This question is for my mother. She filed bankrupcy 20+ years ago, and since then has rebuilt her credit and all her bills are up to date and in good standing. The problem is that she is $17000 in debt and for her that’s like a million dollars.
My mother was advised by a lawyer to not pay her bills for a few months so that creditors will be willing to “negotiate” with her, or to file for bankrupcy. The idea of being irresponsible so that she can cut deals with creditors seems crazy to me, and I hate to see her credit go completely in the dumper after years of re-establishing it. Is there any option that you know of where she can work out deals with creditors without having to become “delinquent” first?
No, there are no solutions that let you repay less that the amount contractually due without becoming delinquent. You are think through this too logically.
Creditors are large policy and procedure behemoths. The issue here is not that it makes sense for them to accept less than the full amount, but that they have no policy that treats people as exceptions.
The way the current policies work is that the best settlement deals are offered when someone is 90 to 120 days behind. The further into collections that someone flows, the better the deal offered. It might be crazy, but that’s the way it is.
I’m not convinced that debt settlement is a viable option for her. Does she have $9,000 lying around to pay out in a lump-sum if a creditors accepted her settlement offer? I don’t think she does. Let me know if I’m wrong in that assumption.
If she wants to get out of debt without injuring her credit then she should make the payments as agreed or pay the debt off in full.
If her income is limited, she has few assets, she is on a fixed income and the monthly payments are not affordable, she should speak to a local bankruptcy attorney and discuss what bankruptcy would mean for her. There is no need to let her credit go down the tubes before speaking with the lawyer. If she can’t pay or doesn’t pay it will lead to stressful collection activity and that might be more than she can bear.