Ch. 7: Pre-Discharge Unsecured Creditor Reaffirmation Offer

Question:
My Chapter 7 discharge is set for mid-October. My attorney recently received an offer from Capital One to reduce my debt from $1.3K to $500, set up a credit card with 14.9% interest and a $600 limit, and roll the $500 over to the card... in exchange for a reaffirmation agreement. The fine print also requires a $3.20 monthly "membership fee." 1. Is this a decent offer? 2. Is there any room to negotiate the terms?

Answer:
Let's see... they're offering to "let" you continue to owe them $500 instead of $1300, and "give" you a whole $100 additional credit line above and beyond that amount, at 14.9% APR. With a $3.20 a month "membership fee" and most likely a $59 or $69 a year annual fee. If you tell Capital One to piss off, the entire $1300 will be discharged, and you will owe them nothing. If you reaffirm, you'll exit the bankruptcy with one credit card with a $600 CL and $500 balance -- right off the bat you'll have an open credit line that's nearly (83.3%) maxed out. This will depress your credit scores even MORE than the bankruptcy alone will, unless you pay that balance down immediately. Now, here's the funny thing -- if you tell Cap1 to piss off, you'll probably get an offer for a Capital One card with a 14.9% APR and NO monthly membership fee, and most likely a $500 to $1000 initial limit, with a $39 or $69 annual fee... within a month or two of your discharge. They may even offer 0% APR for the first six months. I did, and I took Cap1 up on their, ahem, generous offer AFTER I'd discharged several thousand dollars worth of debt on both my wife's and my accounts which was serviced by, yes, CAPITAL ONE! So, the short answer is: Tell Capital One to stick their reaffirmation agreement where the sun don't shine. That's my advice -- note that IANAL, I'm just a poor schmoe who's gone through this crap already and doesn't want to see anyone get screwed over.





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