Debt, debt, go away! I'd like to have a life someday!
July 2, 2013 4:08 PM   Subscribe

Right now I'm poor, I'm in debt, and I don't know the best way to proceed. Please help me make a plan to tackle my debts.

I owe about $20,000 split between three credit cards. For what it's worth it is mostly due to medical expenses. I haven't paid on these cards in about 120 days. All three are maxed out and have been closed by the card companies. I haven't talked to any of the parties involved since I quit payment this winter. (Would it do me any good to answer one of their multiple phone calls and attempt to talk to them?) One of the companies has retained a third party to attempt to collect the debt, but as far as I can tell the debts are all still owned by the original banks.

I'm quite poor and am underemployed. I also don't have any notable assets. The best case scenario is that I could maybe manage to put $200 or $250 a month towards this if doing so would substantially improve my situation, but that is over a third of my income and it would be a hardship to do so. Getting a better job is obviously very high on my list of priorities, but I'd like to have a plan in place for the here and now.

It would almost be ideal to declare bankruptcy, but I don't know if I can. All my debt is unsecured and I'd pass a means test easily. My problem is that when I applied for the cards I was living with my parents and put down the total household income instead of just my personal income. (Household income would have been like 90k versus a personal income of 10k.) In retrospect it was a dumb move, but I don't know if it's enough that it would cause a bankruptcy case to be dismissed.

So, since "I need a plan" is rather vague, here are some concrete questions regarding what I should do: What information about my debts should I be collecting to make things easier on myself? Should I contact a local lawyer and attempt to declare bankruptcy? If so, how do I find one and what can I be expected to pay? Or, do I attempt some kind of debt consolidation or other nominal repayment plan? And if so, again, how do I find a reputable one? Or do I ride this out for the next 6 years and cross my fingers that I'm not worth going after legally? And if I do ignore it, are there still proactive things I can do to protect myself from the worst of the consequences? I've been paralyzed over this dilemma for months now, and I don't quite know how to get started or where to turn, but I know I'm finally ready to act.

tl;dr If you paint me a prudent plan in broad strokes I can fill in the details; so what are my next few moves until I can start bringing in a better income?

Throwaway email:
posted by Zen unicorn rainbow zen journal to Work & Money (14 answers total) 12 users marked this as a favorite
If you're in the SF Bay Area the East Bay Law Center has pro-bono debt counseling lawyers in Berkeley, and they have folks who specifically handle medical debt, because it's its own beast. I'd start with them or someone like them. They won't steer you towards bankruptcy or anything drastic unless it's an actual good idea.

edited: looks like they're in Berkeley, not Oakland.
posted by small_ruminant at 4:30 PM on July 2, 2013

I haven't talked to any of the parties involved since I quit payment this winter. (Would it do me any good to answer one of their multiple phone calls and attempt to talk to them?)

Yes. Call them back first thing tomorrow. I know it's scary, but I promise that the person handling your account is not going to yell at you.

By and large, credit card companies don't want to sell accounts off to collections agencies. In most cases, that loses them money, relative to what they can get from negotiating payment with the debtor, even if the payment winds up being lower or over a longer timescale than originally offered. But they will do it if they think you aren't going to respond to them.
posted by kagredon at 4:46 PM on July 2, 2013 [1 favorite]

Bankruptcy. Borrow the money from your parents to pay for the lawyer if you have to. It's like ripping off a band-aid, the sooner you get it over with, the better.
posted by empath at 4:48 PM on July 2, 2013 [3 favorites]

You don't have to know whether you'd qualify for bankruptcy. That's what a lawyer is for!
posted by Wordwoman at 5:35 PM on July 2, 2013

You can get a copy of "How to get out of debt, stay out of debt and live prosperously." You can either call and work out a payment plan or try for bankruptcy. If it is medical, you should also see if it gives you tax deductions/credits. If you spend a lot on medical care, above a cetain level, I think it qualifies for some kind of deduction.
posted by Michele in California at 6:11 PM on July 2, 2013 [2 favorites]

I would talk to a lawyer about whether bankruptcy is right for you. Before spending money on it, I would see if there is an organization that provides free legal services (look for one that does debtor's rights & bankruptcy) in your area. If you're in the Los Angeles area, memail me.
posted by insectosaurus at 6:47 PM on July 2, 2013 [1 favorite]

I would recommend writing to your creditors to stop the phone calls. Once you put in writing that you will only communicate in writing they should lighten up on the calling. Tell them the truth. You cannot pay the debt and if your situation changes you will let them know.

I had about 10,000 in debt four years ago at high interest rates. I stopped using the cards and made the minimum payments for 3 years. Slowly they went down and my credit score improved. I was then able to apply for 0% cards. My remaining debt will be paid off next year because all of my payment is going to principle and not interest. Good luck.
posted by cairnoflore at 8:10 PM on July 2, 2013

These suggestions about calling your creditors? Talk to a lawyer first.
posted by Happydaz at 11:39 PM on July 2, 2013

I would recommend writing to your creditors to stop the phone calls. Once you put in writing that you will only communicate in writing they should lighten up on the calling. Tell them the truth. You cannot pay the debt and if your situation changes you will let them know.


Lawyer first.
posted by empath at 11:49 PM on July 2, 2013 [1 favorite]

Yeah, to clarify my earlier comment, don't agree to anything when you first call them. If they try to pressure you (and they very well might), tell them that you're still in discussion with a lawyer/financial adviser. But do not hide and hope that they just won't notice, because that will get collections agencies on your ass sooner than later, and once that happens, your options are basically all terrible.
posted by kagredon at 11:56 PM on July 2, 2013

i mean, if you really want to minimize the chance of them getting anything before you get in to see a lawyer, still pick up the phone the next time they call and just say "hello, yes, this is zen unicorn rainbow zen journal, I really have to get to an appointment right now but I have received your call and will return it at a later date."
posted by kagredon at 12:12 AM on July 3, 2013

This is not one of those things where if you ignore it, it will go away. So head over to the law center for advice and then follow it.

The credit card companies may decide to take you to court, get a judgement and then garnish your wages. That would suck.

So, as painful as it is, see someone professional, then do what they tell you.
posted by Ruthless Bunny at 6:36 AM on July 3, 2013

Talk to a qualified bankruptcy attorney in your area. If you are worried about affording one, talk to your local legal aid clinic and they will probably be able to refer you to someone who can help.

The nice thing about a bankruptcy in your situation is that your lack of assets will probably make the process very simple and straightforward.

If you are in Southern California, let memail me and I can refer you to someone. You can also search for something like this in your state that would let you search for specialists.

I don't know if listing the household income when you applied for the cards is relevant. I would guess that it is probably not, but only a lawyer will be able to tell you that for sure.
posted by Aizkolari at 8:06 AM on July 3, 2013

Years ago I solved a similar situation by going through an amazing place called Consumer Credit Counseling Services.

It's legit.
It's a non-profit that
1. Talks to the CC companies for you
2. Has a good enough record that they usually get better terms for repayment than you would on your own.
3. Consolidates all your debt into a single, make-able payment that you can actually manage.
4. Works with you to make sure you can actually manage it.
5. Once they start working on your behalf, your credit won't get any worse: most of the time they can stop the crappy credit clock running while they work things out with the CC companies.
Not ALL CC companies work with them, but they consolidated 3 or 4 cards for me.

Try them out. Give them a call at least. They have branches in most states. They know exactly how to put you at ease.
posted by asavage at 9:17 AM on July 3, 2013 [2 favorites]

« Older FPS issues in one specific game   |   Tips for travelling to Kurdistan Newer »
This thread is closed to new comments.