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Here's some background on a complicated situation. My Mom…

Hi! My name is...
Hi! My name is Sara,
Here’s some background on a complicated situation. My Mom sold her house back in September of 2015. She received about $60K from the house. She owed my brother $35K that she used to make the house payments and repairs on the house until it was sold. She paid back my brother the $ 35K promptly. Now she has only $25K left (which is in my savings account) and no other assets. Not even her car (it's worth about $2000). She is on a limited income. $1300.00/ month. This is the problem. She owes Chase credit card company $22K. That is her only debt. I would like her to be able to hold onto as much as the $25K as possible. So here’s the questions…
1) If she could file bankruptcy (Ch. 7), all her creditors are supposed to be treated equal, correct? I wouldn't want any problems in regards ***** ***** loan that was repaid to my brother. Is there a certain amount of time that could pass where what she repaid to my brother would not be involved in the bankruptcy? And the $25K she has in my savings, would that end up being discovered anyway during the bankruptcy process?
- OR –
I have been trying to work with Chase for a settlement on her credit card. I have spoken to them three times so far. Of the $22,000, they will only come down by half. She's had this card since 1997, and have always been in good standing. So I lied, and said that she only had $6000 in an IRA, and that is all, in order to try to get them to settle for a fourth. That was a no go. So when I talked to them a third time I said I could give $2000 to make it $8000 which would be a third. I want her to be able to hold onto as much of the “house money" as possible. When I went through a settlement, it wasn't this hard. But I didn't have Chase. I read up on this topic and it sounds like credit card companies will settle for a third?
1) I am concerned that if we don't give them what they want, they might sue. Chase did not mention that. They said it could go to collections. Is there a possibility that they might sue for the total amount of money my mom owes them? If they did sue her, could they force her hand to turn over financial records relating to all of this?
2) If it went to collections, can they sue? Or could she just leave it there on her report as a collection. She's going to be 68 soon. My brother or I can help her if she would need credit.
So, which is the best option here? Do I have any leverage to keep telling Chase that a third is all she has? Or could Bankruptcy work to help her keep all of it?
A primary concern is that my brother would have to give back the $35K because of Chase.
Thanks for your time
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Answered in 20 minutes by:
2/25/2016
socrateaser
socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 40,166
Experience: Attorney and Real Estate Broker -- Retired
Verified

Hello...you asked:

1) If she could file bankruptcy (Ch. 7), all her creditors are supposed to be treated equal, correct?

A: "Insiders," such you and your brother are not subject to equal treatment.

I wouldn't want any problems in regards ***** ***** loan that was repaid to my brother. Is there a certain amount of time that could pass where what she repaid to my brother would not be involved in the bankruptcy?

A: One year, from the date of a transfer of property. However, if there is proof that the loan was made according to customary commercial standards (e.g., a promissory note, with market rate interest and payment terms), and paid according to those terms, then the insider rules can be avoided, and your brother can keep the money.

And the $25K she has in my savings, would that end up being discovered anyway during the bankruptcy process?

A: If your mother were to willfully fail to list the assets on her bankruptcy petition, that would be federal bankruptcy fraud -- which is a felony.

- OR –

I have been trying to work with Chase for a settlement on her credit card. I have spoken to them three times so far. Of the $22,000, they will only come down by half. She's had this card since 1997, and have always been in good standing. So I lied, and said that she only had $6000 in an IRA, and that is all, in order to try to get them to settle for a fourth. That was a no go. So when I talked to them a third time I said I could give $2000 to make it $8000 which would be a third. I want her to be able to hold onto as much of the “house money" as possible. When I went through a settlement, it wasn't this hard. But I didn't have Chase. I read up on this topic and it sounds like credit card companies will settle for a third?

A: If the loan is charged off by the credit card issuer, and sold to a debt collector, then the debt collector may be willing to settle for something more than 10% (which is about what the debt collector pays for the debt). But, it really depends on whether or not the debt collector believes you will file bankruptcy or you have no assets that can be reached for payment.

A credit card issuer won't settle for less than the tax value of the debt, which is typically around 45-50%.

1) I am concerned that if we don't give them what they want, they might sue. Chase did not mention that. They said it could go to collections. Is there a possibility that they might sue for the total amount of money my mom owes them?

A: Credit card issuers rarely sue. They just charge off the debt and sell it to a debt collector. Debt collectors sue.

If they did sue her, could they force her hand to turn over financial records relating to all of this?

A: Yes. It's called "discovery," and it's part of the legal process.

2) If it went to collections, can they sue?

A: Yes. See above.

Or could she just leave it there on her report as a collection. She's going to be 68 soon. My brother or I can help her if she would need credit.

A: See above.
So, which is the best option here? Do I have any leverage to keep telling Chase that a third is all she has? Or could Bankruptcy work to help her keep all of it?

A: Tell Chase that unless they accept your offer that your mom will file for Chapter 7 and Chase will get nothing. If Chase believes you, then you may get a settlement. Otherwise, the debt will be sold to collections, and your mom will probably be sued, unless she files for bankruptcy.

A primary concern is that my brother would have to give back the $35K because of Chase.

A: Explained above.

I hope I've answered your question. Please let me know if you require further clarification. And, please provide a positive feedback rating for my answer -- otherwise, I receive nothing for my efforts in your behalf.

Thanks again for using Justanswer!

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Customer reply replied 2 years ago
I want to clarify one thing. If I wait for Chase to sell the debt to a debt collector, am I mistaken if we wait till then, and just pay the debt collector, that would be a better outcome? Wouldn't that end up being less than $11,000 to Chase right now? Or am I playing a dangerous game here? I know that this is just advice you are giving. But should we just pay Chase the $11,000?

In my opinion, since there are risks to your mother and your brother if your mother files bankruptcy, that settling with Chase is probably the preferable option.

I hope I've answered your question. Please let me know if you require further clarification. And, please provide a positive feedback rating for my answer -- otherwise, I receive nothing for my efforts in your behalf.

Thanks again for using Justanswer!

socrateaser
socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 40,166
Experience: Attorney and Real Estate Broker -- Retired
Verified
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