mortgaged i bought with a domestic partner , we applied for loan together and qualified together and the bank messed up and put him on the deed and not the mortgage . my partner didn’t pay his part and it took all my cash to get him off deed. anyway i used my credit cards , they were all fixed at 5 to 8 percent. i never have never been late once on card payments , but now they are at 18 to 24 percent.

if i sell a property to pay credit card debt, is there a chance i can negotiate the pay offs down. if so what”s a good place to start.

also what percent of the balance do credit card companies get in a chapter 13 bankruptsy , i have gotten screwed so badly every is an option

Carl”

The Answer

Dear Carl,

Is a debt settlement approach an option in this situation, yes.

You just need to be aware that in settling your debt it will most likely be reported negatively on your credit report. That will be reported for seven years. Additionally if you are solvent, you will have to pay income tax on the forgiven debt. But if carried out successfully you could possibly resolve your debt situation without bankruptcy.

It sounds like you could raise sufficient income to have funds on hand to settle. I’d plan for 50% settlements but lower might be possible depending on your individual circumstances.

For additional information about a possible plan to make this work for you I’d suggest you contact Damon Day, Consumer Recovery Network, or Zip Debt for help.

The percentage a creditor would receive in a Chapter 13 bankruptcy would be dependent on your disposable income and assets. You’d need to talk to a local bankruptcy attorney for specific information about your situation.

Please post your responses and follow-up messages to me on this in the comments section below.

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About Steve Rhode

Steve Rhode
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
  • http://www.zipdebt.com Charles Phelan

    Carl, sorry to hear about your situation, but let’s try to help. It’s important to understand where debt settlement fits as a potential strategy before attempting to implement it. In my view, it’s only an alternative to Chapter 13 bankruptcy, and only rarely a good alternative to Chapter 7 (where the debts are usually discharged in full). Talk to a bankruptcy attorney even if you are determined not to file, since this will give you a clear understanding of what “Plan B” would look like if you are unable to sell one of the properties and raise sufficient cash for settlement. Assuming that you would be looking at Ch. 13, and that you could raise funds for settlement by quickly selling one of the properties, then it’s a question of which creditors you’re trying to settle with. Some are more difficult than others, but settlements are usually possible with all the major creditors if handled correctly. Overall, it’s a mechanical process, and with training and coaching you can negotiate the settlements yourself and be done in roughly 6-9 months, 12 months at the outside (again, assuming adequate funding). You will take a negative hit to your credit score, as Steve correctly notes, but it sounds like you have already recognized that reality. On the tax impact, if you have a positive net worth at time of settlement, then you would also need to plan for ordinary tax rates on the forgiven balances. If you are insolvent at the time of settlement, then you can claim an exemption and avoid the taxation of forgiven debt balances. Take your time and do your research, and be aware that there are still numerous debt relief scams flourishing out there, so always do independent research on any company you may consider working with. Hope the above helps you get started in the right direction!

  • http://www.zipdebt.com Charles Phelan

    Carl, sorry to hear about your situation, but let’s try to help. It’s important to understand where debt settlement fits as a potential strategy before attempting to implement it. In my view, it’s only an alternative to Chapter 13 bankruptcy, and only rarely a good alternative to Chapter 7 (where the debts are usually discharged in full). Talk to a bankruptcy attorney even if you are determined not to file, since this will give you a clear understanding of what “Plan B” would look like if you are unable to sell one of the properties and raise sufficient cash for settlement. Assuming that you would be looking at Ch. 13, and that you could raise funds for settlement by quickly selling one of the properties, then it’s a question of which creditors you’re trying to settle with. Some are more difficult than others, but settlements are usually possible with all the major creditors if handled correctly. Overall, it’s a mechanical process, and with training and coaching you can negotiate the settlements yourself and be done in roughly 6-9 months, 12 months at the outside (again, assuming adequate funding). You will take a negative hit to your credit score, as Steve correctly notes, but it sounds like you have already recognized that reality. On the tax impact, if you have a positive net worth at time of settlement, then you would also need to plan for ordinary tax rates on the forgiven balances. If you are insolvent at the time of settlement, then you can claim an exemption and avoid the taxation of forgiven debt balances. Take your time and do your research, and be aware that there are still numerous debt relief scams flourishing out there, so always do independent research on any company you may consider working with. Hope the above helps you get started in the right direction!

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