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Thread: Credit settlement vs. Bankruptcy

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    Curious Guest misssunshine's Avatar
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    Default Credit settlement vs. Bankruptcy

    Has anyone ever done a settlement instead of a bankruptcy? How long does it take your credit to bounce back after a settlement? Is it just as bad as a bankruptcy?

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    God/dess Gia2608's Avatar
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    Default Re: Credit settlement vs. Bankruptcy

    Like, if you settle all of the accounts at once, like combine all the debt and then make payments or if you settle one account?
    XoXo Gia
    Danielle Fishell (the Dish): "If the Super-Star thing doesn't work out, Gia makes a great stripper name"




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    Curious Guest misssunshine's Avatar
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    Default Re: Credit settlement vs. Bankruptcy

    A settlement/negotiation - like, for example, if you owe say 10k on a credit card and you stop making payments cause you can't afford it, so after some time the credit card company agrees to a negotiation that you pay something like 2k on the balance and they will stop pursuing you and write off the debt.

    Sometimes they do this if they know you are going to file bankruptcy, because once you file bankruptcy they will get nothing at all. I am curious if anyone has ever done that and how it affects your credit in the long run versus just filing the bankruptcy and paying the credit card company nothing at all.

    Obviously filing bankruptcy will be on your credit for like 7 years, but what does a settlement do to your credit?

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    God/dess Gia2608's Avatar
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    Default Re: Credit settlement vs. Bankruptcy

    My friend had a company that did that and I got licensed as a debt counselor to work there for a little bit. First and foremost, it is pretty hard to negotiate with the CC companies. Usually at that point they have already written it off and sold it for pennies on the dollar. You can then negotiate with the 3rd part debt collector who would be happy to take a settlement from you but now all you have done is create 2 negative marks for the same account.

    The chargeoff is bad, and the settled collection is bad because not only does it appear as a negative remark, it also appears as a new negative mark which is going to drag your score even lower.

    There is a complex matrix used to calculate your credit or FICO score; a mix of the number and types of accounts you have, your payment history, your credit usage (how close to or far from the limit you are) and a mix of your credit inquiries and also believe it or not, your score can be affected by the number of different address/phone numbers/ employers you have reported.

    If you have one CC that you settle and then other good credit history you will not take the same hit as if you do this with several credit cards and have little other positive history.

    Yes, a BK will stay on your credit for 7 years but often after your BK has discharged you can re-establish credit. Some credit card companies will start sending you offers within a very short period of time. You can buy a house with a BK on your credit once you have passed a mandatory waiting period (between 2 and 4 years depending on a few things). You should find lots of lenders willing to give you a car loan.

    Every person and situation is different but in many cases BK is a better option and not as hard to bounce back from as they would like to make you think it is.
    XoXo Gia
    Danielle Fishell (the Dish): "If the Super-Star thing doesn't work out, Gia makes a great stripper name"




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    Curious Guest misssunshine's Avatar
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    Default Re: Credit settlement vs. Bankruptcy

    Well that is what I was wondering. My parents did a bankruptcy and not long after, got a new house and a couple of cars. Of course they had to pay a bigger down payment and higher interest rate.

    As far as negotiating a settlement, some companies will offer the option. My ex boyfriend got two credit cards, maxed them out and never paid a dime (cause he is a jerk), so letters came in the mail that if he would just pay a portion of the debt (their suggestion), they would settle it. Of course in his case I guess they figured they would try to get whatever they could cause it was likely they were gonna get nothing out of him at all since he was a loser. Of course that option is not always available, so a settlement depends on the credit card company itself, unlike a bankruptcy.

    So basically I was wondering how much worse it would be to take a settlement option and have the negative marks on your report, how long that info sits on your report and how a settlement would affect your credit in the long run vs. doing a bankruptcy where you give them nothing at all. Would it take years to bounce back after a settlement, similar to a bankruptcy?

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    Default Re: Credit settlement vs. Bankruptcy

    Yes, it is most likely worse, depending what else is on your credit. Do you have other debt or just credit cards?
    XoXo Gia
    Danielle Fishell (the Dish): "If the Super-Star thing doesn't work out, Gia makes a great stripper name"




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    Featured Member Zofia's Avatar
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    Default Re: Credit settlement vs. Bankruptcy

    File bankruptcy. Credit settlement will not fix your credit. BK, on the other hand, will make you more credit worthy almost instantly. Yes your rate will be higher and the lenders will require a bigger down payment. But, if you manage well, you will have excellent credit going forward.

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