How to settle your debts on your own
Many people today are considering settling the amount of credit card debt they possess. An industry of organizations and companies has built up around America’s overstretched wallets. Currently consumers in the U.S. are up to $915 billion in credit card debt, most likely you are a contributor. It is my personal belief that lack of discipline is what has gotten us here. As such, settling your debts is only complicating your situation, because you still aren’t willing to accept responsibility for your spending problem. I once considered settling my debts using one of those agencies that ran commercials on t.v. and radio. You can read about my negative experience with this in a previous article Reasons not to file bankruptcy or settle your debts. However, if that article still doesn’t convince you to take the long road, here’s some advice for settling your credit card debt on your own. This article is full of useful information about the consequences of defaulting on your creditors. So take your time to review this post and feel free to add your comments at the end. To hear a podcast of this article in windows media player click here. Related Debt Prison articles you should read are Get Everything in Writing: Collection Agencies and Their Lies and How to Deal With Collection Agencies.
DebtPrison.net does not offer legal advice. The information found here is readily available on websites throughout the internet.
Please take a few minutes to read Tell Debt Settlement Companies to Kiss Your Ass, which is actually an email from one of my readers who describes her personal experience with two different debt settlement companies. This will give you an inside look at how these companies work and hopefully convince you not to use them.
When to consider settling your debts
At this point you should already have a tight budget you are following. You might consider settling your debts when you can no longer meet the minimum payments. For example, for whatever reason your income is not high enough to pay all of your bills. If you are in this position it’s my belief that you should stop payment on non-critical items. Critical items are food, vehicle, rent, electricity, water, and a phone. Non-critical items would be credit card debt, student loans (these can be deferred for now), and medical bills. Make a list of your critical and non-critical obligations. Write down the critical items on the left side of a sheet of paper and the non-critical on the right side of the paper. At the bottom of each list write the total amount of debt for both categories. This may be a sobering process for you. It should be crystal clear in your mind how much is owed to each and every creditor. I currently owe money on five different accounts for a total of $49,000. I can tell you within a hundred dollars how much I owe on each one of them. This keeps me focused on lowering my debt and controlling my spending.
In addition to a tight budget you should consider ways to lower your critical expenses. Perhaps you could move in with a friend or relative and pay little or no rent until you get your debts back on track. Also, are there tangible items that you could sell to generate additional cash? Start asking yourself these questions. Remember that the worse your credit score is, the higher interest you will pay on future loans. So let’s try to start thinking about the long term as well.
Why you shouldn’t use debt settlement companies
It is true that debt settlement companies provide a service. There are two points that should be made in regards to why debt settlement companies are unnecessary. The first point is that you can perform the exact same functions that they do. This article is about how to settle your debts on your own. Well basically you accomplish this by going through the same steps that debt organizations do. Why involve a third party in a situation like this? The credit card companies had rather deal with you directly. And although it may not be any fun - you are better off if you will deal with them directly. This means talking on the phone with them and writing letters. I know how stressful this can be, but it’s a necessary evil.
The other point is that debt settlement companies charge you for the service they render. When I contacted a debt settlement agency they charged me $50 just to sign up for their program. I would pay them $600 per month. Of this they would keep $60 for themselves and put the other $540 into an account (their company account - not a bank account with my name on it). So here I am broke, not paying my credit card debt, and paying a ridiculous $60 per month for a false sense of security. In addition, the $540 is going into their account. This is a bad idea. These companies are not banks. If you were to change your mind in a couple of months you can’t just go and make a withdrawal. There is a complicated process and you may not even get all of your money back. I’ve heard some bad stories. After reading the sign up information I simply called them back and said no thanks (I still had to sign and fax a waiver to them)!
What will happen when you stop making payments
For the first month or two you will get some phone calls from your credit card company. You can answer if you want and just let them know that you don’t have the money right now to make any payment. If you make a small payment this will only postpone the debt settlement process for you. So I wouldn’t make any payment at all. It is a good idea to write them a letter explaining why you cannot make payments at this time. It’s always a good idea to send every letter as a registered letter. This way you will know for sure that they received it. Keep the receipt from the post office. If you haven’t already made a file for each creditor - you should do so at this time.
Although you are not making payments the credit card company will continue to add late fees, over the limit fees, and minimum balance due to your account. I recommend keeping track of the fees and interest added to your account from the first month you miss your minimum payments. You may be able to talk them into waiving these fees when they get ready to settle your debt. Meanwhile back at the ranch you should be saving any money you have. But I wouldn’t keep it in a bank or any account that could be traced by an investigator. At home in a safe or a safe deposit box would suffice.
The sixth month is often the magic month. After you’ve gone 6 months without making a payment of any kind the creditor will probably be ready to settle your debt or turn it over to collections. If possible you want to avoid the bank turning your account over to an outside collection agency. Like I said earlier you don’t want to involve another party to this situation. This will complicate your ability to settle this debt and put it behind you for good. If your account goes to an outside collection agency expect the phone calls to increase as they love letting their automated computer dial your phone number. You should keep on file any letters sent to you in regards to your account.
The goal of debt settlement
The goal is to have the bank accept a partial percentage of what’s owed. For example, if you owe them $6,000, maybe they will accept $3,000 as payment in full. They would rather get $3,000 than nothing at all. Now this won’t work if you don’t have any money to offer them. So you must have cash somewhere that you can use to meet this $3,000 obligation. The purpose of debt settlement is to keep you from having to file bankruptcy. If you file bankruptcy then your creditors will most likely end up receiving nothing. You also want the creditor to send you a letter stating that this $3,000 is “payment in full.” They can verbally agree to settle your debt, but if you don’t have this in writing you could be in trouble. They might just send you a bill for the other $3,000 and act as if they don’t recall the conversation.
You want your credit score to be as high as possible. Having the bank close the account and stating “payment in full” will help keep your credit score high. If you don’t demand this your credit report will indicate that the account was closed and you failed to pay the $3,000. Remember, if you have the money to settle the debts then you are in control. You have money and the banks can get it - but let it be on your terms.
Get everything in writing
Never agree to send them payments until you receive a letter from them stating that this $3,000 will be regarded as “payment in full.” And that this payment completely 100% fulfills your obligations to this debt. If you don’t receive the letter then they don’t receive a payment. And when you pay them send a money order and send it overnight. Do not send a check as this will give them your checking account numbers. This could also come back to haunt you. If they refuse to put it in writing then they aren’t serious.
If you are dealing with an outside collection agency (the bank sold the debt to a third party) the rules are the same. But before settling with a collection agency contact the original creditor first and make sure that you can’t settle with them directly. If they say “NO” because they sold the debt then deal with the collection agency. But here’s the tricky part. There should be no grey area. What if you receive a letter from the collection agency stating that $3,000 is payment in full and you pay them, but the bank comes back later and bills you for the remaining $3,000? I’ve heard of this happening as well. So make sure that dealing with said collection agency satisfies this debt in full. Get the agreement in writing and keep every letter. Don’t forget to send all letters registered and keep the receipts.
The negative side of debt settlement
The bad thing about settling your debts is that you aren’t keeping your word. You agreed to honor a loan and you haven’t. This bothers most folks as it should. Settling your debts can affect your credit score. Your score is already affected because of the months you went without making payments. It may be further damaged by creditors reporting that your account was “settled”. This will lower your score even further. Remember, this means that on future loans you will pay higher interest. That’s why getting the “paid in full” or “paid as agreed” is so very important.
The debt settlement process is very stressful. Your phone is ringing off the hook and the conversations can be intimidating. Try to remain calm and stand your ground, you may be able to get through this without hurting your credit that much. You can check your credit report for free every 4 months at annualcredireport.com. I recommend you keep a close eye on this report, it gives you an idea of where you are financially and helps keep you focused on the consequences of debt.
Discuss this article, share ideas, and meet new people at Debt Prison Forums.
If you have found this information to be useful, please leave a donation for Barry.
Related Articles
* The Fair Debt Collection Practices Act
* Reasons not to file Bankruptcy or Settle Your Debts
* Can you go to jail for not paying your debts?
* How to deal with collection agencies
* Sample Debt Validation Letter
* Information on Credit Card Balance Transfers
* How I Escaped Credit Card Debt
* What You Should Know About Credit Cards
* How to seek bargains for food and clothes
Tags: own, settle debt
November 19th, 2007 at 9:04 am
[...] Debt Prison presents How to settle your debts on your own — Barry discusses the pluses and minuses of debt settlement and explains the process of doing it on your own without paying someone else to do it for you. [...]
November 20th, 2007 at 12:51 am
Welcome to Carnival of Debt Reduction #114…
Good evening! Looks like I’m pinch-hitting for DebtFREE-Revolution this week; she’s feeling really lousy and just got on to tell me that she can stay up for a couple of hours at a time before she collapses. So you might want to drop by her blog an…
November 20th, 2007 at 2:01 am
[...] Debt Prison describes the ins and outs of how to settle your debts on your own. [...]
November 22nd, 2007 at 10:14 pm
[...] Michael Bass presents How to settle your debts on your own posted at Debt Prison. It is true that debt settlement companies provide a service. There are two points that should be made in regards to why debt settlement companies are unnecessary. The first point is that you can perform the exact same functions that they do. This article is about how to settle your debts on your own. [...]
November 26th, 2007 at 2:37 pm
Thanks for stopping by Veggies…appreciated your comment. Your blog and site are both very helpful, I look forward to reading more when time permits. G
November 30th, 2007 at 7:48 am
[...] Michael Bass presents How to settle your debts on your own posted at Debt Prison, saying, “It is true that debt settlement companies provide a service. There are two points that should be made in regards to why debt settlement companies are unnecessary. The first point is that you can perform the exact same functions that they do. This article is about how to settle your debts on your own. Well basically you accomplish this by going through the same steps that debt organizations do.” [...]
December 3rd, 2007 at 1:12 pm
[...] Michael Bass presents How to settle your debts on your own posted at Debt Prison, saying, “It is true that debt settlement companies provide a service. This article is about how to settle your debts on your own. Well basically you accomplish this by going through the same steps that debt organizations do.” [...]
December 31st, 2007 at 9:24 pm
It’s nice that you shed some light about debt settlement, however, the problem with most people why we can’t settle the debts with the bank this way by ourselves is because we don’t know how to start, like who to talk to and such. It would be nice if you would explain that part as well
January 28th, 2008 at 12:12 am
I owe Bank of America about $2500. They turned my account over to a lawyer. Is this a real lawyer or just lawyers that work for them? Also when I ask them what if I can’t come up with the money for a settlement what happens they told me they couldn’t give me any legal advice but that I had better get an attorney. Now if they took me to court wouldn’t it be small claims court where you don’t need an attorney??
February 23rd, 2008 at 2:48 pm
I would be honest with all parties involved. No one wants to go to court - including a lawyer because that’s often a loss of their time. Even if you go to court (check with local courts, small claims varies per location) even a lawyer can’t predict how a judge will rule. If you can’t pay the bill and end up going to court - take documentation of your income and bills. Explain why you have not been able to pay - most likely the judge will do what is logical and fair.
April 28th, 2008 at 3:08 pm
The best way to settle your debt on your own and to leave people alone and stop crying about it is to first, think before you act. If you don’t have the money to buy it….YOU DONT NEED IT. Pretty simple. It doesn’t take bill gates to figure that one out. Secondly, be smart and spend your money wisely. Pretty simple rules.
May 17th, 2008 at 8:53 pm
Hi, I’ve a very large electric bill (Over $10,000) they haven’t been able to shut it due to medical need, but I need to get rid of this. We recently refinanced to get caught up and I was wondering if and how one could negotiate to settle an electric/utility bill and also if it would show up on a credit report. I googled to no avail…we’re not in Texas (Thankfully, because thus far, that’s the only state that utility bills can be reported to credit bureaus (but don’t quote me on it as I probably didn’t search enough. Great site and I will share this with all my other ‘poor’ friends
May 17th, 2008 at 11:27 pm
lol, hear ya. You’ve got me on this too. If you get a positive answer on this one come back and give me an update. But I did read a power companies website that said the following:
The Commission can require that person to present evidence that he or she is unable to pay the bill. The Commission makes its decision within 30 days. During that 30 days, the person’s service cannot be disconnected.
“If the Commission decides the person is unable to pay the bill, Minnesota Power will not disconnect service as long as the person makes and adheres to a payment schedule.
10 Percent Plan
If you choose the 10 Percent Plan, it means you will pay at least 10 percent of your monthly income toward the payment of your current bill, not including arrears. If your bill for the month comes to less than 10 percent of your monthly income, and you pay your full bill for that month, you will not be disconnected. ”
It is very possible that your power company has a similar plan. There may be a state office of some kind that will be willing to work out a plan with you.
June 19th, 2008 at 4:45 pm
Is there in place to get debt settelment letter samples ??? to sent to the debt collectors
Like your Sample Debt Validation Letter?
June 20th, 2008 at 1:08 am
Hey David,
not that I’m aware of but you could just copy the sample debt validation later I have posted.
July 2nd, 2008 at 4:22 pm
What does one do when a paid debt is not removed from credit report. Also when you request a receipt from a collections agency and they fail to send you one after numerous requests.
July 2nd, 2008 at 7:18 pm
Hey Joseph
You need to visit the credit bureaus websites (Equifax, Experian, Transunion) and file a dispute. Follow the instructions on the ‘file a dispute’ page.
What is the name of the collection agency? I’d like to know. It’s always a good idea to get a document from the collection agency BEFORE you begin paying them stating the how this will be reported, the months, the monthly payment, etc, etc…
But let’s say you’ve already paid this collection agency off in full and they haven’t sent you a receipt and still show the mark on your credit report.
Check out this webpage to file a complaint and see if you get any feedback. You can also consider hiring a lawyer just for the purpose of writing them a letter threatening a suit.
Good Luck!!
July 14th, 2008 at 10:46 am
where can i find a sample letter to send credit card companys i can no longer pay? also—what should i reveal and what not to reveal to them..? thanks,
July 14th, 2008 at 6:23 pm
Hey Angela,
well it really depends on your situation. Let’s say you’ve gotten too much debt or lost your job temporarily. I would write them a letter explaining your circumstances, that’s what I did. I basically said that I did not have the money to pay them at this time and that later on we would be able to work out a repayment plan that would be mutually beneficial. I asked them to stop the interest and fees but they didn’t. Six months later I was out of the hole and began paying them back.
why can’t you pay them anymore???
bb
July 15th, 2008 at 2:04 am
Hi,
i would like to pay my debts now but i don’t know were to start. Im pretty sure that its very huge amount already since it was way back 2002. i wasn’t able to pay my debts bec. 1. resigned from work 2. my husband passed away due to car accident. I was left with 2 kids to do everything on my own. now im back to work and i want to clear myself with this. what should i do?
July 15th, 2008 at 5:35 am
Hey B,
You need to get a copy of your credit report by going to http://www.annualcreditreport.com
You should be able to find out who and what you owe by looking at it. If you try to pay this after a six year break some could have dropped all together. Others may still be floating around. You’ll probably end up settling this for pennies on the dollar.
Good Luck!!
bb
July 15th, 2008 at 8:40 am
BB said:
” I asked them to stop the interest and fees but they didn’t. Six months later I was out of the hole and began paying them back. ”
BB…so you did not do a debt settlement after 6 months?
i can’t get to personal– mine is divorce,children,no job,medical issues.
July 15th, 2008 at 12:47 pm
Hey Angela,
No I started paying it back in full. I was able to because my monthly bills were lower plus I started making more money. I would just send them a letter stating that you can no longer pay because of X and y. I’d be honest without giving too much info…
bb
July 23rd, 2008 at 8:24 am
Response to Utility Bills,
Dear ‘Trying To Get By’ and ‘Debt Prison’,
Utility Bills and Medical Bills are tougher to settle because they are “Service Debts”. Both the 1st Party Service Provider as well as the 3rd Party Debt Collector view these accounts as gold.
Generally, one can settle their own Service Debts, but success requires a different kind of mission and objectives.
Mission: Locate the “Dates of Service”.
Without knowing the exact “Dates of Service” rendered makes it difficult for the consumer to Validate the debt, and making it easier for the 1st Party and Big 3 Credit Bureaus to “Verify” the account.
In my experience, the best first step to settling a Utility or Service Debt is to get the Dates of Service. This way you can tell if the 3rd Party has “illegally re-aged” the account.
Again, you can settle your own Service Debts. So here’s your mission: with find the exact dates of service with the 1st Party Service Provider.
I’m sure this will help.
Great post.
J. Carlton Ford
July 24th, 2008 at 4:08 pm
I am currently trying to settle several accounts, but some have been sent over fromt the collection agency to collection attorneys, who are ruthless, I owed $1800 on one acct & a few weeks ago the attny said I could settle for $1020, when I called back today he said it’s $3800 due to attny fees, and will only settle for $1800! pls help!
July 24th, 2008 at 10:26 pm
Hey Lissette,
I love your name, don’t think I’ve heard that one before!! Well a lawyer can’t really do anymore than a collection agency could. As far as his actions are concerned, he/she would still have to appear before YOUR civil court judge and try and get a judgment. Even after getting a judgment which would state that you owe the money - the judgment may not imply how this money is to be collected or even a time frame for collection.
So calm down all is good. Now this “lawyer” is just trying to get paid like all these other ‘collectors’. I would agree to a settlement which i could realistically afford and nothing more.
Now bear in mind that talking on the phone to these people is always a bad idea as I’ve explained.
I would prefer to see you deal with these ‘wonderful nice people’ strictly though the U.S. mail and only sending registered letters like this one.
Remember that these legal folks can’t do anything that is illegal. The only thing they can do is take you to civil court (which would be futile if you are trying to work out a payment plan with them) and try and get a judgment. And if you are paying something to them every month the judge will likely tell them to just chill. Spend some more time reading the comments on my article “Can you go to jail for not paying your debts?” and you’ll learn much more from real people that have been in your shows.
Thanks for asking questions and feel free to ask more - I’ve got more free time that I should have!!!
Have a great evening!
Barry Broome
August 15th, 2008 at 12:32 pm
what would be a good course of action if you overdrew on a checking account and didn’t handle if for 4 years. original debt=288 total asked 502. all debt stems from a $30 overdraft charge i refused to pay. now i am being sued for $500. what do i do?
August 15th, 2008 at 1:58 pm
If you’ve already received a summons for a court date then call the court and see if you can discuss this with anyone. They may just tell you to come to court and just talk with the judge but sometimes the court employee can help so call them up. Also, it would be good if you have any paper work related to the $30.00 overdraft. I’ve been in a position like this before and didn’t pay it because I didn’t feel I owed it. It was a small amount of money and was eventually dropped by the collection agencies but I think it shows up on my credit report - I might just pay it one day when I’ve got an extra $300.00 which isn’t right now..
I’d explain to the judge the situation and that you never owed any money in the first place. That this $500 is nothing more than a bunch of fees applied by banks and collection agencies and that you were unable to reconcile this issue with the bank at that time (explain what you did in fact do at that time to handle this matter).
Good luck and hope this helps…
bb
September 23rd, 2008 at 3:22 pm
Hello, BB!
I would like to say how helpful it is all the info you gathered in your web… Good articles… I have been going through a tough time with my credit cards… I owe a total of 40k which unfortunately I can not even do the minimun payments anymore … Just stopped to pay this month… not even a month and my phone is going crazy… I definitely want to pay the creditors but can’t afford at this time due to lost of income.. so I haven’t answered any call and I would like to know if I just should answer and tell them that I do not have the money at this time but I am willing to pay once the scenario changes or just leave to answer these calls after 3 months when most of people says that is going to be when they will try to negotiate something… Thanks and congratulations again for the great web…
September 23rd, 2008 at 3:43 pm
Hey Izzy,
Well there’s no easy way out on this. Unless you want to try filing bankruptcy these guys are gonna harrass and harrass you. Especially with this much money on the line. Here’s the problem you have. You can’t negotiate with them because you most likely have no money. Is this correct? Do you have access to money, investments, or assets that could be sold to generate cash and satisfy these debts? If so then I’d be selling them and getting rid of this useless debt.
If you do not plan on filing bankruptcy at this time then I would send them all registered letters explaining your situation. I’d let them know that later on - when times get better - you’ll try and work out a solution with them.
I really don’t see how answering the phone will do anything but harm. Now if you had plenty of money then I’d say pay them. But it’s been my experience that phone calls do little good - they want a payment and if you can’t provide one, why answer the phone? I’d write a letter instead. And later on if I could - I’d work out a settlement deal with the collection agencies - but that will most likely be at least a year down the road.
Feel free to come back and discuss your circumstances more as I’m always glad to share my opinion.
Best regards,
Barry
September 23rd, 2008 at 4:24 pm
Hey, Barry! That was fast! Thanks for the fast reply…
It hard to find people like you willing to help and share experiences for free like you!
Well.. I was trying to avoid to file bk.. I have cut every single penny that I could like cell, grocery, turning on air just at night to try to save some money to try to settle these cc accounts… I am even looking for a part time job to come with this extra money… but it hasn’t been easy…As you know, the economy is pretty bad and the unemployment has sky rocked… The income I have as of now, I can just pay my mainly bills like car, mortgage, electrical… stuff that I really need to keep my head above water…
Unfortunately, I am not even able to sell my car because I owe more than what is worth… My house I put in the market for 7 months and don’t receive one even call… That’s why I decided to keep my roof and transportation and cut in whatever I could like cell, cable ,grocery and small stuff that you just notice when you are in a horrible situation like I am… I know and I am aware that the only responsible for this, it is me… But I definitely hope to survive and be alive to say: I’m debt free and I was able to do on my own…
I even contacted one of those Debt Settlement companies but as you mentioned, if they can do, I will do my best shot and hope I can handle…
I was not just expecting that they would be calling me right away… I am not even a month past due and the phone is off the hook… I don’t blame them… Today, I even received a letter from one on my credit cards informing that they expect to receive the minimun payment within 15 days and if I am not able to comply to call them so they can work out an acceptable payment arrangement… Should I contact them?
I know that I need to have some extra money in order to settle the debt but was just not sure if I should tell them on the phone that I don’t have the money right now or if instead I should send the letter, as you mentioned, right away…
I am feeling so horrible… even though I was the one tha dig my hole, I know…
But it is reading about people like YOU that makes me cheer up and put a big smile even though my wish is to cry… it is so inspired… You are definitely blessed and I am so thankful for had googled and found you in this cyber space…
It is wonderful to know that in the middle of all this “crisis”, we are still able to find pure “human being” willing to help others..
Sincerely,
Izzy
September 24th, 2008 at 4:30 pm
Hey Izzy,
now if you’re going to talk with them on the phone I wouldn’t let on that you have ANY money.. Cause then they won’t work with you. I would call them and ask if they have anything like a hardship application. But that would be all I would say at this time. If your plan is to settle the debt then talking with them on the phone will accomplish nothing at this time. Except maybe too add more stress to your life. Debt settlement negotiations normally begin in six months to a year and can even go on years after the default occurred…
bb
September 24th, 2008 at 4:53 pm
BB… Should I ignore the letter I receive from one of the creditors as mentioned before? Or should I send a letter informing that I don’t have the money right now and will pay later on? Sorry to bother you again… I’m new in all this… Also, I heard that is better you settle with the cc companies then let it go to Debtor Collector… Is it true? After how long without payment that they will send u to DC?
Thanks for sharing your thoughts…
Best regards,
Izzy
September 24th, 2008 at 5:41 pm
Hey Izzy,
If you don’t have the money to pay them and want to settle the debt then I would not answer their phone calls. Instead I would send them registered letters explaining that you cannot make a payment at this time, that you’ve hit tough financial times, and hope to be back on track in a few months with them. Yes it’s less of a hassle if you can settle directly with the creditors. And even if a collection agency has been ‘assigned’ your debt you may still be able to deal with the credit card co directly.
If you just keep waiting and write the letter - this debt will most likely eventually be sold to a collection agency - in which case you can settle with them. But the problem with the collectors is that they are very unethical and often lie within each phone call and even written agreements. Even after getting the terms of settlement in writing you may have a problem getting the credit card company or even the collection agency to honor it.
Likely the debt will be ‘assigned’ to a collection agency within three to six months of default. Feel free to ask more questions in the future … it’s no problem..
Barry
October 15th, 2008 at 12:02 pm
my mom is 70 yrs old and retired and gets only 800.00 a month social security. She has 2 credit cards that are 10,000.00 each and she can no longer pay them due to the little income she gets–the only thing she owns is her car–she has no assets and no money. Can they do anything to her–jail ect. She has told all of them her incme and expenses and that she can n ot pay anything–now she gets a letter from an attorney but on the bottom of the letter it says that this is an attempt to collect a debt from a debt colletor. what should she do–she is depressed and has been on medication for this for over 12 yrs. please help
thanks you crysta
October 15th, 2008 at 5:15 pm
Hey Crysta,
In this case, if what you’ve said above is accurate, there is nothing they can do…. period…. other than call and harass her and make empty threats. In court she would just explain that she is on Social Security and only makes 800 a month. That’s around the federal minumum - of which a person can’t be collected on. Tell her to stop worrying and she can continue to tell them she has no money… which is the truth… but there’s nothing that can happen to her. In this case her car is O.K. and her money from Social Security can’t be touched so there’s nothing they can do. If you’d like more information do some googling on the federal minimum for debt collection on a persons income.
BB
October 17th, 2008 at 9:57 pm
I have about $15,000 worth of debt. $2,400 on in credit line, $560 in another credit line and about $12,000 on the third credit line. Recently I got into an accident and my car was totaled. I had to resign from work because I don’t have any transportation. I can pay off the $2400, and the $560 in two months with all the money I have; however I won’t be able to pay the $12,000 unless I get a stable job soon. I’m also going to be late in a mortgage payment. Should I just give up?
October 17th, 2008 at 9:59 pm
I forgot to mention that my house is in the process of a short sale, if the short sale doesn’t go through then a foreclosure will come. My house is now vacant and now I’m just waiting for the short sale. In the mean time my main concern is the $12,000. I’m thinking of working at a near by wal-mart but do you think they’ll hire me if they see a mortgage delinquency on my credit file?
October 17th, 2008 at 10:37 pm
Yes i think wal-mart will hire you - you’d be surprised I bet to know just how many have these types of issues….
If you have no job I’d try and at least make the minumum payments on these debts rather than pay off $3,000 at once. Maybe things will change and you’ll get back to normal soon. Otherwise you’ll have to default on the $12,000 debt and just deal with them trying to collect on it….
If you’re going to default on the $12,000 then why not the $2,400 as well. Just pay off the $560 for now, keep the rest of your money in safe keeping, and then hopefully soon you’ll be able to work out a new payment plan with these creditors. However, I think it would be a good idea to at least call these creditors and talk with them about your circumstances….
I think that would help you find the best solution…
Barry Broom