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cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience:  Bankruptcy professor.
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Hello- I dont think I want to file bankruptcy. Instead

Resolved Question:


I don't think I want to file bankruptcy. Instead I am looking at those companies that advertsie that they will negotiate with the credit card companies for a reduction in what is owed. Is that a good route to go? A friend told me to just stop paying the credit card bills and later negotiate with the credit card companies myself to reduce what is owed. Can you provide me any insights on the above? I am drowning in credit card debt, and I will have lousy credit regardless of what course I choose, so your input would be invaluable.Don
Submitted: 5 years ago.
Category: Bankruptcy Law
Expert:  cfortunato replied 5 years ago.

cfortunato :

Hi JACustomer,

cfortunato :

For a number of reasons, filing a Bankruptcy is better than working with debt consolidation companies:

cfortunato :

1) It is far less costly to file a Bankruptcy.

cfortunato :

2) With debt consolidation, in most cases, there will be at least one creditor who refused to participate, so you will still owe all the money to that creditor.

cfortunato :

3) Many debt consolidation companies are not legitimate, and do nothing for the debtor, and it is not possible to know in advance whether you are dealing with one of the legitimate ones.

cfortunato :

4) Participating in debt consolidation has a similar negative effect on one's credit score as filing a Bankruptcy.

cfortunato :

5) With a Bankruptcy, debts are discharged within 6 months. Debt consolidation can take years.

cfortunato :

6) Bankruptcy is far less costly because you pay nothing to have your debts discharged. With debt consolidation, you have to pay for years.


Is chapter 7 perferable to chapter 13, or vice versa? And what if I simply stop paying on the cards and negotiate with the companies myself? Is that something that can be done? My credit is pretty shot anyway. Your ideas? don

Expert:  cfortunato replied 5 years ago.
Chapter 7 is preferable to a Chapter 13, because with a Chapter 7 you pay nothing to have your debts discharged. With a Chapter 13, you have to make monthly payments to the Bankruptcy for up to 5 years.
Although you can negotiate with your creditors on your own, you cannot expect any of them to accept less than around 50%of the outstanding balance, and this amount must be paid in full - they will not allow you to make payments.
In short, there is no advantage to negotiating with creditors over filing a Bankruptcy.
Customer: replied 5 years ago.
I am sorry to get back to you so late. I have another followup question: As an officer in an LLC in Arizona, if I file bankruptcy in California, are the assets in the LLC subject to being sold to pay off my debts? This is an important consideration for me. My wife, whom I am separated from, wants to go after the assets of the LLC. Can you tell me if she can do that? She does not want me to file bankruptcy and we are separated, with a divorce in progress. How can I protect the assets, if indeed I am able to protect the assets? Thanks for your patience.

Expert:  cfortunato replied 5 years ago.

Do you own the LLC?

If yes, are you the sole owner?

Customer: replied 5 years ago.
No, I am one of the owners. It is in Arizona.
Expert:  cfortunato replied 5 years ago.

Since you are not the only owner, only your ownership interest - not the LLC's assets - would be subject to the Bankruptcy estate. This means that if, and only if, your ownership interest can be sold, then the Bankruptcy trustee can sell your ownership interest to pay your creditors.


Customer: replied 5 years ago.
Thanks for you help.
Expert:  cfortunato replied 5 years ago.
You're welcome!
cfortunato and other Bankruptcy Law Specialists are ready to help you