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A.J.
A.J., Attorney
Category: Bankruptcy Law
Satisfied Customers: 4282
Experience:  Experienced consumer bankruptcy attorney.
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I have several credit cards that Im considering debt settlement

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I have several credit cards that I'm considering debt settlement for. If I don't want them to sue me. Is there a benchmark amount that they creditors would sue or not sue. The small claims limit is $3000 in Ohio, so anything under that is a small claims court case and anything over is a civil case.

I was recomended to a website 2settleyourdebt.com that recommeds sending a letter to the creditor before you are behind. This contradicts what I've read. Please comment on that.
Submitted: 1 year ago.
Category: Bankruptcy Law
Expert:  A.J. replied 1 year ago.

SavyLawyer :

Hello, and thank you for contacting Just Answer. I am a debt and bankruptcy legal professional, and I am happy to answer questions that you have about debt settlement or bankruptcy.

SavyLawyer :

First, it is important to know, in response to your initial question, that there is no absolute threshold number at which a creditor will decide to sue or not sue. While each case is different, creditors will generally sue where they believe they can collect (ie if they know you are working, the have bank information, etc). Even then, however, the rule is not a hard one, and creditors will often sue even when logic would say that it is not worth their time.

SavyLawyer :

As for sending a letter to a creditor before missing payments, there are really 2 schools of thought on this issue. Sending them a letter stating that you are going to default is arguably a show of good faith on the debtor's part, because you are trying to keep them up to date and work something out without conflict. So, some people will encourage sending such a letter, because they think it will keep the creditor from taking action such as sending the debt to a collection agency or filing suit.

SavyLawyer :

However, the other argument is that, if you have notified any party that you owe money that you are not going to pay, this arguably triggers their right to collect even if you have not yet defaulted. Consequently, a creditor could choose to take an aggressive stance and pursue you aggressively form the get go.

Customer:

Well, I am working. I'm in a debt management program. I have to start paying on my daughter's student loans (co-signed) because she almost defaulted.

Customer:

I read some books about debt settlement. Im worried about being sued.

Customer:

I'm not a candidate for Chapter 13 because I'm not behind on anything. If I have to pay 100% back what is benefit of Chapt 13 vs settlement?

SavyLawyer :

That is a very good question.

SavyLawyer :

First, suit is a very real risk in debt settlement. There is certainly nothing stopping the creditor from suing (the only way to guarantee that is bankruptcy). So your concern is a valid one.

SavyLawyer :

As for the difference between attempting to settle and chapter 13:

SavyLawyer :

(1) A chapter 13 stops creditors from filing suit to collect. Once the payment plan has been set, that is how much creditors are getting, they cannot pursue you outside of the chapter 13.

SavyLawyer :

(2) Often, the payment plan will only call for your payment of a portion of the debt that is currently owed.

SavyLawyer :

(3) In debt settlement, similar to a chapter 13, you may be able to negotiate the debt down considerably. However, keep in mind that (a) creditors generally will not even talk settlement until you are in default (because they do not want to settle a debt that they are currently being paid on) and (b) unlike with a chapter 13, you can be sued by other creditors while you are trying to settle one debt.

SavyLawyer :

So, the big benefit for chapter 13 relative to trying to settle is that it stops creditors from pursuing the debt (particularly through lawsuit).

SavyLawyer :

Further, while a creditor must follow a chapter 13 plan that has been approved by the court, no creditor is required to even discuss settlement of a debt, let alone actually settle it.

SavyLawyer :

Does that answer your question? Let me know if you have any further questions or need clarification, I am happy to keep chatting with you. Otherwise, please remember to RATE my answer positively so that I can receive credit for my work with you.

Customer:

Yes, you can't control risk. My thought is to discontinue the debt management program. Then:1. keep paying the creditors that gave low interest and are low balances. There are 3 that have high balance so try to settle them by not paying and avoid getting sued. These are around $5000 each so if I give the 50% they may not sue and I'll save the money. A couple of these gave 15% and that's not much of a deal. One gave 4% so I can pay that off. One is 25% for $9000 so I'll try to negotiate the rate on that one because they may sue. Is that a feasible plan. The books tell you what to do, but you guys are good to bounce of my unique situation.

SavyLawyer :

That certainly sounds like it could be feasible, and one of the most common ways to try and pay down debt is to try and negotiate lower interest rates. Because some of your creditors are willing to lower interest rates to the point that you can make payments that will chip away at the principle, then attempting to negotiate on the others may very well work. There is, as you know, a risk for the debts that you were to default on not being willing to settle, but as an effort to try and avoid bankruptcy that certainly sounds like something reasonable to try. If it doesn't work, you can always look at bankruptcy down the road. If you do so, I would suggest working with a bankruptcy attorney.

SavyLawyer :

I hope this helps further, and let me know if you have any additional questions. Otherwise, please do remember to RATE my answer positively so that I can receive credit for my work.

Customer:

Thanks. I did visit a bankrupcy atty this month and he advised me that I was not a candidate at this time. My daughter may be a candidate for Chapt 13, but if I'm paying part of her student loan and she is paying part, it may not be necessary. I hope something is done about Sallie Mae's unresonable pracitces and power. If it wasn't for their unwillingness to work with us I would not be even looking at this.

A.J., Attorney
Category: Bankruptcy Law
Satisfied Customers: 4282
Experience: Experienced consumer bankruptcy attorney.
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