I think you have me confused with someone else. You said I am not employed. I do have a source of regular income and I asked you about sending the creditor pay stubs.
A: How odd. I could have sworn you said that you were unemployed and attending school. I guess it must have been a different customer. I hope I didn't confuse him/her with you on the other Q&A session, too. Thanks for the alert.
I am trying to frame my correspondence to get them to settle and not sue me. I sent them pay stubs in June and they say they won't consider a settlement without all my financial data. I told them in August that I'm not sending them again and they are playing games with me. Their collectors told me I have to send a new packet with all the financial info every time I send a settlement offer. I feel that's a ploy to collect as much data on me as possible so they can sue. As I said earlier, I sent an offer for 50% in June that they did not contact me about. I keep telling them I have to pay Sallie Mae now and that was unplanned and overwhelms my budget. I tell them I have to live. Their letter says they want to go over my budget with me and that's why the need the info, but never do. Also need to do the whole process with all the info for every offer.
A: In my experience, negotiation with a large institutional creditor, is largely a function of telling the creditor that unless it agrees to your terms, you will file for bankruptcy, because you have no alternative. Everything else that happens is generally just treading water, because the creditor has it's botXXXXX XXXXXne, and the loss mitigation representative usually has very little negotiating room. In my opinion, all that's happening here is that the creditor is determining whether or not it can get more money, net from you through negotiation, than it can get by either selling the debt to a collector or hiring a lawyer to sue.
Since a large corporation will pay 35% of its income in federal income tax, the debt is worth that same 35% if it's charged off. So, there is no economic benefit to reducing the negotiation to 35% or below -- especially as it costs nothing to simply charge off the debt. As long as the creditor has net income, 35% deducted from taxes is better than a 20% settlement.
So I thought Chapter 13 protects you home while you are paying other debts. You are telling me it does not. I saw an attorney in February who told me Chapter 13 would protect my home. I decided to settle selected high balance unsecured debt on my own to avoid bankruptcy.
A: The bankruptcy "stay" (Bankr. Code sec. 362) prevents a creditor from foreclosing a home loan, if the debtor is not current on the loan, unless the creditor asks the bankruptcy court for relief from stay. A creditor will not seek relief from stay, unless the property subject to foreclosure has equity (fair market minus loan balance), sufficient to pay the loan balance in full, plus reconveyance/auction costs.
In cases where fair market value falls below the loan balance of the first loan, the second loan can be stripped off in Chapter 13, making it an unsecured debt, and if the debtor pays the bankruptcy plan in full, then any remaining balance on the second is discharged entirely, leaving the debtor with only the first loan.
If fair market value is greater than the value of your first loan, then no lien stripping is possible, and unless you pay both 1st and 2nd loans during the bankruptcy plan, a creditor can request relief from stay and then foreclose.
It is possible to create a bankruptcy plan where you do not pay your home loans in full during the plan, but where you must pay a balloon at the end, or the plan is dismissed entirely. Some debtors take this route in the hope that the real estate market will recover, and the debtor can refinance or otherwise find the money to pay the balloon. This is an extremely risky choice, but for debtors who have no other choice, it's one that is frequently chosen. I would never recommend this route, because in my experience, it is just delaying the inevitable.
I don't know your entire financial picture, but as a general proposition, unless you re a candidate for lien stripping your 2nd loan, then you must pay your home loans as originally agreed during the bankruptcy plan, or the creditor may seek relief from stay, or the trustee may ask the court to dismiss your bankruptcy for failing to pay according to the plan. In either case, your goal of protecting your home from sale would be defeated.
Hopefully, my explanation is more thorough than that which you relieved from the attorney you consulted, and you now have a better picture of exactly what a Chapter 13 can do for you. It may still be the best option in your case -- as long as you can pay your home loan while satisfying the rest of the bankruptcy plan, because if you make all plan payments as agreed to, then your unsecured debts are discharged and you keep your home.
If your home is underwater, or you cannot make the mortgage payments, then dependent upon your income, you may be better off with a Chapter 7. Regardless, in my opinion, bankruptcy is generally the only satisfactory means of getting a fresh start on your debts. But, if you can negotiate your final creditor for less, then you don't have much to lose by trying.
However, the creditor can "run the numbers" for bankruptcy as easily as you can. So, by providing all of your financial info, you are telling the creditor what your likely bankruptcy plan will be, which means that the creditor will know in advance how much it will get paid during the bankruptcy. Consequently, it has no incentive to negotiate for anything less than that amount.
If I were you, I would have a competent bankruptcy lawyer take all of your financial info and plug it into the computer, create a pro forma plan and the determine what you will have to pay your uncooperative creditor. That's probably the amount that the creditor will accept -- and you could use your pro forma plan to try to negotiate -- i.e., "If I file Ch. 13, you're going to get $X. So, we can either settle on that amount, or I'll file Ch. 13, and that's all you will get."
Hope this helps.