Bankruptcy debtors often unaware that they frequently have an excellent opportunity to reduce balances and change payment terms on secured loan accounts.
This is especially true for furniture accounts, electronics, jewelry and sometimes automobiles.
If you think about it, it makes sense. What is a furniture retailer going to do with a room full of used furniture? Delivery, storage and re-sale costs would likely exceed any re-sale proceeds.
Here is an example of a deal I recently negotiated for one of my bankruptcy clients. About two years ago, he had purchased a computer system from CompUSA, financed by HRS, USA. The account was eventually purchased by a debt buyer, eCast Settlement. At the time we filed his Chapter 7 case the outstanding balance was $3,518.28.
At the first meeting of creditors, a paralegal from the law firm that was handling this account showed up and tried to encourage my client to reaffirm the account at the full balance. I told her that we could not make a decision now and that I wanted to speak to the supervising lawyer in her office.
I subsequently tried to call the lawyer, but ended up with a senior paralegal. After a bit of back and forth, we agreed to settle the account for $950. Thus, my client saved over $2,500 and kept his computer equipment.
I engage in this type of negotiation all the time – and in many cases, the savings exceed my attorney’s fees. What you should take from this – although you may not realize it, you have leverage, sometimes significant leverage, when you file bankruptcy.
Here is a video that discusses a more recent debt negotiation: