advice needed for difficult financial situation
June 3, 2017 12:28 AM   Subscribe

you are not my lawyer, financial planner, debt counselor or in anyway legally obligated to put my best interests first as part of a conversation. nonetheless, my situation is that i owe quite a bit of money i have few options to deal with.

to keep this short and sweet, i need advice on who to talk to, in order to make it through a difficult period. i am in the middle of a quite serious medical problem where i am not able to work right now but maybe in the near future (i have some leads). my prognosis is around two years. a less than 50/50 chance of getting a procedure that would extend that to say 10 years or so. might be possible but might not.

(this other part of my prognosis is, you know, about two weeks. care to draw the inside straight?)

i have enough cash to make it about 18 months for my place, only counting utilities and normal bills. i owe the irs approximately 35k and haven't filed the last two returns. i owe a little more than that to credit card companies that are all about to send everything out to collections in the next month.

i need to talk to some professionals to help manage this, but i'm not sure exactly the right types. i do know that i need a non-involved person to help me manage my cash situation so that i can make sure that 18 months doesn't turn into say 9. and other guys to make sure nobody can wrestle that little next egg out of my hands while i am dealing with this. and also, you know. stay out of court, and jail and all that.
posted by anonymous to Work & Money (7 answers total) 1 user marked this as a favorite
 
1) Don't panic.
2) You can do this
3) Yes: you need help
4) If I were you, I'd need two things, a financial planner and a psychologist. The financial planner will help you deal with your money issues and help you choose a strategy. The psychologist will help you deal with the very real stress that you may feel (or I would feel if I were you). The stress is fair: you're going through a lot. My psychologist has helped me a lot.
posted by Murray M at 4:18 AM on June 3, 2017


I'm sorry this is happening.

1/ Look into SSDI, ASAP. If your condition is on their list or your prognosis is terminal, this greatly expedites the application process. If not, it will take longer and probably involve application, denial, appeal and then approval.

2/ The IRS is pretty reasonable about payment plans. If you are just flat out terrified by the IRS, get an accountant to deal with them for you.

3/ Regarding the credit card debt, I'd be inclined to declare bankruptcy on this. I mean sure, you can negotiate and make payments. But if you have finite resources and finite time left, who gives a fuck about protecting your credit rating?

I'd also re-post this question in r/PersonalFinance with as much detail as you can provide. The replies can be shitty and/or stupid but the excellent replies from people who know their shit are gold. More info and ideas and experiences cannot hurt.
posted by DarlingBri at 4:53 AM on June 3, 2017 [8 favorites]


Sometimes hospitals and hospital systems have ombudsmen or care coordinators - they can connect you with resources for this if you ask. If your medical condition has a support group (like a Gilda's Club or some sort of national or international association), they will also be a resource for you. Note that declaring bankruptcy may limit your housing options if that's a concern for you, or care credit if you need to put future medical bills on credit. Also, if you are in the US, debt will not send you to prison.

Framing your issue in an "elevator speech" style statement is going to help a lot with the overwhelmed feeling of explaining the situation over and over again to various entities. You don't need to put in nearly as much detail as you did in this AskMe. I'd probably just bullet it out:
  • I have a terminal illness.
  • I am exploring options to prolong my life, but my illness is still terminal.
  • I have a lot of debt.
  • I would like to enjoy a good quality of life for the time I have left.
If I had only between 2 weeks and ten years left in my life, I would probably not worry about paying it back. That's just me, but the finite time and the uncertainty would cause me to focus on just my health and damn the torpedos with the money.
posted by juniperesque at 6:30 AM on June 3, 2017 [3 favorites]


I'm not your lawyer, and there isn't anywhere near enough information in your question for somebody to give you qualified legal advice. Having said that, I am a lawyer with expertise in debt collection, and I also have some relevant personal experience. Maybe my perspective can be helpful in thinking over your own decisions.

Here in Massachusetts, we have legal aid volunteers who frequently counsel debtors to use bankruptcy in avoiding credit card debt. In most—not all—of the instances I've seen this happen, I have disagreed. Bankruptcy is a big stick. I wouldn't use it lightly, and credit card debt usually isn't tremendously difficult to avoid.

Nowadays, what happens to your credit card account will depend on the bank. Some banks just bury them. It'll go on your credit report, but that's all. Other banks will send your account straight to a collections law firm. And others will sell it to a debt buyer, which will try to collect on it directly before sending it to a collections law firm. The relevant point is that in either of the latter two cases, consumers are (usually) okay ignoring letters until they start coming from a law firm. At that point, you need to participate in the process—but the salient point is that you have a lot more control you might think, and there are still plenty of opportunities for low payments, discounted settlements, hardship relief, etc.

And I have never, ever seen a (consumer) debtor arrested or jailed. (Except that one guy who was detained in a holding cell for a few hours...but he had said something very impolite to the judge.) Civil arrest exists in our judicial system, but I'm not aware of any entity that would be collecting on a credit card account—either original creditors, or the major debt buyers—that allows its collectors to use civil arrest. Credit card companies never stop viewing you as a potential customer, even when they are suing you. (And they require the debt buyers to do the same.) You might encounter a collector who doesn't understand the policies he's supposed to be following, or a constable who doesn't care...but those are exceptions, and frankly a consumer rights attorney would love to chat with you at that point.

So that's a little bit of information about my experiences working in the debt collection industry. Now I'll say this, from my personal life: when my father went into hospice, I wasn't an expert in this stuff. We paid off his credit cards before he passed. If I had known then what I know now, I wouldn't have made those payments.

I'm really sorry to hear about your situation. My thoughts and prayers are with you, and your family. Good luck.
posted by cribcage at 7:18 AM on June 3, 2017 [4 favorites]


Most importantly, definitely seek SSDI, which, as mentioned above, has accelerated approval for a set of terminal conditions. Also unemployment insurance, if you have worked recently.

You do need professional advice: a lawyer and an accountant. Bankruptcy has many drawbacks, but it does sound like it might be the proper option in this case, where long-term concerns can't be given much weight. Bankruptcy also has the advantage of imposing an automatic stay on any collections actions that may be about to be brought against you. I hate to waste any of your possibly limited remaining time with legal proceedings, but, with a simple personal bankruptcy, the procedure is fairly streamlined. People do file pro se, but, again, you'll be wanting to spend that time living it, so a bankruptcy attorney (they specialize) will both advise you as how best to do it (if it's appropriate) and help save some of your remaining time for you. If you decide not to file after a consultation, the lawyer can probably also refer you to someone to handle any debt collection activities.

An accountant will help you deal with the IRS, which is more reasonable than you would think. They strongly prefer you to be paying into the system rather than floating outside it.

And others will sell it to a debt buyer, which will try to collect on it directly before sending it to a collections law firm. The relevant point is that in either of the latter two cases, consumers are (usually) okay ignoring letters until they start coming from a law firm. At that point, you need to participate in the process—but the salient point is that you have a lot more control you might think, and there are still plenty of opportunities for low payments, discounted settlements, hardship relief, etc.

I suppose this is the kind of pretty story you need to be able to believe to be in this line of work, but everyone else knows that debt collectors will attempt to torture every dime you owe, and twice again as much, out of you through constant harassment. "Hardship relief?" Dear God. The unconscionable behavior of debt collectors is why I can't advise OP just to let the process work itself out; the thought of a possible dying person being called six times a day with vile threats is too terrible.

OP, if, for whatever reason, you opt not to get a lawyer up front, please review this advice about dealing with collection activities. If you do attempt to negotiate with creditors, remember that it is very important to be realistic about what you can offer. No hopefulness about possible future employment. In your situation, I personally might try it once for each, with a small offer (remember that collectors bloat the totals with unjustified imaginary fees and expenses), and then, if it's rejected, inform them that there should be no further communication. This NCLC guide is aimed at lawyers more than consumers, but it contains a sample letter you can use. (I would probably add that you are terminally ill.) Keep in mind that your debts are yours personally. When you die, the estate owes the debts. You can't bequeath your debts to anyone, even your heirs. Therefore, when the jerks on the phone helpfully suggest that you should get family to pay your debts, they are trying to extend their reach beyond what they legally can, and, unless you have a fairy godmother who can pay the full amounts without blinking an eye, you should not feel pressured into asking family to pay for you.

Should any creditor then take you to court, many states offer volunteer debtor assistance; they usually won't represent you in the case, but they will help you fill out the paperwork. If the amount is significant, really, at that point you must bite the bullet and get an attorney to protect your remaining 18 months of assets. Remember, in the end, they can't get from you what you don't have. If you're not working, they can't garnish your wages. The major forms of public assistance are immune from garnishment as well. Each state has a minimum amount of income and assets that creditors can't touch, though that amount tends to be low, and a judgment creditor will try to seize any surplus amounts in your bank accounts. (You should also keep an eye on your credit report for any reported judgments, as there are plenty of unscrupulous firms that will file suits falsely claiming that you have been properly notified so they can win the case on a "default" basis, i.e., that you never showed up. If you see a judgment turning up that you don't recognize, then definitely seek legal assistance.)

No matter how guilty you are feeling, you do not have to tolerate harassment.

I wish you the best of luck. Please try not to waste any of your remaining life on shame. Our system is ruthlessly unforgiving and affords no margins to people struck by the calamities of life. You are not a deadbeat.
posted by praemunire at 11:11 AM on June 3, 2017 [2 favorites]


everyone else knows that debt collectors will attempt to torture every dime you owe, and twice again as much, out of you through constant harassment.

The gap between what experts know and what everyone else knows is sometimes referred to as expertise.

Because it might help the OP—who explicitly references credit card debt and collections, and who expressed fear about being jailed—I'll discuss a bit more about the industry. For many years, credit card defaults worked thusly: first the bank (eg, Citibank) tries to collect, then they sell the account to a large debt buyer (eg, Midland) that tries to collect, then they sell it to a slightly smaller debt buyer (eg, Resurgent) that tries to collect...and as the account gets staler, it slides farther down the chain into the hands of less reputable players—until you reach the bottom, which consists of companies whose corporate documents are falsified and whose agents will say things like, "Hi, this is Officer Jacobs. You need to pay this Citibank bill or we're going to arrest you." (That's not really an exaggeration: they pretty much say exactly that.) These "companies" are not debt collectors in any meaningful sense: they are criminals who buy lists of defaulted debt because if you're going to cold-call people demanding money, then being able to reference real accounts those people will remember is basically like having the Glengarry leads.

In recent years, the industry has been reformed dramatically, in part because of state agencies but mostly because of the CFPB. The most significant change with respect to this discussion is that the largest debt buyers (Midland and PRA) have been told explicitly not to resell accounts. Once you buy 'em, you're stuck with 'em. No more sending them down the chain to become "bad paper." Although these commandments were technically given only to a few companies, the CFPB made clear that these are the new game rules, and so everybody has adapted—including the banks upstream.

The point is, someone who is presently defaulting on a credit card debt—as the OP indicated—will likely have a very different experience than someone whose account defaulted five or ten years ago. The accounts are showing up in court faster, and the courts' dockets look much different: you see more original creditors and far, far fewer of the later-generation debt buyers. The latter are almost exclusively older cases still puttering through the system (eg, wage attachments on years' old judgments, etc).

Nobody is trying to paint a rosy picture. I have clients who are currently dealing with abuses exactly like Praemunire described—for instance, "being called six times a day." (Quoting from a recent demand letter: "[CLIENT] received at least seven calls on her personal cell phone within a few minutes at approximately 10 am.") Yes, those Premiere Properties scoundrels are still out there. But criminals will always be out there trying to collect your debt, or renew your auto warranty, or help you fix the virus on your "Windows computer." If you're going to worry that you might be a mark for a con, that's fine but it's qualitatively different from worrying about the consequences that will legitimately arise from your credit card debts. I, personally, would encourage most people not to worry about the latter.

Please try not to waste any of your remaining life on shame.

Agreed. People have different reasons for wanting to repay defaulted debts, and sometimes those reasons are valid—but don't let anybody talk you into feeling shame about financial debt in a situation like you've described.
posted by cribcage at 8:29 PM on June 3, 2017


If you want to negotiate with the IRS, the first thing you're going to hear from them is that they can't negotiate until you're current with your tax returns. So you need to file for the last two years.

Generally speaking, the IRS is among the best kind of creditor to have - if you set up a payment plan, they'll leave you alone (as long as you make payments), and the interest rate (currently something like 4%) is far lower than for credit card debt. Keep in mind that IRS employees don't get commissions for the amount of money they collect,

Don't fall for those advertisements that claim that if you pay them money, they can get the IRS to agree to accept only a small percentage of what you owe. Typically these organizations negotiate to eliminate penalties, and possibly interest charges, but can't get the IRS to budge on the principal.

If you had high medical expenses in 2016 and/or didn't work much, you might not owe the IRS anything for that year (after you itemize rather than taking the standard deduction); in fact, you may be owed a refund, depending on how much you earned and/or how much was withheld. (If you were an independent contractor and didn't make any estimated tax payments, then you almost certainly do owe taxes.) You won't see a refund, if you're entitled to one (the IRS will take it to reduce the amount you owe), but - in any case - you do want to file
posted by WestCoaster at 4:15 AM on June 4, 2017


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